American Elephants

And a Growing Crisis of Confidence As Well. by The Elephant's Child

Having addressed the “greatest economic crisis since the Great Depression” with a $787,000,000,000 stimulus plan that will put an additional $8 into a worker’s weekly paycheck,(“Making Work Pay”, also known as a tax cut) President Obama has turned his attention to the housing crisis.

Another $75,000,000,000 will be allotted to subsidize select mortgages.  To keep the expenses from ballooning  well beyond that paltry sum, some folks “will pay more in taxes so that others can pay less for housing” as economist Alan Reynolds remarked in the Wall Street Journal today. He pans the plan here. Another editorial points out that re-default rates are 55% after six months.

The reaction to the mortgage bailout from the Chicago Board of Trade and CNBC’s Rick Santelli has been all over the internet.

Apparently people found the rant inspiring, or at least comforting, to know others feel the same way.  Markets have not given the plan a rousing cheer.  Today marked a new low, down nearly 50%.

Stan Liebowitz, Ashbel Smith Professor of Economics at the University of Texas said:

The government still can’t keep its hands off the housing market, even after its previous interventions wound up leading to our current economic problems.  Obama’s plan lowers mortgage rates… to just about everyone, which is just another stimulus program in a different guise that will hardly imlpact house prices.  The plan rewards the homeowners who took out the worst mortgages, whom it defines as “at risk,” with interest rates that can be as low as two percent, less than the best mortgage applicant can receive in the market.  It plans to lower monthly payments even for homeowners who are current on their mortgage and have not had a change in circumstances, if they are deemed to be paying too much or the house is underwater.  In spite of its rhetoric, the plan rewards speculators and people who lied about their income on their mortgage application.  Read the rest here.

Beyond that, the banks have not been bailed out yet, and the car companies  in Detroit are awaiting funding.  And it seems like the rest of the country has it’s hands out.

So, do you want to lean into the crisis, learn all you can?  Or do you find it too scary?  We cannot do much right now, except to call our congressional representatives.  But you can learn about what is going on, you can educate your  family, friends and neighbors.

We have this situation because our congressional representatives did not read the bill, but just listened to the siren call of “Crisis.” Without learning that there was no haste, that they didn’t have to act without giving the public a chance to respond, they responded emotionally to the fellow who was crying “crisis”  in a crowded theater.

Funny, among those old sayings from your grandmother are “Haste makes waste” and “Look before you leap.” Plain common sense.  It’s what forms the guardrails of life.


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