Bailout Nation

Senator Shelby of Alabama and other economically literate political leaders are walking against a gale-force wind in opposing the government-financed rescue of every failing business concern, because it looks like almost every major entity in the United States is floundering in a flood of bad debt and falling revenues. You have to wonder just how many holes the treasury can plug before it flounders, too.

This weekend, treasury officials are scrambling to concoct a plan to rescue Citicorp, whose collapse financial pundits have been anticipating for months, in which the government, i.e. the taxpayers, will assume approximately $100 Billion-200 Billion in losses on the books, according to sources. The government will be guaranteeing about $300 Billion of mortgages at the troubled institution.

Meanwhile, Team Obama is contemplating a $700 Billion stimulus package to be implemented over the next two years. This will be in addition to the approximately $2.5 Trillion in government interventions to support the crumbling financial system and the additional $2 Trillion in loans given to various banks over the past two years.

At the same time that we are placing ourselves at risk of a treasury default with a complete economic collapse, Argentina style, by bailing out the messes created over the past ten years, our massive structure of government-sponsored home ownership programs is enabling more of the same. The FHA, which was created expressly to help otherwise unqualified buyers afford homes, is in the process of making hundreds of billions of dollars more in shaky mortgages to unqualified buyers, that many financial observers predict will create the need for yet another massive rescue package a few more years down the road.

Right now, it is fashionable to blame something some folks refer to as the "free market" for the cascading financial debacle, yet, were it not for FHA, GNMA, the GSEs, local home buyer programs, and the multitudes of other government props to home buyers, lenders, and builders, as well as the implicit government guarantee of rescue for failing financial concerns, most of these bad loans would never have been made to begin with, and the structured debt based on them with its uncharted and apparently unlimited risk, would not have been created.

Let's put the blame for this debacle where it belongs- on government intervention in economic affairs.

Angry Renters: Our Cup of Bitterness Runneth Over

Well, it looks like our pandering politicians and their desperate contributors, the banks and investment firms, will do whatever it takes to keep housing prices levitated at their current grossly inflated levels, the better to rescue over-leveraged lenders and bankers, investors facing deep losses, and buried homeowners who borrowed over their heads.

The Republicans are determined to bail out the financial industry at any cost to our currency and the economy as a whole, while leaving underwater homeowners to "take responsibility". This is the big problem with the Repugnants- their notion of "free enterprise" and "market capitalism" means rob the population at large in order to dispense Corporate Welfare by the billions to major corporate contributors, and free them from the normal business risk entailed in pursuing Free Enterprise, while passing on the losses to the population at large.

The Dummycrats, of course, are pandering to the Common Man after their usual fashion, by proposing that anywhere from $ 30 Billion in economic stimulus, to $400 Billion in funds to back up troubled mortgages, in a plan endorsed by both Clinton and Obama. The Dimocrats don't seem to be able to grasp that the money applied to propping up greed-crazed borrowers in houses they never had any business buying to begin with, is money taken away from the most disadvantaged people in this country, the extremely poor.

It is also money taken away from the renters of this country, who either couldn't quite afford to buy on the terms offered, or who were dismayed at the types of places they could afford on a mortgage that made sense. Once more, the honest and prudent are bailing out the unscrupulous, the greedy, and all the folks who wanted to Feel Rich for five minutes.

What this means is that people sidelined by the inflated prices will wait that much longer for an opportunity to buy, while their taxes help people like the Park Ridge couple I recently heard of from their neighbor, a friend of mine- they "bought" a house costing $900,000 on an income of $60,000. Such people will now get the benefit of tax-funded programs in which the government exchanges zero-coupon government bonds for the junk CDOs containing mortgages on properties worth half the face amount, or, via a new proposal, government agencies will refinance the underwater borrower via federally-guaranteed FHA loans in which a substantial percentage of the original loan is written down by the lender and a new one written and guaranteed with our tax monies, to the detriment of moderate-income borrowers who will have to pay more in insurance on FHA loans to offset the high default rate of these mortgages.

Market capitalism, permitted to work unhindered by politicians and bureaucrats, is swiftly forcing home prices down to their fundamental level, as determined by local rents and incomes. However, neither the "conservatives" nor the "liberals" will let the market do its work on the absurdly overpriced housing market, to the detriment of both the "free market" that the conservatives love to tout, and to the least advantaged populations that the "liberals" effect to champion.

Let honest market capitalism do its work on unscrupulous lenders and self-indulgent borrowers, so that we Angry Renters can get our chance at honest home ownership.