Bailout Update

The GBH (Greatest Bailout in History) gains momentum. David Wessel of the WSJ spreads the word (boldface mine):

Mr. Paulson is losing his argument that the government response, so far, is sufficient—even with all the Fed has done, all Mr. Paulson has done to prod mortgage servicers to voluntarily modify loans and his successful pummeling of Fannie Mae and Freddie Mac to reluctantly raise capital so they can buy more mortgages. Preventing housing prices from falling will prolong the agony, he says. "We need the correction." But influential congressional Democrats and a growing number of economists—many of them Democrats, to be sure—argue that "the overall health of the economy" is threatened by a combination of falling house prices, malfunctioning mortgage markets and a rising number of homeowners whose home equity has been wiped out. In one form or another, they would have the government buy mortgages at today's marked-down prices, make lenders or investors take the losses and then have the government provide or guarantee new loans to homeowners at less than the original principal.

My take: Honestly, I don't think I've gotten a single E-mail or phone call from a homeowner in favor of a bailout beyond something like "If they can bail out Wall Street, why not Main Street?" I think this bailout talk creates an opportunity for some savvy politician out there.