The Economy's a Wreck, But We Can Fix It

Yes, It’s A Wreck, But We Can Fix It

NEWSWEEK

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No one can confidently say how far housing prices will fall, and the value of mortgages depends on those prices. The steeper the fall in housing prices, the more homeowners will default. That's the risk that buyers of mortgage bundles have to accept.

Contrary to much public comment, sales of mortgage bundles are still occurring. The low price paid reflects the large risk the buyer accepts. Usually, mortgages sell for less than 50 cents on the dollar of original value. Merrill Lynch sold a big stake for 22 cents on the dollar. Most financial firms that have large holdings would wipe out their capital if they sold at prevailing prices. They expect, or hope, to get a better price from the Treasury.

Promises of future profits for taxpayers are the stuff of dreams. The much simpler bailout of the savings and loans cost the taxpayers $150 billion. That will look small before we finish the mortgage bailout.

How Long Will a Recession Last?
Desmond Lachman, resident fellow, American Enterprise Institute
History will judge American policymakers harshly for their misdiagnosis of the current crisis, which has become the worst in 80 years and may lead to the most severe recession since World War II. More than a year after the beginning of this crisis, both the U.S. Treasury and the Federal Reserve do not fully recognize how much falling home prices and rising foreclosure rates complicate the problems in the financial sector. Worse still, as the markets have been quick to realize, Secretary Paulson's bailout plan only partially addresses the liquidity problems of the financial sector, and does not address its solvency. Inadequately capitalized banks will remain mired in the process of selling assets and will restrict lending to repair their damaged balance sheets. Prices of assets will be driven lower as banks sell, compounding the problem.

The United States is already in a serious recession, and the most recent credit freeze and equity price plunge all but ensure that it will last through 2009, with unemployment rising above 7.5 percent. How long the recession lasts will be determined by the economic policy of the current administration over the next few weeks. The economy will not have a meaningful recovery until the housing market is stabilized and the banking system is adequately recapitalized, two goals that ought to be the first order of business of the next president. He should also consider another stimulus package, and the Federal Reserve should consider more interest-rate cuts.

The rest of the world will not be spared. Europe and Japan are already in recession. Their economies will also continue to be buffeted by falling equity prices, tight global credit, and severe housing busts in Spain and the United Kingdom; and the growth of the emerging-market economies will slow as their overseas markets shrink.

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Paulson is a train wreck happening as we speak!! Helping ease credit will not work when people have no jobs to get credit. We need jobs; jobs create wealth and spending and borrowing. Without them, all the money being issued to prop up our economy only, as usual, helps the affluent!! Asking them to borrow, when they have no means to pay back is like asking a bull to step inside a china shop and expect no damage. This is NOT rocket science; it is common sense, which unfortunately Mr. Paulson nor anoyone associated with this administration and this plan, is purely lacking!!! PEOPLE NEED A HAND UP RIGHT NOW; PEOPLE NEED JOBS TO RENEW THEIR PRIDE, TO SAVE THEIR HOMES, TO PURCHASE!!! tHIS IS THE ONLY THING THAT WILL BRING US BACK, NOT ASKING US TO BORROW MORE!!!

Please investigate this idea to help American. A straight fix is better than working all around the problem. To create main street jobs, have middle Americans to put money back into the economy, and get rid of fear, will be to stabilize the American people first. Could this work ? A stable home could stimulate the economy. Instead of working all around the problem, The government should use taxpayers money directly on the taxpayers by paying off our mortgages to be paid back to us taxpayers with little or no profit at first. Start by fixing the root of the housing crisis will implode new money as well as bailout money into the economy at the same time. Free American families from the threat of becoming homeless will have Americans ready ,willing, and most of all able to help our economy out of crisis. Middle class and upper class united will be a blessing for the American economy. Freeing up cash to spend is better than trying to freeing up credit to charge, because, the misuse of credit is the problem. 911 has proved that we all are Americans and we will come together for the greater good of America because we all know that together we stand, and if we stay divided we will all keep falling. Even the wealthy can lose parts of their American dream. Our government MUST invest in the American people ,in turn, the American people WILL invest back into America. When everyone unite for a common good you get results. We MUST stop giving presidential power to the industries to help Americans. The power of America belongs to WE THE PEOPLE OF AMERICA. In return we can install solar panels, buy hybrids , conserve energy, create jobs, and invest in our American economy while being lead toward a unified America . Industries are getting taxpayers money to help us, but they are mostly helping themselves. Let's take the straight and narrow fix. Taxpayer money to taxpayer mortgages. This will pay only principal money, and banks only lose the rest of the interest. Homeowners in trouble due to the fault of the economic meltdown still owe the principle but at 1% for 3 years and in return we will be able to buy things, not charge things, to turbo charge the economy . banks will be saved because they will get their money back, and jobs will return because we have a demand for services again. To be productive, please add ideas that could help even more americans. we have to start somewhere. Be constructive not destructive and pass it on for more construction THANK YOU!

