How the mortgage bailout has simply lengthened a recession.
Modify it baby.
The Obama administration loves to tell you how bailouts and mortgage modifications have stabilized a paralyzed industry. This is simply not true. Throughout history it has been proven that only truth can set you free, and this applies to finance as well. When Obama and the Sec. of the Treasury decided to prop up housing by creating special loans and incentives for less than reputable buyers, they have only lengthened the amount of time it will take for a market correction. Because once again, there are false positives. The housing industry has not settled, it has simply been buffered. These are not one in the same.
Any real estate agent worth their merit will tell you that there are cyclical market fluctuations. Dabbling in the system, as the government did with Fannie/Freddie (giving less desirables loans to buy homes). with government regulations and quotas simply makes the system inoperable. All markets fluctuate. That is how bad assest and losses are weeded out. You can't keep giving 10th place contestants trophies.
The way to help the 'mortgage crisis' and the economy in general would have been to restructure the loans of the top 25% of mortgage holders based on payment history, loan amount and credit rating. Why you ask? Because those would have been the individuals to make the best use of the new found assets; creating businesses, growing businesses and pumping high-value into the economy. By propping up the lowest of the low for the numeric sake of the industry, we have simply created another issue.
But why was the correct move not made? Very simple. There are more people with credit problems than credit successes. Those who were responsible get to bare the brunt of failure in others: cash for clunkers, TARP, stimulus checks and the like.
History will tell you that America is in for a rude awakening. The only way to resolve the mortgage industry and financial sector is to MAKE MONEY EXPENSIVE. This means, raising interest rates dramatically. Look for the FED to rack up the rate big time post 2010, because that is the only way to correct financials. Cheap money means those who shouldn't can, and expensive money means that you need to plan before you ask for a loan. I'm sure we'll hear lots of crying from the masses when the FED rate is 18% but that is what is necessary and that is the only way to clean this mess up. Next time government, keep your hands out of it and let the market be the market.
The Obama administration loves to tell you how bailouts and mortgage modifications have stabilized a paralyzed industry. This is simply not true. Throughout history it has been proven that only truth can set you free, and this applies to finance as well. When Obama and the Sec. of the Treasury decided to prop up housing by creating special loans and incentives for less than reputable buyers, they have only lengthened the amount of time it will take for a market correction. Because once again, there are false positives. The housing industry has not settled, it has simply been buffered. These are not one in the same.
Any real estate agent worth their merit will tell you that there are cyclical market fluctuations. Dabbling in the system, as the government did with Fannie/Freddie (giving less desirables loans to buy homes). with government regulations and quotas simply makes the system inoperable. All markets fluctuate. That is how bad assest and losses are weeded out. You can't keep giving 10th place contestants trophies.
The way to help the 'mortgage crisis' and the economy in general would have been to restructure the loans of the top 25% of mortgage holders based on payment history, loan amount and credit rating. Why you ask? Because those would have been the individuals to make the best use of the new found assets; creating businesses, growing businesses and pumping high-value into the economy. By propping up the lowest of the low for the numeric sake of the industry, we have simply created another issue.
But why was the correct move not made? Very simple. There are more people with credit problems than credit successes. Those who were responsible get to bare the brunt of failure in others: cash for clunkers, TARP, stimulus checks and the like.
History will tell you that America is in for a rude awakening. The only way to resolve the mortgage industry and financial sector is to MAKE MONEY EXPENSIVE. This means, raising interest rates dramatically. Look for the FED to rack up the rate big time post 2010, because that is the only way to correct financials. Cheap money means those who shouldn't can, and expensive money means that you need to plan before you ask for a loan. I'm sure we'll hear lots of crying from the masses when the FED rate is 18% but that is what is necessary and that is the only way to clean this mess up. Next time government, keep your hands out of it and let the market be the market.
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