The more and more I read about this bailout the more I am convinced our so called "leaders" haven't a clue. The latest is Bernanke's comments that the government should buy all that toxic waste at a price close to the "hold till maturity value". So instead of buying this crap at market values they are proposing to buy it basically at full price or what would have been full price had the market not imploded. There reasoning is that the prices we are currently seeing are "fire sale" prices and they don't reflect the "actual value". Are they freaking kidding me?? They really believe those 700 sq/ft shacks in Compton are worth $500k. This is beyond insane.
News Flash Mr Bernanke, the current fire sale prices are still more than most of this stuff is worth! They are attempting to keep homes unaffordable in the mistaken beleif that they really are worth that much. Even though very few people could afford them under normal underwriting standards.
They would be far better off taking that 700 billion and starting a government backed mortgage program with low, fixed 5% rates. That would thaw the real estate market in a hurry. As long as they used traditional lending standards to ensure that people could pay the loans they might actually make some profit on that 700 billion.
Besides 700 Billion is not going to go very far considering the current rate of defaults is over 50 billion per month. Plus they are proposing to buy the stuff at maturity value which would probably make that 50 Billion per month closer to 70 billion per month.
Oh yea, this just keeps getting better and better.....