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Posted By: kpwood @ 03/23/2009 11:28:14 PM

I believe two things would tremendously help the economy back onto it's feet: 1) Stop laying people off and hire people. Most companies laying people off are still posting profits each quarter, USE THEM. 2) Bring jobs back from overseas. Bring back help desk and manufacturing jobs to Americans, bring money back into America. Then, and only then, will there be money to spend in America.
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Posted By: 4carol @ 11/25/2008 3:55:15 PM

Paulson is a train wreck happening as we speak!! Helping ease credit will not work when people have no jobs to get credit. We need jobs; jobs create wealth and spending and borrowing. Without them, all the money being issued to prop up our economy only, as usual, helps the affluent!! Asking them to borrow, when they have no means to pay back is like asking a bull to step inside a china shop and expect no damage. This is NOT rocket science; it is common sense, which unfortunately Mr. Paulson nor anoyone associated with this administration and this plan, is purely lacking!!! PEOPLE NEED A HAND UP RIGHT NOW; PEOPLE NEED JOBS TO RENEW THEIR PRIDE, TO SAVE THEIR HOMES, TO PURCHASE!!! tHIS IS THE ONLY THING THAT WILL BRING US BACK, NOT ASKING US TO BORROW MORE!!!
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- Report Abuse
Posted By: SC-HOPEFUL @ 11/13/2008 9:13:39 AM

Please investigate this idea to help American. A straight fix is better than working all around the problem. To create main street jobs, have middle Americans to put money back into the economy, and get rid of fear, will be to stabilize the American people first. Could this work ? A stable home could stimulate the economy. Instead of working all around the problem, The government should use taxpayers money directly on the taxpayers by paying off our mortgages to be paid back to us taxpayers with little or no profit at first. Start by fixing the root of the housing crisis will implode new money as well as bailout money into the economy at the same time. Free American families from the threat of becoming homeless will have Americans ready ,willing, and most of all able to help our economy out of crisis. Middle class and upper class united will be a blessing for the American economy. Freeing up cash to spend is better than trying to freeing up credit to charge, because, the misuse of credit is the problem. 911 has proved that we all are Americans and we will come together for the greater good of America because we all know that together we stand, and if we stay divided we will all keep falling. Even the wealthy can lose parts of their American dream. Our government MUST invest in the American people ,in turn, the American people WILL invest back into America. When everyone unite for a common good you get results. We MUST stop giving presidential power to the industries to help Americans. The power of America belongs to WE THE PEOPLE OF AMERICA. In return we can install solar panels, buy hybrids , conserve energy, create jobs, and invest in our American economy while being lead toward a unified America . Industries are getting taxpayers money to help us, but they are mostly helping themselves. Let's take the straight and narrow fix. Taxpayer money to taxpayer mortgages. This will pay only principal money, and banks only lose the rest of the interest. Homeowners in trouble due to the fault of the economic meltdown still owe the principle but at 1% for 3 years and in return we will be able to buy things, not charge things, to turbo charge the economy . banks will be saved because they will get their money back, and jobs will return because we have a demand for services again. To be productive, please add ideas that could help even more americans. we have to start somewhere. Be constructive not destructive and pass it on for more construction THANK YOU!