What could be even scarier is all the reaction could be to a problem that could have been handled by less draconian measures. Example: Mortgage meltdown: Typical Calif. inland empire(one of the worst effected areas) house sold for 500,000 in 05' with no down. It was foreclosed on in 07'. What's the loss? The fed etc seems to think it is $500,000, the total loan. The real loss of course is $500,000 less what it re-sells for after foreclosure (guess: 200,000 - 250,000). Of course, not every home sold in 05' is in default. So what seems to be missing in the policy discussion is the size of the problem. As an aside, Orange county home sale activity is up % wise on a yr to yr basis, so is Riverside County (one of the inland empire counties, referred to earlier). The market is working and people who just 18 months ago could not afford a home are not buying.
As to the "credit swaps", nobody I know wrote them....hmm!..could it be that the only ones on the hook, are the Goldman Sachs of this world??? Since the Fed. and US Treasurer are all fraternity bros with the wall street boys, I suspect they feel any "street" pain should be shared with all us folks. Good of them, don't you think? Of course, they would say what would we do if there wasn't a Goldman Sachs? And I would say the traditional functions of Goldman would be reconstituted virtually overnight in a newly named firm. There will be a morning tomorrow even if GS is gone.
At this point, the Treasury and the Fed has the nation's credit card without any card limits, and they are a spendin.'
God save the Republic!
Rich
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