Bailout woes

The irony of the bailout is credit will not ease as hoped by the Feds despite its massive credit-backed, cash injection. As long as home prices continue to fall, banks will remain reluctant to loan to anybody with less than stellar credit and income. And guess what? Home prices will keep falling for at least all of calender year 2009.
The bailout is the latest in a long series of M.B.O. (Management by Objectives) measures. Government is run by the tenets of M.B.O.. These objectives are quantifiable in terms of G.D.P., unemployment and homeownership percentage…. M.B.O. came into full force under the Clinton Administration, which saw fit to boost a hollowing industrial economy by stimulating the housing market. Not unreasonable given roughly 8% of all U.S. workers directly or indirectly work in the housing sector (real estate brokers, furniture, mortgage loans, insurance, appliances, homebuilding, repair, etc.). The Clinton Administration started the housing bubble with his its ZERO capital gains tax for up to $250,000 for individuals and $500,000 for couples. As a result, a tremendous amount of money flowed into housing from other investments subject to higher capital gains taxes. A new cottage industry of fixer upperes bloomed. It was the age of “before and after” for homes which figuratively had their own sort of nose jobs and breast implants. As if the capital gains incentives were not enough, Andrew Cuomo, who headed H.U.D. and Fannie Mae and Freddie Mac loosened credit standards to meet the M.B.O. imperative to increase home ownership. On top of that, leave it to the financial engineers of Wall Street to extend the housing bubble to the Nth degree by passing on the risk to unsuspecting investors/pension plans with complex Mortgage Backed Securities which no one can value within any “ball park”.

So here we are today with the U.S. government reassuring us, “Twelve o’clock and all is well!” with its new M.B.O. solution under George W. Bush, a graduate of M.B.A. boot camp and thus an even greater proponent of M.B.O. than Clinton. But all is not well…the Wild Westesque $62 trillion Credit Default Swap Market is still entirely unregulated…the mythical “lender of last resort” U.S. government remains heavily dependent upon foreign investors who will someday sneer at the world’s largest single country economy by deeming it unworthy of credit. In the meantime, America plugs up the holes of a huge dam with the toothpaste of more credit, akin to supplying drugs to a drug addict suffering severe withdrawals. When will it all implode? I wrote in an earlier post that the Mayan catastrophic year of 2012 may mark the year America declares bankruptcy. I sure hope I was wrong. Until then because of the overnight explosion of the Federal deficit, I see little chance of Obama, whom I presume to be a shoe-in to win the Presidential election, to succeed in overhauling healthcare or any of his ambitious plans of change for the betterment of the American people.

(Forward to 12 seconds to hear this apt Gregory Isaacs tune: “Thief a Man”.)


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One Response to “Bailout woes”

  1. paul nader vets united Says:

    Barack John
    Left and rights of passage
    Black and whites of youth
    Who can face the knowledge
    that the truth is not the truth?
    Obsolete Absolute

    Ron Ralph
    Cruising under your radar
    Watching from the satellites
    Take a page from the red book
    and keep them in your sights
    Red alert Red alert

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