Dear Reader, I would like to shake your hand and congratulate you on our latest acquisition: GM & Chrysler!! Champagne all around!
Perhaps that was a shade over the top but I believe the government is close to the point of forgetting why this whole fiasco started: mortgages handed out to anyone with a pulse. Until that problem is rectified and the foundation of the housing market is restored, the rest of this is just window dressing because bad mortgages are at the root of the problem that ails us.
At some point, even the princes of Washington will decide that the government cannot single-handedly fund industry and that consumer spending is required. With the TARP and the upcoming Obama stimulus package, we’re up over $1.5 trillion dollars in debt fueled spending. Now, I’m not against careful government spending to avoid a fiscal calamity but it seems that at some point we need to address the fundamental problem: housing. With housing prices falling at 25% year people are terrified. Those who aren’t underwater are close and many are just walking away. We need to stem the foreclosures and the devaluation of our housing stock.
Paulson, over at Treasury, walked into Congress with a four page memo demanding $750 billion within 72 hours to “fix” the problem – or else. That alone should have been sufficient to disqualify him from the process, but, far from that, the Congress gave him the money to bail out Wall St. and Banks with little or no oversight. Paulson doesn’t want to hear about Main St. bailouts.
For my money (and it is) Sheila Bair over at FDIC seems to have the right focus – foreclosure mitigation. This is the program that we need to get serious about. One could make the argument that recapitalizing the banks was necessary in any event in order to make mitigation possible and I suppose I would buy it. However, it doesn’t seem as though our leaders in Washington are very serious about it as FDIC can only really work with loans from banks that they have taken over. At that point, it’s too late…..