Wednesday, October 01, 2008

I am glad the bailout failed here are some better ideas

I do realize this is a little off topic for a personal technology focused blog, but I think the scope of the matter is broad enough to warrant some discussion, or at least some opinion. The companies that have been complicity playing on cheap credit extended to those that could not afford it and thriving off of the associated rapid appreciation of land that landed excessive amounts of cash in the hands of most everyone that glad handed the whole process along are due. The bell is tolling for the greedy and they are hoping that their ability to peddle fear will be effective enough to get congress to barrow money from each and every American to pay for their folly.

I am not going to say that semi-innocent people such home construction workers, and other associated trades that have lured too much of the population away from productive jobs to support this artificially over heated real estate boom aren't going to be put through hard times. I just don't believe that there is any chance of that money having a "trickle down effect". 700 billion is a lot of money, and it will likely vanish like water on sand. It will not help those struggling to stay in their home find a solution that allows them to gain equity and pay down the principle through partial loan forgiveness (say the value that the land has lost now that everyone is waking up to how inflate real estate has gotten), or any other innovative "help the people" initiatives out there.

For people that bought several houses speculatively there should be some consequence, but not necessarily loosing their primary homes (that are likely the collateral of several other homes). Letting the bank have the speculative properties and erasing the loans, (and the speculators are out all the costs that they have spent getting into those homes) would be another program that I could get behind. The banks could find themselves in the unlikely position of trying to rent houses, but there is demand out there in many markets. I realize this is pretty far out and completely unlikely to boot, but there are ways that we could minimize the damage overall, while not requiring a bailout. This would require actual hard work and true human/honest interactions, but the sting of being out $10-20k or more has to be far less then finding yourself out of home and filing for bankruptcy due to defaulting on several loans simultaneously. This would be so completely out of the character of banks and people in general, I cannot imagine a world where this happened but leasing loan forgiveness properties to property management companies that get to keep the profit between what they rent the land for and what they pay for it would drive efficiencies (property management companies are unlikely lease land they couldn't rent for a profit etc).

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