Housing Bubble Bailout

The speculative episode that is the housing market has created huge excesses in the lending industry and banking system. The US financial system has become increasingly unstable in the past few years due the housing boom. Already we have seen the collapse of some sub prime lenders including Acoustic Home Loans and the massive layoffs that are happening in the lending industry including at Ameriquest Mortgage.

Foreclosure rates have risen significantly since 2005 and will continue to rise as an increasing amount of ARMs adjust to their higher interest rates. Meanwhile, consumers are getting squeezed on many fronts as the price of gasoline, electricity, food, medical costs and other consumer goods and services are increasing much more then people's salaries.

As the housing market continues to decline many financial institutions will be hurting. Some financial institutions may ask for a federal bailout. Perhaps, a large group of individual home purchasers may also demand a bailout in a few years as they are underwater on their mortgage loans and facing a lifetime of debt.

Will there be a massive federal bailout like the S & L crisis which culminated in the 1980's?

The Bubble Meter Blog stands strongly against any federal bailout of the excesses of the housing boom, unless there is solid evidence that the US financial system is facing likely collapse. At this point, it appears very very unlikely that the US financial system will collapse as the boom turns to bust. The speculative nature of the housing market should have been curtailed by the federal government a few years ago.