Paul Krugman, in his column at the NY Times, makes the case against a bail-out and for government intervention on a limited scale:
Today, however, the mortgage broker who made the loan is usually, as Ms. Morgenson says, ‘the first link in a financial merry-go-round.’ The mortgage was bundled with others and sold to investment banks, who in turn sliced and diced the claims to produce artificial assets that Moody’s or Standard & Poor’s were willing to classify as AAA. And the result is that there’s nobody to deal with.
This looks to me like a clear case for government intervention: there’s a serious market failure, and fixing that failure could greatly help thousands, maybe hundreds of thousands, of Americans. The federal government shouldn’t be providing bailouts, but it should be helping to arrange workouts.
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