Unlike the bank bailouts, the Detroit aid (which is costing 30 times the value of the 1979 lifeline to Chrysler) has no chance of breaking even, Gregg Easterbrook wrote on Reuters. To do that, stock in the new GM would have to rise to the old company’s all-time peak valuation. You’ll see George Clooney driving a Yugo before that happens. Moreover, included in the GM bailout was a gift to GM’s finance arm — a subprime lender.
A strange irony surrounds the idea that homebuyers might be rewarded for inflating the housing bubble.
Economists have been puzzled why so many “underwater” homeowners, whose properties are worth less than they owe the bank on their mortgage and who would thus be wise to simply walk away and let foreclosure happen, are staying put and toughing it out. A University of Arizona paper published last year by Brent T. White concluded that “shame and guilt associated with foreclosure” are a big reason why people stay and pay against their economic interests.
Americans feel shame about being irresponsible. What about the American government?