I think the current bailout would stop the bleeding, temporarily. The problem is nothing much will have changed and the circle will start over again. If they remove the bad debt the banks are holding in mortgage assets (mostly), banks would be inclined to start offering more credit. A couple years down the road, someone (HUD, governor, banker) will start screaming for affordability or to increase the % of homeownership, riskier programs come to the market, and no one is overseeing.
Personally, my family and friends have been hit hard by this. We are both in new contruction/mortgage banking, and all of my friends (other than softball) are mortgage bankers. My best friend and I laugh (hesitantly) about this all the time. We both predicted
exactly this and that there would be 5 banks left standing in the end. We were only off by 1, there are 4. We aren't the ones with Masters or PhD's running the secondary markets for a global investment bank, but we're the ones that got laid off. Sick, but funny.
This was the response from our Congresswoman:
First, I am convinced that the Congress must act quickly and decisively in order to avert further disaster and stabilize the situation. However, I have very serious concerns about the plan for recovery that has been outlined, and I will tell you why.
1. Our first responsibility is to the taxpayer, not Wall Street. There are alternatives being offered that would allow Wall Street to work out their problems rather than taxpayers bailing out Wall Street. Those are the solutions we should be seeking.
2. Lack of oversight is one of the reasons we are in the crisis we are facing today. The plan as proposed does not have that oversight. Too much power is left in the hands of one person. We should immediately impose transparency, oversight and market reform.
3. There is too much opportunity for those who got us into this problem-Wall Street executives-to benefit, not pay for their mistakes.
4. Too much private capital is sitting on the sidelines during this crisis. We should give tax relief that can help companies free up capital. We should temporarily suspend dividend payments by financial institutions and cut capital gains to encourage the market.
This problem cannot be corrected by passing a bill by the Congress. I believe the changes I have outlined will immediately help stabilize the situation, but the creation of a blue ribbon panel with representatives from Treasury, SEC and the Federal Reserve Board should be immediately named to bring recommendations for the new administration and Congress so that we will have the changes necessary to continue improving our economy throughout the coming year.
Lastly, economic recovery should include a real energy policy that allows drilling for American independence, conservation, and investment in alternative forms of energy such as wind, nuclear and solar energy. Energy independence and job creation is the best stimulus our economy could have.
