Posted by
John Aube' on Saturday, March 07, 2009 12:55:41 AM
House On Fire
Ben Bernanke said that the house is on fire (housing market) because the owner is irresponsible and smokes in bed. It has already been proven that if you put the fire out, most owners go back to smoking in bed within six months. The government wasted 80 billion of the 350 billion in the first part of the TARP plan, so they are obviously lousy at fighting fires. Irresponsible lending cannot be resolved with irresponsible spending. That is like using fire to put out a fire, so of course the fire just gets bigger. The answer is simple. Provide loans at 4% fixed to all home owners in America. Freddie and Fannie can buy the paper.
Offer streamline loans (reduced doc) to the 91% that pay on time and the other 9% that are behind must fully qualify. That allows more disposable income for consumerism, which is 67% of our GDP. There is nothing to be afraid of, if the owners are upside down, let the foreclosures happen. In California in the 1990s, we had the worst real estate market since the depression and the free market took care of it then, and will take care of it now. In the 1990s S & L crisis, 2000 banks failed and new healthy ones took their place. That's what should be happening now. Instead, the banking system is shrinking to a few big bloated nonperformers who can't even handle a garden hose.