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Backlash Grows As Congress Moves Toward Housing Rescue, by

Publication Date: 
May 11, 2008
Source: 
Agence France Presse
Author: 
Rob Lever

Professor Kenneth Scott is quoted in an Agence France Presse article about a growing resistance to government bail-out of distressed homeowners:

Kenneth Scott, professor emeritus of law and business at Stanford University, said such aid programs can be easily manipulated to reward risky activity.

"If the prerequisite for getting assistance is that you're delinquent, it's very easy to become delinquent," he said. "You just stop paying and if that gets you a significant amount of money, what would you expect people to do?"

Scott said there is pressure to help homeowners in the wake of a Federal Reserve-backed effort to rescue investment bank Bear Stearns in March.

"The question that ought to continually be asked is whether you are creating incentives for a repetition of the present overhang," Scott said.

He added that speculators and unscrupulous lenders "will anticipate there would be some form of government payment if things don't go well."