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The Truth is that until this happens everything you do in Congress to "try to stabilize the housing market" is instead causing household costs to rise precipitously and destroy Americans' personal balance sheets, and if you don't stop it soon, our economy will be forced not into Recession, but Depression, as there is simply no more credit capacity possible.
The Truth is that this whole scheme of bailout after bailout is escalating at warp speed in terms of its cost, and yet it is doing exactly one thing - preventing the stock market from correcting to a sustainable earnings level with financials making honest money instead of swindling municipalities on swaps (as has recently been uncovered in regards to Alabama and elsewhere) and similar "structured products" that are in fact nothing but a gigantic scam. Yet the first of these, Bear Stearns, was $29 billion and created a ramp job in the futures and stock market for a couple of months. This one has a price tag of at least $100 billion and perhaps as much as $1 trillion according to Standard and Poors, yet you were told (and told us!) that this was a $25 billion expense, according to the CBO. You lied to us again and the price of these repeated "stick save" attempts for the markets is increasing at an exponential rate.
The Truth is that Hank Paulson just spent in five minutes half of what it took us four years to spend in Iraq! Further, he spent it to bail out the Chinese and Japanese central banks and investors in foreign lands. You folks kvetch about the war and its cost, well, how about economic warfare waged by these people where we don't even bother to fight back - we just give them all our damn money! How in the hell do you justify such an outrageous transfer of our wealth?
Repeal Paulson's "Bazooka" or force these firms into receivership. Do not allow him to blow the $300 billion we do not have.
As I have noted, split off the current book of business and let it run down; what happens to those debtholders and shareholders happens. Underwrite NEW loans at 30 years fixed, 36% DTI and 20% cash down payments. Guarantee these new MBS with the full faith and credit of the government.
Tell Bernanke to drain the damn swamp and force the other banks, both investment and commercial, to take their marks. Tell Sheila Bair to do the same damn thing with the banks under her control at the FDIC. The FDIC is losing, on average, more than 30% of the asset base in each bank it closes right now. This is a historic high and THE FDIC IS GOING TO RUN OUT OF MONEY IN A FEW MONTHS IF YOU DON'T STOMP ON THIS RIGHT NOW. There are literally DOZENS of banks, including some big ones, that need to be closed TODAY while there is still value in them. Proof of this is found at IndyMac that should have been closed last FALL. There are SEVERAL other institutions, including a couple LARGER than IndyMac, that have even more booked "capitalized interest" from Option ARMs that will never be collected, yet is on their books. THESE BANKS WILL ULTIMATELY GO UNDER, IT IS SIMPLY A MATTER OF WHEN, NOT IF. The longer the FDIC waits the worse the cost will be and THAT promise - the $100,000 deposit insurance - is one you MUST keep. THERE IS LITERALLY A TRILLION DOLLARS OR MORE OF EXPOSURE HERE IF YOU DON'T PUT A STOP TO THIS IMMEDIATELY
After consultation with the FHFA, Treasury and the Securities and Exchange Commission, we feel that this decision will allow investors to digest the news that has been disseminated over the weekend, to interpret the news and the analysis that will be generated on Monday morning and to evaluate the resulting aggregate supply and demand.
Mortgage crisis has Washington putting aside free-market ideology.
Despite decades of free-market rhetoric from Republican and Democratic lawmakers, Washington has a long history of providing financial help to the private sector when the economic or political risk of a corporate collapse appeared too high.
The effort to save Fannie Mae and Freddie Mac is only the latest in a series of financial maneuvers by the government that stretch back to the rescue of the military contractor Lockheed Aircraft and the Penn Central Railroad under President Richard Nixon, the shoring up of Chrysler in the waning days of the Carter administration and the salvage of the U.S. savings and loan system in the late 1980s.
More recently, after airplanes were grounded because of the terrorist attacks of Sept. 11, 2001, Congress approved $15 billion in subsidies and loan guarantees to the faltering airlines.
Now, with the U.S. government preparing to save Fannie and Freddie only six months after the Federal Reserve Board orchestrated the rescue of Bear Stearns, it appears that the mortgage crisis has forced the government to once again shove ideology aside and get into the bailout business.
"If anybody thought we had a pure free-market financial system, they should think again," said Robert Bruner, dean of the Darden School of Business at the University of Virginia.