Did I read this correctly?
Bernake said “If the actions taken to save the banks works, we could end the recession this year”.
This is equivalent to saying if GM sells ten thousand cars more this year, than they did in 2004, they will survive. It is highly unlikely that either one will happen. Keep in mind GM couldn’t make as many cars as they did in 2004, even if they had the market for them. There is no market for them. GM is a zombie kiss them goodbye, they aren’t gonna come back this time.
As for those banks. Most of the (large) banks the government is propping up are so far underwater, they don’t even have to worry about submarine crashes, because subs can’t go that deep. Banks like BOA and Citi are just dragging the economy down with them for as long as they can hold on. There is no chance Citi is going to recover. Throwing more money at them, is sort of like watching a drunk gambler, go to the ATM machine, with his credit card, hoping to win back the mortgage money before his wife finds out what he did. We have wasted enough money on them now. We need to just take over, tell the stock holders sorry you invested in the wrong company, and just get on with it.
We need to stop the cycle of foreclosures. In fact we should forbid any bank receiving government assistance, from foreclosing on a single house for at least six months. Here is why. Most people and by most I mean over ninety five percent of the population, want to keep their homes and will keep paying their mortgage if it is at all possible. Stopping foreclosures in government owned banks wont cost us much. In fact it will probably cost less then continuing to foreclose on millions of homes. The prices of houses is deflating as fast as we can put more homes on the market. If we stopped all the foreclosures tomorrow, it would at least help stabilize the price of real estate. Like I said most people would continue to pay their mortgages. The unemployed could at least not become unemployed and homeless. It would give us sometime to just breath, while the economy gets restarted. The mortgage foreclosure crisis took a couple of years to develop. It will take at least a year to fix. The people most politicians are concerned with saving are, for the most part, the very people and institutions who caused the problem in the first place. These banks had no hearts when people came to them for help. When they had thousands if not millions of homes facing foreclosure, did they do the right thing and try and fix the problem? No they instead sold the loans for profit. When they couldn’t be done anymore, they went to the government for help. Not once did it occur to any of these financial geniuses to look at their policies and perhaps stop the flood of foreclosures. Nope they were to busy golfing at private clubs to bother noticing that they had more houses in their possession than the market could bare.
Playing the blame game isn’t going to solve anything. I could sit here an dtype (like I just did ) that it is mostly the fault of huge banks that got so big they could keep track of what they were doing. The bankers can and have said it was because people bought homes they couldn’t afford. Other will say it is because no one really understood the whole mortgage back securities and so they just kept buying them because they were making money. The fact is many things added up all at the same time and we wound up here. Two million homes were foreclosed on last year and it could be worse this year unless we do something drastic.
Obama ran on change. He said he wants to change the way things are done in Washington. We said hell yea! You go bro! We want you to change the way things are done in Washington too. So lets stop doing it the same way it has been done. Sooner or later the government is going to own most of the largest banks in this country whether President Obama wants to say the N word or not. We have already all but nationalized some banks already. If we don’t get real drastic soon the treasury wont be able to print money fast enough to save what is left. It really is simple if you take off your propella hat for a monet and think freely.
We stop the foreclosures. Just stop making them. Most foreclosed on houses sell for less than half of what is owed on them so what is the big deal? The banks might loss a few million dollars if you add them all up. When we continue with foreclosures, it adds up to billions.
Make adjustable rate mortgages illegal. Take all the adjustable rate mortgages set them at four and a half percent and leave them there. Most of them were made at that rate or lower. You can’t tell me if the bank was willing to make the loan at three percent, suddenly they lose money at four and a half percent.
Repeal the laws that allowed banks to sell these mortgage backed securities. Pretty much everyone agrees this law change made in the last days of the Clinton administration, is the main cause of how we got here. It was illegal before for a reason. Does anyone still doubt that?
Give the SEC some more leeway to kick butt and stop corporate mergers. We used to have antitrust laws in this country that worked. Somewhere along the line it became far to easy to let these huge mega companies take over markets and destroy all competitors. GM and AIG are great examples. If the government is going to own these companies (and it will within a few months) the government needs to turn them into several companies. Maybe next time they wont be too big to fail.
Stop letting companies claim huge profits, when they are really in debt up to the eye balls. Lets be realistic here. If a company does five billion in revenues but racks up ten billion in debt to do it. They didn’t make a (two billion dollar) profit, just because they only had to pay three million of the debt off this year.
There it is! The easy way to solve the problem. Now I am going to go cook dinner.