Thoughts on the bailout
Below is the text of a letter I have sent to both senators and Congressman Mark Udall. Have you told your representatives what you think about this situation?The reference to Steve Winn came about because he was on Hannity & Colmes Tuesday. They mentioned that Donald Trump had been on before, making the same points. It makes no sense, Winn said, to buy up a pile of loans from all over the country, and expect bureaucrats and political appointees in D.C. to deal intelligently with them. As badly as the bankers have performed, those at the local level are probably the best ones to figure out which way to go for each loan that needs attention. As long at they arent hampered by PC regulations and special interest exceptions that over-ride ordinary lending standards. My letter: I oppose the bailout as presently set up. The federal government should not buy bad paper. What the economy needs is liquidity. The federal government can provide that to banks in exchange for preferred stock and/or warrants. That way, the lenders holding the paper can figure out how to best deal with the problem write-downs, foreclosures, extensions, interest adjustments -whatever. This view is supported by such persons as Edward S. Phelps, 2006 Nobel Laureate (see Tuesdays Wall St Journal – Opinion section) as well as real estate tycoons Steve Winn of Las Vegas and New Yorks Donald Trump. These guys know the subject. This is only the beginning. Directives to banks that make them ignore standard lending practices to promote minority home ownership has to go. Of course, the golden parachutes and other compensation excesses as well. And delete as a goal maintenance of the present level of housing prices. Theyre too high. This is good for sellers and mortgage holders, but not good for buyers.
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