A leading US economics expert has said the bailing out of distressed mortgage borrowers will be inevitable if the country’s economy is to be maintained.
Robert Shiller argues the point in a new book called the Subprime Solution, in which he lays out plans to prevent a similar mortgage-related crisis in future.
According to the Wall Street Journal, Mr Shiller argues for a new federal agency modeled on the Home Owners’ Loan Corp, set up in the 1930s to refinance mortgages and prevent evictions.
The paper also reports Mr Shiller argues for new insurance policies which protect home buyers from falling property prices.
According to the Wall Street Journal, the Yale University professor writes on the idea of using taxpayers’ money for mortgage bailouts, saying:
“Much as we might like to, we cannot quickly and reliably sort out who is at fault and who is not.”
TheStreet.com also says the book lays the blame for the current US property slump at the feet of Real estate speculators, mortgage brokers, underwriters, ratings agencies, borrowers, appraisers and investment bankers as a whole.
Mr Shiller has also written on financial markets, financial innovation, behavioural economics, macroeconomics and real estate, among a host of other topics.
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