Senate Banking Committee Chairman Christopher Dodd considers bailing out sub-prime borrowers.

Sen. Dodd avoids mentioning the other half of the equation, i.e. a bailout implies giving money to the lenders. Sure, people would have lost houses = not good, but big banks would also have lost money on the delta between sales in an appreciating market and foreclosure sales in a decelerating/falling market; and that delta looks bigger every day.

"For every bad borrower, there is a bad lender." -- Anwar Ibrahim

While letting market discipline hammer on the stupid looks seductive from a long-term perspective (Do we really want to bail out citizens whenever they do something dumb? What kind of incentive does that establish?), we don't currently know the size of the foreclosure risk. The Federal Reserve has warned on foreclosure risk in Sept 2006, and the Fed has stuck to the "recession unlikely" refrain.

Given that the risk of this causing an economic depression looks low, I'd vote for "tough love", and deny a bail out. What do you think?