On MTP the Treasury Secretary was on. He was saying that the govt will buy the "illiguid assets" the financial institutions are holding and that then the govt will hold them and sell them, maybe a few years down the road. Now, I know Tom Brokaw is a politics guy not a finance guy, but I wish he would have asked questions like:
1. Mr. Secretary, what makes you think that people will want to buy these "illiquid assets" in the future?
2. It is thought that this bail out will cost taxpayers $500 to $1T, my question is how do you know that since the problem that caused the crisis in the first place is the fact that no one knows how much those "illiquid assets" are worth?
I wish Hank would be straight with us and tell us that there will be a write off against the U.S. Treasury and that thoses "illiguid assets" will never be sold, much less at a profit like want us to believe.
I hear that Dems want this bailout to be contigent on capping CEO pay. I agree.Wall St. will have to decide whether it is capitalist or socialist. If they want the bailout, they are socialists and can not argue that the free market should determine CEO compensation. If they insist the free market regulation CEO pay, then don't accept the bailout.
For the long term:
1. Privatize Frannie and Freddie.
2. Get rid of the home mortgage deduction.
3. Stop telling people that buying a home is equivalent to the American dream, renting is fine in the 21st especially when people change jobs and careers and every 5 or 6 years. This is not the 1950s anymore when everything was nice and stable.
4. If we are going to have regulation, then updating them would be good. Rather then depression era regulations, let's have 21st regulations.
5. Don't allow firms to have 40 to 1 leverage, but let's regulate the Fed too, why should a bank that gets $1 in deposits be able to make $9 dollars in loans?
6. If you make a loan to someone you know can't possibly pay it back and they declare bankruptcy, you lose, the bankpruptcy court will decide the terms of future payments. It's not the end of the world. I know people who declared bankruptcy who managed to keep their cars because the judge and modified the terms of the loan in order for the person to be able to keep it. There is no reason not to do the same with homes in some cases, of course.