Really Pissed Off!

After listening to the President and Congress, it is becoming apparent that everyone has missed point regarding turning the Economy around. With any patient undergoing a major trauma, you first must stop the bleeding! In this case, the bleeding is the continuing foreclosure rate increase, which is bleeding the Economy dry. As long as it continues, there is little we can do turn the Economy around. Once we have, then the next major problem is the creation of jobs. You don’t have to be a Harvard Economist to understand the problem. Perhaps we’ve spent too much time with Harvard Economists as they and others keep putting the carriage in front of the horse!

The projected number of foreclosures for 2009 is 2,432,000. If you think that’s bad, how about 8,100,000 over the next four years! The foreclosure rate is up 81% for 2008 and 225% from 2006. President’s Obama’s American Recovery & Reinvestment Act has yet to deal directly with this issue. There are some proposals which attempt to nibble around the edges, but I have yet to hear what must be done. Over 700 billion dollars has been or is being thrown at the banking and financial institutions. So far, under the TARP, the banks have yet to make an attempt to start lending and have tucked the money away for a “rainy day!” Initially, the TARP was designed to buy up as much as the “toxic investments” which are strangling these institutions. Without any strings or provisions, the Bush Administration threw the first 350 billion dollars at these institutions and with the request of the incoming Obama Administration, the other 350 billion following it could also go into oblivion. If one more dime is delivered to these institutions, the Administration and Congress should attach a provision that if any bank accepts funds from TARP II, they are obliged to renegotiate, on an individual basis, any mortgage they plan to place into foreclosure. The Federal Discount Rate is .50%. A year ago, it was 4.0%! With 700 billion thrown into the banking industry over the past three months, we have to demand “Where is the money?”

It’s time for the banks and financial institutions to feel the pinch of the Economy. So far, we’re provided them a lifeline and awarded them for “bad behavior!” If the government demands that some mortgages are to be renegotiated, then it should mandate that all mortgages be renegotiated. It stands to reason that the Economy is going to get worse before it turns around and that means more job losses. For those people who can presently afford their present mortgage, there is a good chance that many will fall by the wayside over the next year as the unemployment rolls increase. The key to economic recovery is to stop the mortgage crisis and to create jobs. The American consumer will play the most important role in accomplishing the recovery. Until he or she begins to spend money, the Economy will continue to fail. When there is no Demand, Supply will stop and Corporate America is finally discovering that fact! Right now, we “own” Fannie Mae and Freddie Mac. If they want more money from TARP II, then they must try to renegotiate any foreclosure. There are a large number of home owners who will not be eligible for this bailout, but it will separate those who can and cannot. We have a major investment in nearly all of the major banks in the United States. If we set the 30 year mortgage rate at 3.5% for the next year, we can slowly get out of this disaster. If the banks cannot handle the paperwork, how about creating jobs to do it? Let’s get something for our money. Is this nationalizing the banks? No matter what you call it, when the government steps in to bail them out, it’s nationalizing the banks. They can get the government out as soon as they pay the loans off. This will limit the number of foreclosures and find the bottom of the Economy, and that’s where we want to get to as quickly as possible. Otherwise, we’ll continue this economic freefall in which we presently find ourselves!

If all fails, here’s one solution……………..