Crony Capitalism for Dummies: Housing and Economic Recovery Act of 2008. How the Bailout will not Help you and Cost you Money. A Deep Look at the 694 Pages of the Bill.
As it stands, the Housing and Economic Recovery Act of 2008 otherwise known as the housing bailout bill is moving quickly through both the House of Representatives and the Senate. This weekend, the Senate overwhelmingly passed the bill with a 72-13 vote and now heads to the White House for President Bush’s signature even though he earlier voiced that he would not sign such a bill. As it stands, the majority of our politicians are backing this bill which as time goes on, will prove to be the biggest and most costly bailout in American history. Time will prove this out.
In this article, I have taken some time at digging through the 694 pages of the bill and will highlight some of the most important mechanics of how this will play out in the country. The initial centerpiece of the bill was a $300 billion FHA-insured mortgage nucleus that would allow cash-strapped buyers and lenders to refinance toxic mortgages. As you will see in this article when we deconstruct this part of the legislation, very few people stand to benefit from this smoke and mirrors. The more troubling aspect of the legislation is a stealth bailing out of Fannie Mae and Freddie Mac with an almost bottomless pit of financial access. The bill practically guarantees a taxpayer bailout for these two.
The problem with our current politicians is this. Democrats with control of the House should have fought harder to simply come out and nationalize the two mortgage giants. If their mission of providing liquidity to the secondary mortgage market and helping provide affordable housing to the American public is so vital, these two should be nationalized, allow shareholders who knew these were quasi-private enterprises take their hit and move on. Unfortunately, the party had no backbone of standing up for fear of being labeled a “socialist” or for fear of their political life come this November. Incredibly the market is the only thing living up to the original mission of the GSEs; ironically lower prices via this correction are making homes more affordable. That is why we have seen some increased action in sales for the Inland Empire where prices have fallen drastically.
http://www.doctorhousingbubble.com/crony-capitalism-for-dummies-housing-and-economic-recovery-act-of-2008-how-the-bailout-will-not-help-you-and-cost-you-money-a-deep-look-at-the-694-pages-of-the-bill/
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