Bailouts are only short-term fixes

Letter to the Editor

By Inman News, Tuesday, April 7, 2009.

Re: 'Negative equity: a housing time bomb' (April 6)

Dear Editor:

History will show that our economic problems were government-created and that they were extended by more government involvement. The government said buyers needed no skin in the game -- nor did banks that were asked to make questionable loans and package them with good loans in what we now call "toxic assets."

The consequences produced a real estate bubble, along with fictitious wealth and gain. When the check came due, the call was made for more government intervention which will only create more unforeseen problems.

Many seem to ignore and have already forgotten Freddie and Fannie producing millions for lawmakers' reelection and multi-millions in bonuses and fees for the politically aligned. This is government in action. It is not that government should not seek to control lawlessness. (Problems occur) when one thinks (government can do better) than private enterprise.

The financial markets -- with a suspension of mark-to-market (accounting) and a use of government insuring, not bailouts, to create resale value for the "toxic packages" -- could have been done with a 20 percent insurance guarantee at a far lower cost. That would have opened the private markets on resale of the packages and restricted the fall in the value of the "toxic assets." This would also had the effect of restoring credit availability on a more qualified basis, albeit, on a gradual basis forming a much needed confidence base.

The bailouts, as corrective measures for the short-term, will provide enormous profits for wealthy Wall Street firms, banks, and wealthy individuals with the tax payers and future generations the big losers. But, when has the government ever been the answer with long-term planning? Just look at Medicare and Social Security funding. And to those ... thinking greater government action will provide the answer, get your checkbooks out.

Dennis Wooff
Wooff Inc.
Illinois

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Submitted by Larry Whited Sr. on April 7, 2009 - 4:48am.

Investment banking and consumer banking should be separated and regulated accordingly. That is how it was a few years ago until the laws were changed at the urging of the banks.

Consumer banking is critical to a sound society and should be tightly regulated.

Investment banking is by definition a venue of high risk or high return just like the stock market. We, the tax payers, should not have to bail out the investment banks but because they are now intertwined we have no choice.

Shame on us if we let his happen again.

Larry A. Whited, Sr., CRB, CRS, GRI

President & Founder
www.maxUnet.com & www.WebMLS.net
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