Some Critics of Rate Freeze May Be Angry Investors

FDIC chief speculates that investors are blasting the plan to boost their income
By Wesley Oliver,  Newser Staff
Posted Dec 8, 2007 1:34 PM CST
Treasury Secretary Henry Paulson, right, looks on as President Bush, left, makes a statement about subprime mortgages, Thursday, dec. 6, 2007, in the Roosevelt Room of the White House in Washington. ...   (Associated Press)
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(Newser) – Critics of the government’s new rescue plan for strapped homeowners may be investors who would cash in on a foreclosure-ridden market, one of the plan’s chief architects charges. Sheila Blair, head of the FDIC, speculated that naysayers may have a conflict of interest, the Wall Street Journal reports. “I do worry that some of the investors have taken short positions” on the subprime-mortgage securities index.

Blair admitted she has no proof, but an analyst whose firm helped draft the plan said investor outrage is “to be expected.” While the plan would freeze interest rates for homeowners current on their loans, critics say it amounts to a bailout rewarding reckless behavior. “It’s in everybody’s interest to modify these loans,” Blair said.