Tag: solvency

Bailing out your neighbor

Alan Greenspan is now promoting a direct taxpayer-funded bailout of homeowners. Mr. Greenspan has been trying very hard to shift blame for the mortgage crisis, but this statement takes the cake. Begging for increased Fannie Mae, Freddie Mac, and FHA limits serves much the same purpose. It’s socializing losses.

Be forewarned – a direction is being drawn. A 600 FICO score and a pile of credit card debt is no problem – you are hereby authorized to sign any borrowing agreement you can get your hands on. You won’t need to return that widescreen TV that’s now a part of your HELOC. That leased car you’ve already missed two payments on? It’s yours – just keep it.

It’s not a liquidity issue, or one of solvency. It’s a government problem.

A solution for your debt overindulgence is close at hand – you’re neighbor will soon be bailing you out.

UPDATE: More support for subsidies, at the high end of the market. The high end hasn’t started getting whacked, yet.

UPDATE 2: Yet more on neighbors, including how some are being hurt by the questionable decisions of others.

UPDATE 3: And back to blaming the Fed.

After the Money’s Gone

Paul Krugman speaks:

In past financial crises — the stock market crash of 1987, the aftermath of Russia’s default in 1998 — the Fed has been able to wave its magic wand and make market turmoil disappear. But this time the magic isn’t working.Why not? Because the problem with the markets isn’t just a lack of liquidity — there’s also a fundamental problem of solvency.

I’m personally divided on Krugman – I often categorize his opinions as bellyaching, sometimes borderline inane. In this case it is the exact opposite – flawless.