That would not have been an entirely fair characterization of Senator Dodd's housing bill, but neither is it entirely fair to describe the bill as an effort to "rescue homeowners at risk of foreclosure," as the Post does today. The bill would allow banks to substantially reduce their losses on houses facing foreclosure. The banks would be able to decide which loans it puts up for refinancing. Presumably it would only put in loans on which it anticipated large losses. The appraisal mechanism in the bill is also likely to have many of the new loans guaranteed at bubble-inflated prices, thereby reducing banks' losses on their loans. Clearly the Democrats understand the ways in which this bill will be beneficial to banks. It is wrong to inaccurate to describe it as simply an effort to rescue homeowners.
--Dean Baker