What we need…

Below I will lay out what, in my opinion, would help our market and economy recover in a timely manner. Some of the parts are more critical than others.

We need…
1. The government to buy mortgages- The bill that failed in congress today actually had a decent plan for this. They were giving an unprecedented amount of money to the Secretary of the Treasury, Hank Paulson, with which he was to buy mortgages. The government would then be in a position renegotiate terms with the borrowers, keeping more people in their homes. By buying the mortgages, banks would be able to lend again because they’re already paid back for these loans that they thought were going to go bad, be it at some amount of cents on the dollar.

2. Congress to wake up! The size of this problem should have put politicing at the very, very, very back of anyone’s mind… but it didn’t. The bill, even though it was far from perfect, would have done a lot to help banks be able to lend again, housing prices to slow their fall, and our economy to begin a recovery. Think of anything you need a loan to buy: car, home, tuition, you name it. And do it again for businesses. Right now BANKS CANNOT LEND MONEY, they do not have it, they are just trying to stay afloat and meet their reserve requirements. How much is your house worth if you try to sell it and someone who wants to buy it cannot take out a loan? It’s worth whatever someone can pay in cash. No help will result in real estate values being cut in half, to start with. How many people are going to show up and offer a couple hundred grand in cash for your house? Welcome to a deflationary environment. Seriously, this is the environment we are in RIGHT NOW, and will continue to be in for 4-7 years without some help from the government. Not to mention, with out any help, many of our banks will go under in the next 6-12 months. I hate government intervention as much as anyone. The government being involved with Fannie and Freddie worked out great. But right now, they’re the only friendly balance sheet big enough to help.

3. People to listen to Paulson. Hank is the smartest financial mind in the federal government. He made himself hundreds of millions of dollars, a lot of it off the buildup of this problem. Now let’s let him help us fix it.

4. Minimize moral hazard. This is part of what congress has been complaining about, CEOs getting big severance packages. They think the whole bill was a bailout of financial firms that took on way too much risk. It is, but the people who took on the risk have already been punished, any net worth they accumulated through options is gone. The government can reposses executive shares as part of the deal, I don’t care how we do it, but making sure no current executives walk away with posh deals is important. However, this is not a reason to not pass the bill. The bill is not for the Wall St firms, it’s for every American who owns, or wants to own an asset of significant value. This is closer to an investment than a bailout, and the more our government is willing to invest, the quicker the housing market will turn around, the quicker the economy will turn around and the more money the government will make off their investment.

5. Europe to watch us. They’re next, about 12 months behind. A British lender and a Dutch bank both had to have government rescues over the weekend…

6. People with a backbone in regulatory positions. Fire Christopher Cox. “Naked shorting” is, and has always been illegal. To short you first have to borrow the stock you want to sell. In the past it’s been ok to sell short if you say you’re “in the process” of borrowing the shares. Check the filings, the vast majority of short positions, including ones that have been on for weeks, are still in the process of borrowing the shares. They’re naked shorting (shorting without borrowing the shares) because they know the SEC under Cox’s astute leadership won’t do jack! Pull Elliot Spitzer out of jail and make his sentence house arrest at the SEC for a few years, he’ll slap hundreds of millions of dollars of fines on firms playing games like the one above before they turn around. McCain says he’ll appoint Cuomo, current NY Attorney general, but why not go for the ultimate white collar crime fighter in Spitzer and save the penitentiary system a few bucks, just a thought.

7. People to forget it’s an election year. The most frustrating thing about the bill not passing is because a big reason it didn’t pass was politicing between congressmen. It’s an election year and these guys are going home soon to campaign. Sometimes it’s the role of an elected official to do what’s right even if their constituents don’t immediately agree. In an election year, politicians aren’t willing to do this because they want to be reelected.