Congress Feeds, Taxpayers Eat Each Other

Just as you were about to pick up the chainsaw to carve a support beam in half, you get the news that the government is stepping in (again) and you breath a sigh of relief. The kids can stop peeing on the wall now. The wife can mop up the acid spread across the attic floor. Finally the government you have been begging for has stepped up to be of maximum assistance.

Yes the Fed tried mightily, with some progress, to keep the whole system from going under, but what is the collapse of American life as we know it, when compared to the loss of your house. Better you have a house and no economic system, than an economic system with no house, or so goes the theory for those caught up in housing treachery. The Fed was too concerned with the big picture, it's Fed friends (ECB and BOE) too concerned with local inflation, to be of much help to the likes of real people.

The political leadership in Washington has taken note and come to the rescue in the form of a bipartisian aid package. Like most new projects in the works, this will probably go a long way toward doing absolutely nothing for the issue at hand, or nothing in the next few moments between the homeowner having to trash the home, and the sheriff coming to dump the household, little Muffie too, out onto the front lawn.

In short, and still under discussion:

• More money for foreclosure counselors, like $100 million to expand counseling for homeowners at risk of defaulting on their loans



• Tax-exempt bonds to let local housing agencies refinance subprime mortgages.



• $4 billion in grants for local governments to buy foreclosed properties.



• More transparency in real-estate closings to help borrowers better understand the terms.

(N.Y. Times)

I am not sure this is what the average investor thinks they want (or whether it will be the right or the left hand of the taxpayer that is handing cash to the other hand). Ideally what the average person would request is a plan similar to the following, and up for discussion nowhere:

1) Have the government call the bank/mortgage company to hold off on any action for about three months while I get my junk together.

2) Force my bank/mortgage company to refinance me at a lower rate on my fixed rate loan, or a lower rate than my teaser rate, since things have gotten way out of control, what with the payments to Visa for the big screen tv. ("N.C. Final Two babee!!)

3) Roll my two months of $50 payments (with $3000 past due) into the refinance or write it off (because of Bush, Exxon profits, Iraq, Bear who?, Yes You Can, gas prices).

4) Adjust the mortgage down so that it reflects the 40% drop in accessed value, less another 60% for any contingency loss of value. Force the bank to comply, or have the government guarantee the difference, don't really want to get into the specifics or read the documents.

Given the gap between what is coming eventually, and what people want yesterday, one imagines there will be a certain sort of disappointment.

Between all the measures-the finance facilities, debt swaps, lowered rates, Fed window openings, free checks in the mail, contract rewriting, counseling-one imagines that eventually we will see complete doom (as the gold bugs are talking lately) turn into general recession or annoyingingly higher unemployment.

But these past few months should be a joy. We are seeing all the levers of government at work to save us, and were we in certain less developed parts of the world, this would have ended quite differently, resulting in us literally eating each other or installing a true dictator.