Pandora’s Box

I’m glancing every once in a while at the Senate Q&A session hearing, “what did you know and when did you know it?”  It’s good to find some of this out and it’s good that they are working on coming up with solutions to the housing and financial system crisis.  But, I still don’t know how you can help someone that may be foreclosed on soon and not go back and help someone that was foreclosed on 3 months ago.  Do you help the guy with 2 houses that he was trying to flip in California and got foreclosed on along with the young couple who was duped into a tricky mortgage they didn’t understand?  Who knows.  Was the lender at fault or was it the borrower?  There are millions of different scenarios.  So, as usual, they (the government) are going to go way overboard and make lending more restrictive while bailing out someone who shouldn’t be bailed out.  Then, you’ll have a young couple with good credit struggling to get a house when they deserve one.  At the same time, someone that should get foreclosed on stays in their home.  That’s my problem with all of this.

There isn’t an easy fix here.  It has to be a combination of solutions.  But, freezing adjusting ARMs (adjustable rate mortgages)?  We need to let capitalism work here.  One of the best ideas I’ve heard is giving potential buyers tax credits.  You let the people with the capital have a reason to use their capital and keep the economy growing as opposed to just sitting on it.  Let’s give buyers incentive as opposed to bailing out the people who took on too much debt. 

I’m keeping my capital liquid while I wait to see what’s a good deal, as usual.  Housing is a good deal, but is it a great deal?  If I was offered some incentive to buy some houses to rent, that may entice me.  Economies move in circles.  Growth slows, then it speeds up.  Bubbles burst and then they become such a good bargain buyers step in.  Stocks in 1982 hadn’t gone up in 18 years.  They were dirt cheap.  Then they ran up for 18 years after that.  Tech stocks were a bubble.  They burst and then they were too cheap to pass up in 2003.  Financials and housing stocks will be that way.  Homes will be that way.  That’s capitalism. 

I agree that something has to be done to help housing.  I’m not arguing that.  If housing and the financial system keep spiraling downward, it affects all of us along with our investments.  Something should be done and it is being done.  I agree with the steps the Fed has taken so far.  They were slow but they are making up for it and soon the economy will start to show it. 

I just believe there needs to be more creativity involved as opposed to saying let’s freeze ARMs that are about to adjust up.  Bail outs and stimulus only cause you and I to pay more taxes down the road when we were acting responsible.  Let’s not forget that this is an election year.  So, throw creativity out the window.  It boils down to pandering.  Democrats want money thrown out of helicopters and everyone to stay in their home and tax the rich at the same time.  Republicans don’t want to seem heartless.  They know these stimulus packages they’re passing aren’t the best solutions.  But, come this fall, they want to be the ones up there saying “I feel your pain.  Look what we did for you.  We helped you keep your home.  By the way, vote for us.”

Frustrating. 

Am I off base here?  Give me your comments. 

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KARL’S TWITTER (www.twitter.com/karleggerss)

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