the way the bailout money SHOULD have been used

[unblock]

the clear and unequivocal goal of the bailout was to get the financial markets lending again. it was the credit crunch and the ensuing economic calamity that rang the alarm bells and caused the rush to infuse trillions in an effort to prevent a wholesale seizing up of the credit markets.

the initial thought was to buy up "troubled" assets, most notably, mortgage and mortgage-related products that were otherwise likely to default. this was ill-conceived because at best one dollar helps one dollar of assets. there's no bang for the buck, it's throwing good money after bad.

the later thought, largely stolen from those "socialists" in europe, was to buy equity in in financial institutions. that's about a dozen times better, because for every dollar invested, you can lend out twelve dollars at today's far more conservative leverage ratios.

however, the whole idea is still ill-conceived, because we're investing in troubled companies and worse, we're not actually requiring them to lend. in fact, companies are actively DE-leveraging in order to prevent complete failure, or they're hoarding cash to use for acquisitions of failed competitors, so grow at bargain-basement prices.


the real solution, which works on both moral and practical levels, was to let the failing institutions fail, let the failed products default, let those who invested in them pay the price, and to invest the trillions instead in NEW companies, NEW government sponsored entities, with a CHARTER and a MANDATE to lend. fnma and fhlmc would fail, but fnma2 and fhlmc2 would help bring new homeowners into the housing market, buying up foreclosed houses, and putting a floor on home prices.


of course, a better plan would have been to do this over a year ago, when it was obvious to those in the credit markets. or, of course, to not have kept the housing/credit bubble going as long as greenspan did. but that's another argument....

[dkf]

1. The Chinese Govt ordered us not to let Fannie and Freddie fail.

They have us by the you know whats.

[RC]

2. The biggest problem is that that the same criminals that got us into this mess

are handling the "Bail-out" also. It is like the bank robber handling the investigation into the bank robbery. There is no difference because that is what is happening.

[Turbineguy]

3. At this point there are about 1 million houses foreclosed.

Let's see... $700 billion divided by 1 million... that's $700,000

The housing maket has dropped some 20% (roughly) so those houses on average must have been at one time worth $3.5 million each. OK, I got it.