With the disaster confronting America's home owners now shaping up as a hot political issue, it's no surprise that President George Bush has come up with a rescue package. And the Fed is promising "additional actions as needed".

But are bailouts necessary? More to the point, can they actually do more damage by flooding the market with cheap money?

That is a very real danger, warns James Surowiecki in the New Yorker. As he rightly points out, there is something unseemly watching these players get bailed out for their bad bets. But there is something frightening when we contemplate the bigger bets they'll take in the future knowing the Fed will bail them out with cheap money.

It could create bigger problems ahead.

In any case, the bailout is unlikely to solve the problem says Alan Abelson at Barron's.

"Softening the tax bite on mortgage writedowns and allowing homeowners who are delinquent by more than three months and who have a decent credit history to switch into a Federal Housing Administration loan carrying a lower interest rate will effect modest fixes, but are no big deal. Certainly, given the wretched condition of housing, the inexorable decline in home prices and the prospect of a huge resetting upwards of adjustable-rate mortgages over the next 12 months, with a big spike in March '08, we're talking Band-Aids rather than serious relief.

"Now that the president, however tentatively, is officially on board, the bailout bandwagon is sure to pick up speed, volume and passengers, particularly with an election year looming. That could mean, as the sharp rise in the price of gold, up over $7 an ounce on Friday, gives fair warning, a rash of fiscal fecklessness, fresh debasement of the dollar and that most unenviable of economic combinations - no growth and inflation.

"What it doesn't mean is a return to the good old days of easy and just about free credit and all the nice bubbly things that went with it. Nor, we fear, does it portend even a modest rebound in housing in the next 12 months. The party's definitely over and no one's sorrier than we are. It sure was fun to watch."

You can read Abelson's piece here.