Posted: Tuesday, August 5, 2008 12:00 am
Watching Congress and the Bush administration/s efforts to bail out failing sectors of the U.S. economy is a little like watching a one-armed sailor trying to bail water out of a lifeboat with a gaping hole below the water line.
It would be amusing 7 if the outcome were not so very serious.
You have to give them credit for trying. President Bush/s bailout effort for individual taxpayers, in the form of the stimulus rebates, helped the retail sector keep its head above water this summer, but just barely.
The two houses of Congress collaborated on housing legislation that seems mostly aimed at rescuing real estate speculators and lenders whose faulty strategies caused the problem.
The housing bailout authorizes up to ,300 billion in mortgage guarantees. Another ,25 billion is provided to prop up mortgage giants Fannie Mae and Freddie Mac.
The stimulus check money has already been spent or put into savings accounts. The eye-popping, big-dollar amounts listed in the housing bill probably will only scratch the surface. Most experts believe the housing market has more sinking to do. Some predict there won/t be a turnaround for another year or so.
Good or bad, California always seems to lead the way. The state/s foreclosures increased by more than one-third in the second quarter/s year-over-year comparison. Nearly 64,000 California homes reverted back to lenders in the three-month period.
The bad news doesn/t stop there. Defaults and foreclosures reported so far are mostly on subprime loans 7 mortgages given to home buyers who didn/t have enough income to qualify for the loan in the first place. Experts believe the next wave of misery will wash ashore when those pesky adjustable-rate mortgages reset to a higher monthly payment in the next year or so.
It/s a harsh lesson, to be sure, but one that could, ultimately, help the national economy. The lesson is this 7 you can/t build a good home without a solid foundation. This housing crisis is, in large part, a result of lending practices that have proven to be little more than a house of cards.
August 5, 2008