Although I am typically against government intervention in free markets, I could favor a bailout package if the legislation actually fixed the problems that caused our current housing and banking crisis.
The government needs to pass good regulation rather than bad regulation. The community reinvestment act was part of what led to this housing bubble. The government forced banks to lend to unqualified low income people, and minorities.
Historically, home ownership had been steady around 64% from 1950 until the 1990's.
Home ownership was up from 64% to 69% from 1995-2005....The same time frame that Clinton expanded the Community Reinvestment Act and Bush went on his push for minority home ownership. But the CRA helps EVERYONE right? Even the poor white people, right? So they should have seen an equal boom from the housing market going up.
Well, not exactly:
Race change in home ownership since '94
White +8.28%
Asian American +17.15%
Native American +12.57%
African American +13.59%
Hispanic or Latino +20.14%
That said, I don't blame minorities for this, I blame the government officials who are more interested in getting campaign payoffs than doing things right. There are plenty of those in both parties.
If they wanted to increase low income home ownership it should have been done the right way, by making more blue collar jobs available along with better educational opportunities.
So what should we do?
If it were up to me I would:
Freeze foreclosures for six months. Keep people in their houses. This provides many benefits. Banks aren't stuck with depreciating assets on their books, people will maintain their homes instead of being thrown out on their butts, and it provides some stability.
Force banks to open up their balance sheets to one another. Banks aren't lending to one another because they're scared of what kind of garbage the other guy might have hidden on his balance sheet. This means the "Off balance sheet" type stuff needs to be brought into the daylight for everyone to see. The credit default swap market needs some sunlight and deregulation as well.
The federal government buying bad mortgages might not be a bad idea. They shouldn't have to buy them at their former market price though. Something like 75% would be fair.
Banks should be forced to use that cash to re-leverage themselves.
Paulson should be forced to step down. The conflict of interest he has is rather large.
Banks should not be allowed to wrap up and resell mortgages.
Consider a means tested bailout of consumers. By that I mean, if someone is too poor to every pay a mortgage, or too rich to need help, don't consider them. For the others, force banks to renegotiate mortgages with these people. Perhaps a direct refund check could be used to help these people as well.
I don't like the idea of helping people who made a mistake, but if we're going to have a bailout, I'd rather the money go to the middle/lower class people who are having trouble with mortgage payments than the banks who were part of this problem in the first place.
If the problem really is the US mortgage market, we could fix it pretty easily, much cheaper than handing a blank check to Paulson.
Long term stuff I'd do for the economy:
Repeal the Community Reinvestment Act, and the other 'Affirmative Action" housing programs. Require 10% down (at least) to buy a house.
Cut military commitments overseas. Make it known that we'll use the "Vir War Doctrine" from now on, which states:
"We're not going to invade you. We are no longer the policemen of the world. If your country attacks us, we'll simply drop large bombs on you until all your people are dead."
Make "Affirmative Action" programs for school based on family income rather than race.
Put a tax on exports. Other countries are cheating the "Free Trade" agreements by doing this, so why shouldn't we?
Start a national program to make blue collar jobs available to American workers again. Punish companies that produce overseas rather than at home. If need be, use a tariff. It is time America started making things again, instead of buying things from foreigners on credit.
Finally, many of the politicians pushing a bailout bill are bankrolled by the financial institutions. other politicians pushed the opinion that there were 'no problems' at Fannie Mae and Freddie Mac in 2004 when others were asking for stricter regulations.
When is America going to wake up to all of this? Will people have to lose everything to start caring about how their government is run?
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12 comments:
What would you hope to accomplish by taxing export? It's also pretty contradictory to tax exports and try to increase domestic production at the same time.
Somehow, I doubt the entire country waking while television continues to exist. I'll add social networking sites to that too (DIE MYSPACE, DIE).
No offense to you or other intelligent Americans Vir, but my experience from living there is that the average American person is extremely ignorant. On top of that they are lazy. So no knowledge and cba to learn. It's a terrible combination.
So yes, it is going to take a massive catastrophe to get people to wake up and start asking questions.
I'm kinda hoping no bailout goes through and some kind of civil/criminal justice is dealt to the leaders of these companies.
And the feds really need to take their their fat little fingers out of the free market.
Nabukun
Very interesting and well reasoned proposal. I'm a frequent reader of WoWRiot and decided to finally check out your blog over here. Quite happy I did-be interesting to see just how much the House listens to its constituents when it comes to further proposals.
Naked News Empire.... hardly naked.
You should talk about how much of a screw up sarah palin is lawl.
And how much the republicans love spending.
Economic freedom expands the prosperity pie; government can only divide it up. That is why Republicans advocate lower taxes, reasonable regulation, and smaller, smarter government. That agenda translates to more opportunity for more people. It represents the economics of inclusion, the path by which hopes become achievements. It is the way we will reach our goal of enabling everyone to have a chance to own, invest, and build.
This is from the republican platform. http://www.gop.com/2008platform/economy.htm
Smaller government regulations Vir. I love watching Republicans scramble for a bailout when its against your ideal.
Many of the things on your list would be accomplished by implementing the Fair Tax. Seriously.
~Reason
You should talk about how much of a screw up sarah palin is lawl.
And how much the republicans love spending.
Oh, Democrats aren't totally fucking up the entire spending process by allowing social security to still be social? In my opinion FDR was one of the worst presidents this country has ever seen, and he is just as dumb as the rest of you today.
Liberals have absolutely no right to talk about any type of spending when there are so many efforts opposing the privatization of social security.
Smaller government regulations Vir. I love watching Republicans scramble for a bailout when its against your ideal.
What caused the crisis in the first place? Oh, yeah, affirmative action. Who supports affirmative action? Liberals. It's pretty hard to stick to one ideal when you have a force opposing everything that is done. We wouldn't have an issue here if we didn't have a party of minorities.
That's right, all Americans should be white and rich!
The rest should be exterminated, Hitler-like.
you have to consider that home ownership grows more for people who were more behind.
you should add the total percentage of white, asian, ... who are home owners.
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