Herbert Hoover Copycats, Japan's 'Lost Decade' Copycats

The frustration of Obama's natural Hooverism is excruciating. I realize why Obama and Summers are incapable of acting on the glaring lessons of economic history but still, if we don't do so it will be so painful for nearly all of us. Very soon, for you, for your aging mom and dad.

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Well, it won't be painful for the elite, not for Michelle, Barack, not for Penny Pritzker or Pete Peterson, but for all of us who needed -- and I mean needed -- their soon-to-be shredded Social Security (yup, that's the plan) and Medicare/Medicaid (yup that's the plan too: "Obama said in January that the [fiscal deform] summit would have a special focus on Social Security, Medicare and Medicaid.").

And all for what? To bail out the biggest, most irresponsible banks. Read Ismael Hossein-Zadeh's column and weep again:

Faced with the financial meltdown of the Great Depression, the Hoover administration created the Reconstruction Finance Corporation that poured taxpayers' money into the coffers of the influential Wall Street banks in an effort to save them from bankruptcy. Like today's Bush/Obama administrations, the Hoover administration used the "too-big-to-fail" scare tactic in order to justify the costly looting of the national treasury. All it did, however, was to simply postpone the day of reckoning: almost all of the banks failed after nearly three years of extremely costly bailouts schemes.

In a similar fashion, when in the mid- to late-1990s major banks in Japan faced huge losses following the bursting of the real estate and loan-pushing bubble in that country, the Japanese government embarked on a costly rescue plan of the troubled banks in the hope of "creating liquidity" and "revitalizing credit markets." The results of the bailout plan have likewise been disastrous, a disaster that has come to be known as "Japan's lost decade."

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Weekly Audit: Geithner's Terrible, Horrible, No-Good, Very Bad Bailout

 

by Zach Carter, Media Consortium MediaWire Blogger 

In this week's Audit, we're examining Treasury Secretary Timothy Geithner's thoroughly uninspiring bank bailout plan, which fails on almost every level. What's more, some of the most insightful (and stinging) critiques of the proposal are coming from progressive media.

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Foreclosure Crisis: A Demand-Driven Solution

A Letter to President Barack Obama

Demand Driven Solution for the current housing foreclosure crisis: Using Rent-to-Own Mortgages to combat the foreclosure problem and stabilize the housing market.

Dear Mr. President,

In finding a solution to the current foreclosure problem, the government should be concerned with some of these questions:

1.    What measures would help the people already in foreclosure without encouraging those Americans who are still paying their mortgages promptly to default on purpose to qualify for principal-reduction or rate/term modification?
2.    Which measures are more likely to halt the steady price decline in the housing market and stabilize the market?
3.    Which measures would be most effective and transferable to the private sector?

I tried to answer those three question with the idea of government backed Rent-to-Own Mortgages.  In which people that are currently facing foreclosure could qualify to access the money to buy back their property from the Bank through the rent-to-own mortgage.  

I believe that this little idea could be helpful in assisting your team to find effective solutions to our current housing foreclosure crisis.  If applied, a Rent-to-Own Mortgage program would discourage people from manipulating the system by defaulting on purpose, while it gives immediate help to those families loosing their homes.

Before going further, I want to introduce myself to you.  I am 37 years old economic and financial professional currently serving as the Chief Financial Officer of a Los Angeles based community development and housing service organization.  A non-profit dedicated to building affordable housing, providing community sensitive lending, and helping stabilize communities through pre-purchase and post-purchase homeowners' financial education.  I have actively worked in the financial industry for the past 17 years.

While my lengthy financial industry years don't make me a unique expert on finances, my hands-on experience helping this community development and housing service organization does.  In the past 21 months, I have witnessed the organization help more than twenty thousand homeowners navigate through foreclosure either getting their loans modified, doing short-sales, or accepting foreclosure and relocating into rental properties.  

Housing is a basic necessity to every American family.  Whether they are buying or renting the properties, every American family needs housing.
 From experience trying to relocate families displaced from their homes, I realized that demand for rental housing in this market has skyrocketed in many areas of the country.

Looking at the market within the areas our clients wanted to relocate, we found a serious shortage of rentals but an abundance of REOs (foreclosed properties).  This fact is the main basis for the idea I am going to present in this letter - rent-to-own mortgages provided to all Americans utilizing the TARP II funding.  

While the demand side of housing-purchases has been declining speedily, supply for housing keeps increasing (with many banks' balance sheet seriously burdened with REOs).  The same cannot be said about the demand for rental-housing because it has increased significantly while supply of same has remained constant.  This risen demand for rental properties across the nation now presents the government with one singular opportunity to step in and satisfy this demand while at the same time stimulating demand in the housing market through a federally backed "Rent-to-Own" mortgage program.  

Rent-to-own Mortgages:
This mortgage should be offered through HUD, Fannie, Freddie, or other agencies; and should offer the mortgages through non-profit housing service organizations throughout the country that would also be responsible for the "case management" part of the "rent-to-own" mortgage program.  These mortgages should be structured in a way to attract private capital into the program too by specifying reasonable parameters and guidelines that make it a profitable venture (even for the government) and do not reward irresponsibility by borrowers or homeowners.

Potential Impacts of this program:  
Some of the potential impact of this program apart from the fact that it would create millions of new jobs for property management, property rehabilitation, and financial and lending services jobs include the following:

1.    Neighborhood Stabilization (because it would prevent cases of abandonments, and neighborhood blights).
2.    Stabilizing the housing market (by creating market demand to absorb the increases in supply due to foreclosures).
3.    Preventing further foreclosures as banks and financial institutions copy from the government program and start their own programs that would transform non-performing loans on the balance sheet into performing current investments.
4.    Helping American families in trouble at their time of need by giving them shelter even when the whole system was against them.  

I do not believe that this alone is enough to solve the housing crisis or financial crisis; however, I think that it would be a reasonable approach that would require minimal sacrifice from the American Taxpayers and potent minimal social moral hazards.

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Is Geithner's Wall Street bailout running out of gas?

While Treasury Secretary Geithner doesn't seem to be getting it, many others are.

As recently as today, U.S. Treasury Secretary Tim Geithner continues to make pronouncements of a "private-public partnership" (his vision for the follow-up proposal on TARP I, originally implemented by the Bush administration in the fourth quarter of '08) which will, effectively, expand the $350 billion, second portion of former Treasury Secretary Henry Paulson's Wall Street bailout program to $2 trillion: "Geithner Reassures G-7 on U.S. Financial Rescue Plan."

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Real Bipartisanship: Waters and Graham for Nationalizing Banks.

Hmm-is real bipartisanship taking root? to nationalize the banks? Looks like it. Sen Graham and Rep Waters appear onthe same page-nationlize the banks to make them lend to the people, etc.. Moreover front page stories in the NYT and WaPo on the banks and the Swede policy are pushing this notion into the mainstream. Time for Geithner, Schumer and the rest to get on board. Krugman says its cheaper this way than spending trillions to attempt to keep bans private. This is bipartisanship dont mind seeing.

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