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The U.S. Faces a New Epic Crisis

November 12, 2008

bailout failure

bailout failure

The bailout that was proposed to save the nation and perhaps the planet has been shelved, leaving the United States to face a new epic financial crisis without a core solution or hope of immediate resolution. The sales pitch U.S. Treasury Secretary Henry Paulson made to Congress for the bailout hasn’t delivered what was promised. The Troubled Asset Relief Program (TARP) was billed as a way to rid bank balance sheets of toxic mortgage debts.

Liquidity problems in banking have continued, putting the consumer credit market at considerable risk. “This is creating a heavy burden on the American people and reducing the number of jobs in our economy,” Henry Paulson confessed to Congress today. Buying mortgage-related assets, the main function of the month-old bailout, is no longer being considered. Instead, Paulson is looking at other ways that he can be useful. Whether Congress will continue to give the Treasury Secretary more monetary credit to complete the more than $700 billion bailout is now a wild card.

feet to the fire

feet to the fire

What U.S. Treasury Secretary Henry Paulson has just admitted is that the functionality, transparency and the scope of known defective banking instruments is so poor, that buying them up won’t solve the problem or would involve a significantly larger sum of taxpayer money, showing a huge chasm in the underlying viability in the U.S. and global banking industry and perhaps the U.S. economy as well.

Finance Committee Senator Charles Schumer is scheduled to hold a press conference today to praise Paulson observation of the superiority of capital injections to asset purchases. Schumer also criticizes the U.S. Treasury’s unwillingness to issue strict guidelines to ensure participating firms use the funds to increase lending rather increase the number of banking buyouts. Reactionary politics is in full swing.

facing a larger Bear Stearns?

facing a larger Bear Stearns?

Clearly, the failure of the projected bailout is not good news and the fact that Paulson has decided on other measures without consulting other authorities is not promising to the overall success of this program or any other. Effectively, the premise of the bailout has been shot down. America is without a comprehensive plan. Now Congress needs to return to the drawing board with new ideas. There is no time to lose, yet the nation is in the grasp of a lame duck president with diminished influence.

A meeting of world leaders is supposed to take place in Washington, D.C. this weekend to address global concerns for the failing global economies and the promotion of a new economic global order. How the plight of the U.S. and the failure of the bailout play into the scene remains to be seen. Capitalism seems to have failed. Is Global Socialism around the corner? ~ E. Manning

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One Comment leave one →
  1. November 14, 2008 6:08 pm

    The FDIC came out with it’s plan to prevent about 1.5 million home mortgage foreclosures by promising to share any losses with mortgage companies that agree to refinance certain home loans. This is a really good plan guys and will help alot of homeowners who have income (ei, working) stay in their home. It will slow down the tide of foreclosures and help the market absorb the REOs that exist right now and get them sold.

    Their program will be applied to the estimated 1.4 million non-GSE mortgage loans that were 60 days or more past due as of June 2008, plus an additional 3 million non-GSE loans that are projected to become delinquent by year-end 2009. Of this total of approximately 4.4 million problem loans, we expect that about 50% can be modified, resulting in some 2.2 million loan modifications under the plan.

    That means 50% of those who do not qualify to get modified. They will need our help! So make sure you continue to help those who do not have the income to stay in their home. The government could help by better regulating foreclosure rescue scammers and by allowing homeowners to sell their houses with the new buyer assuming the old loan or a workout loan.

    This also means our window to buy REOs at unbelievable prices will not be here forever as the flow of new REOs will be slowing down and our house market will stabilize once this excess inventory is absorbed.

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