Still, what the Banks said would be fixed, when Paulson threatened us with martial law has not been done. CREDIT IS STILL CONTRACTING, which is the driver of all economic woes.
Some of it still needs to contract. There was some stupid lending. I am still seeing lending being done. My Mother is currently re-financing the house to lock in a good rate. I was showing her how to use the fact that her LTV is around 18% to strong-arm the banks. She is looking at a 4.113% 5yr fixed, LIBOR based ARM with a 9% cap as well as a 5.113% Fixed 30 year. I am trying to convince her to go Fixed because I suspect the interest rates are going to go up in about 1 year.
I suspect that people in general, got used to stupid lending… and now that lending is not so stupid, they see it as overtightening.
(1) Throwing trillions of dollars at the “too big to fails”, instead of admitting that many of them are insolvent
Some of the too big to fails.. are really solvent, on the other hand others, ie AIG are really toast. Many of these ‘too big to fails’ are paying back their TARP money (which was a loan in comparison to the following stimulus money) AIG will probably never be able to repay its TARP money. Freddie probably will, unless they sacrifice their recovery to prop up house prices.. http://finance.yahoo.com/news/Government-unveils-new-apf-2353211474.html?x=0&.v=11
Maybe this is why the existing conservator was replaced..
Fannie Mae has a bigger risk of failing than Freddie.
(3) Failing to restore Glass-Steagall, reign in credit default swaps, or do anything else necessary to stabilize the financial system
One of the biggest problems were the SIVs which were completely opaque. This makes it hard to understand the condition of a borrower. There was the potential of all sorts of toxic waste in those SIVs. Credit Default Swaps should be treated as a insurance of margin product.. which is what it really is.
(5) Failing to take real measures to decrease employment and increase manufacturing
I think you meant to say ‘decrease unemployment’..
(6) Creating an enormous debt overhang and trashing our currency
This is one of the reasons that I felt that TARP money should have come from ‘printed’ money and not Treasury bills. The TARP money has to be repaid.. and to make inflation neutral, the fed only has to collect the interest and ‘destroy’ the principal when it gets returned. The result would have been a significantly smaller debt overhang.
