No matter the merits or intellectual distinctions, it is nearly impossible for a politician to explain the following: Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson were willing to risk as much as $30 billion of taxpayer money -- without congressional approval -- so that J.P. Morgan Chase could buy Bear Stearns cheap at an auction in which it was the sole bidder. But a taxpayer-backed rescue of homeowners whose mortgages are worth more than their homes is unwise and unwarranted.
It's hard to fashion the sound bite that deflects the inevitable question: Why a "bailout" for Wall Street, and none for homeowners?
True, dat.
Mr. Paulson is losing his argument that the government response, so far, is sufficient -- even with all the Fed has done, all Mr. Paulson has done to prod mortgage servicers to voluntarily modify loans and his successful pummeling of Fannie Mae and Freddie Mac to reluctantly raise capital so they can buy more mortgages. Preventing housing prices from falling will prolong the agony, he says. "We need the correction."
Butt, butt, butt... you said... And NOW we "NEED" the correction?
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6/20/07 Hank Paulson: "We have had a major housing correction in this country. I do believe we are at or near the bottom."
3/16/08 Fox News Sunday:
CHRIS WALLACE: I think the growing concern is that you, the president, keep saying, "We're all over this." And then a few months down the road, things are worse. And so they wonder are you out ahead of these things, or are you always behind the curve?
HANK PAULSON: Well, Chris, there's a question what — when there are excesses, excesses we've seen in the housing market, a correction there is inevitable. You're going to see a correction.
Can we outlaw the forces of gravity? You know, how much can government do? But this administration has been focused on this, I think very early involved — very early, beginning in August, working very hard to avoid foreclosures that are preventable, putting in place programs that are making a difference, are working.
Are they going to prevent the inevitable correction in housing prices? No. But we're working hard on that. And again, I think we were early with the stimulus package.
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Update: YRHT 2005 pre-flood flashback. And what the hell, for full disclosure purposes, I might as well link to this YRHT housing bubble post from a year earlier in August 2004.
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Update #2: Jim Rogers discusses the weak dollar, Hank Paulson and Bear Stearns executives' Maseratis. As head researcher (and co-founder) of the Quantum Fund throughout the 1970's, Rogers has seen this all before-- and profited. He expects a 20 year bull market in commodities.
"Poor Hank Paulson. He had a reasonable education, a reasonable good career, head of Goldman Sachs, now he goes around the world making a fool of himself."
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Update #2:
I'm really, really liking the "socialism for the rich" meme. From the 3/21 NYT editorial:
The ongoing bailout of the financial system by the Federal Reserve underscores the extent to which financial barons socialize the costs of private bets gone bad.
Indeed.
Labels: Cons, Dismal Science, Housing, Markets
