The other day I saw a bearded homeless man in tattered clothing standing by the side of the road with a shopping cart and sign that read "Will Develop Real Estate for Food," which accurately describes the current state of the U.S. housing industry.
The other night on TV I heard President Bush explain why U.S. taxpayers should purchase $700 Billion worth of mortgage-backed securities (the actual value of which cannot be determined by either accounting methods or divination) to prevent the Wall Street financial institutions that own these securities from going bankrupt. Apparently, the Wall Street firms have reclassified these mortgage-backed securities of unknown value as "Toxic Assets" and are determined to dispose of them in the toxic waste dump of last resort, the U.S. Treasury. I believe that this falls under the "Privatizing Profits While Socializing Losses" school of Neo-Con economic theory. All of this along with the disturbing rhetoric coming from the Federal Reserve, SEC, and Treasury, should be enough to scare the trickle down economics out of anyone who's been watching this fraud upon the U.S. Taxpayer unfold.
The hypocrisy of a president and his administration who are the personification of unregulated free market let-the-buyer-be-damned Neo-Con policies that are directly responsible for this financial crisis pleading for a federal bail out of their Wall Street campaign contributors is, for lack of a better term, hypocritical.
A brief history of how the U.S. financial system wound up in this crisis goes back to the early 1990s when Newt Gingrich and his gang of Neo-Cons took control of the U.S. Congress. One of their principle articles of faith was the deregulation of all sectors of the American economy, especially the financial sector. Dick Armey and Phil Graham, who were the financial gurus of the Neo-Con movement, pushed banking and securities deregulation through Congress in the late 1990s, and Bill Clinton signed their bills into law, which overturned the regulatory protections that American mortgage holders and banks had enjoyed since the Great Depression.
In 2000 the Presidency changed from Democrat to Republican, which eliminated the final barrier preventing Neo-Cons from implementing their agenda throughout all facets of the federal government. The economic collapse of the U.S. banking system that we are all witnessing today is a direct result of Neo-Con banking and securities policies that glorified entrepreneurial zeal and eliminated financial regulation wherever possible. To protect the American people from similar excesses in the future, the next president will have to embark upon a "De-Bushification" policy to purge Neo-Con elements from the federal bureaucracy.
Bailing out Wall Street titans who are rich and smart enough to protect their own butts will do nothing to solve the current financial crisis, the root cause of which is homeowners defaulting on their mortgages and walking away from their houses. The obvious and simple solution to this crisis is for Congress to find a way to prevent homeowners from defaulting on their mortgages keeping them in their houses. Now that the administration has taken over Fannie May and Freddie Mac, the U.S. taxpayer already owns mortgage banking institutions that could easily be provided with funding to:
1) Buy up problem mortgages for the actual value of the real estate, which is pennies on the dollar of the original loan amount.
2) Issue homeowners new mortgages based upon the actual value of their real estate with terms and conditions providing an affordable re-payment schedule.
3) Re-sell these revamped homeowner-affordable mortgages on the open market with federal homeowner loan guarantees.
The Wall Street financial institutions that made billions of dollars during the housing bubble issuing and selling mortgage backed securities will sustain substantial losses under this "Homeowner" bailout plan, as well they should. The U.S. taxpayer, on the other hand, will only be paying fair market value for the "toxic" assets and at the end of the day may break even on the deal.
If the Bush bailout plan goes through, most of us will not live long enough to collectively pay off the trillions of dollars in principal and interest necessary to retire the Bush debt, which is the legacy that you will be leaving to your grandchildren for having foolishly voted Neo-Cons into office.
If you are looking for a safe haven to keep your assets in, I highly recommend buying new pickup trucks because they have been deeply discounted by auto manufacturers who can't unload them and, unlike real estate, stocks, bonds, mortgage backed securities, derivatives, commodities, and other financial instruments, pickup trucks will hold their value for a couple of years. Additionally, you will have the peace of mind of knowing where your pickup truck and money is, and what it's worth.
So, how do we stop the red ink from bleeding all over our national books? Well, a good place to start is to vote out of office the gross incompetents who got us into our current financial predicament. Don't be fooled by Fox News or radio talk show hosts who are always trying to blame the other guy, or religious groups peddling superfluous issues that don't get to the heart of the financial problems that we all face.
In these times of economic chaos, your very own financial survival is entirely dependent upon who gets elected to local, state, and federal office. Vote for the smartest one of the bunch in each race in the hope that they just might be able to find a way out of the financial mess that Neo-Con policies have gotten all of us into. Brains matter in electoral politics, and we need political leaders with the intellectual capacity to solve complex problems in perilous times. Nothing less will do.
- Fred Kessler of Carson City is a general contractor.