Virgil
09-22-2008, 08:07 AM
This is the man I listen too and this entry in the A&E forum is about promoting this author as an authority. The mass media will cooperate in giving stage to all those that support and diminish the outcries of the opposition to what looks to be inevitable.
Ritholtz does have a book called Bailout Nation - http://www.amazon.com/exec/obidos/ASIN/0071609059/thebigpictu09-20. One of the thoughts he presents is that the government should have let Chrysler fail and downsize to a leaner and meaner innovative competitor. The innovation from a smaller Chrysler might have been inspirational enough to prevent the disaster that that GM and Ford are today.
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From http://bigpicture.typepad.com/comments/2008/09/fixing-housing.html#comments
Fixing Housing & Finance: 30/20/10 Proposal
Monday, September 22, 2008 | 07:30 AM
in Bailouts | Real Estate | Taxes and Policy
A Modest Proposal: The housing crisis worsened over the summer of 2008, prompting Congress to debate various bailout proposals. But the housing market worsened, raising the default rate on mortgages. The entire inverted pyramid of derivatives built on top of the mortgage market further worsened, adding yet more pressure to the credit crisis. The bankruptcy of Lehman Brothers and the nationalization of AIG were the results.
The response to this financial crisis from the Treasury Secretary Hank Paulson borders on Insanity: An outrageous trillion dollar plus bailout, with the potential for unlimited expenditures at the behest of the Treasury Secretary. It is a terribly expensive plan, one that prevents judicial or administrative or budgetary review. It is fraught with moral hazard, rewarding bad judgment and excessive risk taking. It punishes the prudent and rewards the profligate.It focuses on all the wrong issues.
Worst of all, it is unlikely to work.
Most of the current solutions under discussion amount to throwing obscene amounts of money at the problem, rather than recognizing what the key issues are.
These approaches have several fundamental problems. The goals are less than desirable: 1) they attempt to keep people in homes they cannot afford; 2) The Paulson plan takes bad loans off of the books of poor lenders, and dumps them onto taxpayers; 3) They maintain price supports for homes that remain significantly over-priced.
At the heart of the $700 billion dollar unlimited finance Paulson bailout is the desire to move weak performing or poorly made loans off of the books of the lenders who made them and onto the taxpayers back (likely via the FHA). To understand the folly of the this housing bailout, one must grasp the magnitude of the prior housing boom, as well as the historical norms that exists in the American housing market.
The current proposal moves bad mortgages from the irresponsible lenders to the innocent. It punishes every taxpayer who was prudent, and every homeowner that behaved in a responsible manner. It eliminates the sanctity of contracts, and allows judges to “cram down” mortgages.
These may be desperate times, but they do not call for ill thought out, desperate measures. Rather than merely criticize the $700 billion dollar unlimited finance Paulson plan, I would instead like to propose an alternative approach, one that costs much, much less, and is more likely to be effective: The 30/20/10 Proposal.
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Ritholtz does have a book called Bailout Nation - http://www.amazon.com/exec/obidos/ASIN/0071609059/thebigpictu09-20. One of the thoughts he presents is that the government should have let Chrysler fail and downsize to a leaner and meaner innovative competitor. The innovation from a smaller Chrysler might have been inspirational enough to prevent the disaster that that GM and Ford are today.
=================
From http://bigpicture.typepad.com/comments/2008/09/fixing-housing.html#comments
Fixing Housing & Finance: 30/20/10 Proposal
Monday, September 22, 2008 | 07:30 AM
in Bailouts | Real Estate | Taxes and Policy
A Modest Proposal: The housing crisis worsened over the summer of 2008, prompting Congress to debate various bailout proposals. But the housing market worsened, raising the default rate on mortgages. The entire inverted pyramid of derivatives built on top of the mortgage market further worsened, adding yet more pressure to the credit crisis. The bankruptcy of Lehman Brothers and the nationalization of AIG were the results.
The response to this financial crisis from the Treasury Secretary Hank Paulson borders on Insanity: An outrageous trillion dollar plus bailout, with the potential for unlimited expenditures at the behest of the Treasury Secretary. It is a terribly expensive plan, one that prevents judicial or administrative or budgetary review. It is fraught with moral hazard, rewarding bad judgment and excessive risk taking. It punishes the prudent and rewards the profligate.It focuses on all the wrong issues.
Worst of all, it is unlikely to work.
Most of the current solutions under discussion amount to throwing obscene amounts of money at the problem, rather than recognizing what the key issues are.
These approaches have several fundamental problems. The goals are less than desirable: 1) they attempt to keep people in homes they cannot afford; 2) The Paulson plan takes bad loans off of the books of poor lenders, and dumps them onto taxpayers; 3) They maintain price supports for homes that remain significantly over-priced.
At the heart of the $700 billion dollar unlimited finance Paulson bailout is the desire to move weak performing or poorly made loans off of the books of the lenders who made them and onto the taxpayers back (likely via the FHA). To understand the folly of the this housing bailout, one must grasp the magnitude of the prior housing boom, as well as the historical norms that exists in the American housing market.
The current proposal moves bad mortgages from the irresponsible lenders to the innocent. It punishes every taxpayer who was prudent, and every homeowner that behaved in a responsible manner. It eliminates the sanctity of contracts, and allows judges to “cram down” mortgages.
These may be desperate times, but they do not call for ill thought out, desperate measures. Rather than merely criticize the $700 billion dollar unlimited finance Paulson plan, I would instead like to propose an alternative approach, one that costs much, much less, and is more likely to be effective: The 30/20/10 Proposal.
<snipped>