The mortgage bailout deal would essentially make the taxpayers liable for bad mortgage lending by private companies, but federal officials argued that this was the best way of stemming the credit crisis. Investors worldwide hold $5 trillion in debt backed by the two firms, and their failure would shake the global economy.
Apparently, it wasn’t enough to cover the mortgage crisis up with a TARP. No, Treasury Secretary Paulson’s Troubled Asset Relief Program wasn’t the kind of credit repair scores the endangered homeowners needed. Now that Federal Deposit Insurance Corp Chairman Sheila Bair has pushed a new mortgage modification program forward, 1.5 million homeowners will have someone new on their side when they’re facing foreclosure. This $24.4 billion program will be drawn from the $700 billion pool that TARP set up, and it’s a very straightforward system. Lenders will be given a stipend of $1,000 per loan they renegotiate with financially stuck homeowners, and in the event of default on a loan, the FDIC has promised to take on up to 50 percent of the loss. Paulson has condemned this as mere spending that will only bankrupt the FDIC, others view this action on Bair’s part as a needed investment to maintain liquidity in the mortgage industry. While this won’t solve all of the problems at once, it’s certainly a valiant effort to help repair credit, isn’t it?

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