Bailout? Schmailout!

The mortgage bailout programs being touted by both the public & private sectors are all fine in theory but miss the point in one huge way.

So many of the homes currently under threat of foreclosure were bought by speculators looking to either flip the home or sell out and profit in a year or two. They, and even people who bought a place to call home, can not be expected to have much interest in deals that give them 40 years of low interest to pay for a home that's worth a fraction of it's original value. In areas like California, Florida and Las Vegas most would have to wait decades to see their value return. Even with affordable payments I believe most will do the math and walk away at their earliest opportunity.

Stop The Madness

Recent news has shown that once again, the American people are right & our elected representatives are wrong. The multi-trillion dollar bailout of our financial system has done nothing to alleviate or correct the underlying problems facing our economy & now the financial institutions are calling out for further cash injections. All the while they are using taxpayer's money with little or no transparency or accountability.

Next on the table is a bailout for the US auto industry. What next? Surely the airlines deserve some relief? What about the credit card companies, hotel chains and home builders? The list is endless. During the good years many US companies grew lazy. They built high risk accounting schemes, signed unworkable labor agreements, produced substandard products & paid their executives fat bonuses. These times are gone & it is not the job of the US taxpayer to wipe their noses, pat their bottoms & send them back out to play again.

The auto industry does not have the management structure or R&D pipeline to make our investment sensible. They are years away from producing the type of vehicles already available from Asian plants. They ignored long term trends in the energy markets for short term, easy credit fueled profits. I see no reason why they would be able to compete any more effectively with our money than without.

Update : Apparently CBS agrees with me.

My Bailout Plan

According to statistics on the White House's web site there are about 75M homeowners in the US. Instead of sending the $700B to the organizations that, as Ollie would say "got us into this mess" why don't we split the funds up amongst these US homeowners? The math comes to about $10K per home which in turn represents about 6 months of payment on the average mortgage. The money could be directly deposited into homeowner's mortgage accounts which in turn would save the banks and give the economy a kick start in re-energizing.

Now I don't have one of them fancy economics degree but this seems to be a win-win to me, unless you're a Wall Street type looking to get off scot-free that is.