I suspect that the bailout will do more harm than good, like "aiding" an alcoholic by giving him booze. It perpetuates the moral hazard produced by government guarantees that created the problems in the first place (http://tinyurl.com/5yc4fk). It acts as an enabler by giving more money to opportunistic lenders who assumed they'd be bailed out. And of course the politicians made a bad bailout bill worse by adding in tax breaks for stock-car racers, movie producers, "alternative" energy, etc. Then they insisted that all health insurance must cover mental illness, a requirement that will launch an orgy of fraud and make health insurance unaffordable for millions. The conceit of the anointed knows no bounds.
Huh. That "tinyurl" came along for the ride. I'll leave it in and see if it works.
I like the first commenter, too:
elko.mike
Location: NV
Reply # 1
Date: Oct 8, 2008 - 12:53 AM EST
Subject: Thanks John
My sense since this started was that there were still lenders and borrowers out there. The problems were created when government decided that lending institutions should be in the affirmative action business.
The twin problems of bad loans, which we all get, and inflated properties follow. Inflated properties are a consequence of Fannie and Freddie lending at a rate lower than is justified by the risk. Why not? Congress (er taxpayers) will bail them out. Home buyers are limited by their monthly payment. So lower interest rate means that sellers can ask a little more for the home.
So a consequence of the low rate loans are inflated property values, which caused a bubble. Then all of these institutions found leveraged financial devices, which are good as they cover risk, but are problematic as they are built upon a housing bubble pushed upwards by Fannie and Freddie. When the housing prices began to correct due to default the leverage went the other way. As real estate is somewhat inflated the reverse leverage will be painful.
No comments:
Post a Comment