This is the million dollar question which is on everyone's mind as of late. With the bailout signed off on so far the government has injected $150 billion into the banking industry, $120 billion into AIG, and even $25 billion for the auto makers in Detroit. Well what about the homeowners in distress, now here is the KICKER, the government still has to think that one over. Here is what we know for a fact thus far.

Voluntary programs don't work:
There are already several voluntary efforts to encourage banks and their customers to renegotiate failing mortgages on their own, such as the HOPE NOW program that regulators cite frequently as a stand-in for a real solution. But voluntary efforts are marginal at best. First of all, most banks are free to rework loans without any government urging at all. The reason they don't--big surprise--is that they often lose money. Even if the government tries to strong-arm the banks, that doesn't eliminate the loss, and CEOs still have shareholder money to safeguard. Telling stockholders that "the government said so" doesn't usually justify poor financial performance.

It's hard to tell which homeowners deserve to be rescued:
Most people agree that the government shouldn't bail out flippers who bought and sold homes to make a quick buck or people defaulting on a vacation retreat. In real life, we might know who those people are, but the banks--and the government--don't necessarily know. In some cases, it's easy to tell from loan documentation whether the property in question is a second home, or whether the borrower was unqualified for the loan in the first place. But remember, one part of the problem was "no doc" loans that didn't require very much disclosure. In other cases, lenders or borrowers simply lied, and nobody noticed or complained. A comprehensive bailout plan might catch some of those borrowers, but others would essentially be rewarded for their cunning and hubris.


Read More Here:
http://biz.yahoo.com/usnews/081029/29_why_the_feds_rescue_banks_not_homeowners.html?.&.pf=banking-budgeting

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