The Repugs disdain for any kind of government regulation and oversight has brought us to the verge of destroying our credit system. No modern economy can function without it. The fly-by-night investment bankers and mortage brokers don't give a rip about the long term credit health of the country. Once again their radical theories of government and the desire to turn the country over to the robber barons has left us in financial ruins and incompetence. Dodd is a real rationally based political leader. What a concept!

In 1995, Congress passed a bill limiting stockholders' right to file lawsuits against company executives when they cook the books or otherwise violate the law. When President Clinton courageously vetoed the bill, then-Democratic National Committee Chairman senator Chris Dodd (CT) led the successful fight to override him, earning himself a quarter of a million dollars in accounting industry campaign contibutions. As one market analyst noted after the Enron scandals, the measure "paved the way for corporate chieftans basically to lie without fear of being sued."

Hostile Takover by David Sirota, p. 264 (hardcover edition)

When Dodd posted on DKos recently, I asked him to respond to what Sirota wrote. Funny, he never answered the question.

Dodd may talk pretty, but he's just another Washington hack. Nothing to see here folks. People are ignoring his campaign with good reason.

The last time Dodd ran for reelection, over $2.6M of his over $7M warchest came from the Finance, Insurance, and Real Estate industries.  And even though he is at 1% in the polls, he gets millions from the same financial industries during his run for the White House... he gets more money from these groups than John Edwards or John McCain.  And more money from Hedge Funds and Private Equity groups than Hillary Clinton or Barack Obama.  

So why can we trust that this policy isn't just another pro-financial industry move?  Having Freddie and Fannie (which are partially federally owned) bail out private corporations is a terrible idea.  Why should taxpayers help out billionaires?  

and a Democrat is outraged by Dodd's and Schumer's proposal on this. He says there has been a lot of corruption in Freddie Mac and Fannie Mae. I don't know the details on this, but my brother follows the issue closely.

I think Dodd (like Lieberman) also supported a lot of the bad deregulation in the 1990s that let to the stock-option abuses and other corporate mismanagement.

I predict a strong voter backlash against any candidates for any office who propose any kind of bailout for the financial industry, or for home buyers who signed up for loans they have no prayer of repaying.

If you read any of the large number of highly popular housing bubble blogs, there are a lot of upper-middle class, politically active people who are livid that politicians would propose helping the greedy and the irresponsible, while they exercised self-restraint in staying out of an obvious bubble.  They have been waiting for the correction, and will not take kindly to candidates who try to prop up home exorbitant home prices.

Each of Senator Dodd's ideas has serious drawbacks:

Bailing out home buyers will be at enormous taxpayer expense, and impossible in many cases.  If the buyers could have financed a 30-year loan, they would have done it already.  They are in option-ARMs, negative amortization, and interest-only loans because they couldn't make the payments otherwise.

The Fed extending liquidity bails out the banks and lending companies for now, but makes the impending crash that much bigger for every day it postpones it.

Increasing Fannie Mae and Freddie Mac exposure to bad loans will increase the damage to taxpayers when the crash really hits.  

Cheaper FHA mortgages for sub-prime borrowers?  They were way too cheap already.  Extending home ownership to more people was a political goal that helped cause the current mess.  Why make it worse?

With all due respect to Sen. Dodd, I completely disagree.

Firstly: the current limit on Freddie Mac/Fannie Mae is somewhere around $400,000. The purpose of these government programs was to promote homeownership among lower and middle income families and young/first-time buyers. It was not to subsidize McMansions for the rich. The median family income in this country is somewhere around $50k. That means the average home an average family can afford should be around $200k. I think $400k is quite generous enough for federal subsidies.

Secondly: there's plenty of talk about "victims" of abusive lending. While I agree that some people were probably deliberately duped into signing agreements that they didn't understand (I'd guess primarily the elderly and perhaps immigrants who didn't understand the language so well i.e. the usual targets of most con artists), the vast majority of people who signed up for all those toxic loans knew exactly what they were getting into. They were just betting that they could get out of them in time (either by selling the property for a nice profit, or re-financing in 1-2 years). In other words, hoping for a pay-off, they bet that home prices would continue to go up and mortgages would continue to be available on easy terms, rather than go with the safe option of traditional fixed loans. Well, guess what. They bet wrong, and they're paying for it. Nothing "predatory" or "abusive" about that.

The bottomline is that housing has gotten way too expensive (especially in certain regions) to the point that the average family can't afford the average house. The only way to correct that is either wages go drastically up or house prices come drastically down. That's it. Any attempt to "ease the pain" will only delay and worsen the effects of the ultimate correction.