DEMOCRATIC ECONOMISTS SEEK TO GIVE UP POSITION VERSUS GOP
Both heavyweight Larry Summers and lightweight Austan Goolsbee come out for tax cuts, to stave off consequences of a foreclosure recession, or whatever.
I listen to this b.s. and I feel like I'm taking crazy pills.
No sooner has the Democratic Party flanked the Republicans on their core issue of fiscal responsibility, than two leading economists, one for Clinton (possibly - let's hope not) and one for Obama, come out with a plan to ... you guessed it, to copy the Republicans, cut-taxes and spend away!
Meanwhile, Senator Schumer gives a speech at Brookings that indicates upwards of 60% of sub-prime people can refinance at prime rates, i.e. that they were fleeced. (Can we really trust Summers, after ignoring a figure like that? He seems increasingly out-of-touch, to me, read from a great distance).
The rest of the problem is twofold.
1. The markets for junk debt need to clear. Getting the mop-up SIV going is job #1, in the absence of a government sponsored RTC-like solution. The FHA refinancing everyone, including "jumbos" is bogus (sorry).
2. The firms weakened by losses need capital injections in order to avoid stalling. The Fed should (a) waive capital requirements for a year or two (same for Freddie/Fannie, to some degree) and (b) Freddie and Fannie should get some leeway to buy up securities in the secondary market (i.e., after lenders have taken their medicine, not before).
other ideas:
3. There should be a more vigorous attack on onerous loan terms, including ridiculous pre-pay penalties and re-sets to impossible rates. The FICO scores in the Bush-Paulson plan/guidelines should be raised.
4. As the Fed Rate has fallen, a cut in the Prime Rate by 3% (or more) would really be stimulative to the real-estate market...
SOME THINGS EVEN TAX CUTS CAN'T FIX
There is no amount of passing out tax relief that is going to stave off the impact of rising prices and high oil/energy costs.
We could help out the construction industry, while it is on real-estate bust slowdown. The nation desperately needs new and better airports and bridges. Said so back when the GOP was handing out candy to the super-wealthy, instead of investing in America, circa 2002.
AT THE END OF THE DAY ...
Meanwhile, as a footnote, Republican Alan Greenspan says that giving judges the right to modify loans in court (any loan modification, really), even for a time, is worse than giving money to borrowers that they can, in turn, use to bail out lenders. How predictable.
The only problem with loan modification is that it cannot happen soon enough. Any delay incents lenders to rush to foreclose, possibly, to avoid having to meet other, possibly less favorable terms.
Wednesday, December 19, 2007
Tax Relief?
