As some of the commentary became public, the threat of falling asleep promptly departed as I fell out of my chair. The Chairman, indicating he thought foreclosures would continue to rise and more price declines are expected, suggested a plan to combat the problem that forces me to immediately call for his resignation as Federal Reserve Chairman.
Bernanke offered that mortgage companies and banks could reduce and/or forgive portions of the principal of the loan amount in an effort to provide relief for those about to lose their homes and those in the foreclosure process. I’m no Milton Friedman, or Larry Kudlow for that matter, but this suggestion is un-American and a prelude to derailment of free market capitalism.
To begin with, it is not the job of the taxpayer to bail out idiots who made poor economic decisions. Secondly, what ever happened to free markets cleansing themselves of their excesses without governmental influence? Have we not learned what artificial influence on markets can do?
Stocks immediately sold off, as those on Wall and Broad have keen insight. The idea spells trouble on many fronts. First, most mortgages have been resold, and part of our current economic issues are that there are no buyers for these packets of mortgages because it is too difficult to estimate the hidden damage, or potential writedowns. Unless you are a shareholder of these banking institutions, you are not shedding any tears their balance sheets are in such turmoil.
In addition, how about those mortgage holders who did their due diligence and making payments on time, who have performing loans? We don’t get this benefit? Bernanke seems to favor debt forgiveness over default, but it's the shareholders of the banking institutions debt, not Americas. It seems Bernanke wants to reward bad behavior. In fact, he is not the only one.
With that in mind, why would anyone without internal integrity ever pay off a loan since portions may be forgiven. In economics, there is a ripple effect and in this case, it could damage liquidity and economic psychology beyond repair.
The Fed Chair has had an embarrassing couple of months but this absurd idea seriously questions his competency, and that type of thinking has no business as Federal Reserve Chairman.
Bernanke offered that mortgage companies and banks could reduce and/or forgive portions of the principal of the loan amount in an effort to provide relief for those about to lose their homes and those in the foreclosure process. I’m no Milton Friedman, or Larry Kudlow for that matter, but this suggestion is un-American and a prelude to derailment of free market capitalism.
To begin with, it is not the job of the taxpayer to bail out idiots who made poor economic decisions. Secondly, what ever happened to free markets cleansing themselves of their excesses without governmental influence? Have we not learned what artificial influence on markets can do?
Stocks immediately sold off, as those on Wall and Broad have keen insight. The idea spells trouble on many fronts. First, most mortgages have been resold, and part of our current economic issues are that there are no buyers for these packets of mortgages because it is too difficult to estimate the hidden damage, or potential writedowns. Unless you are a shareholder of these banking institutions, you are not shedding any tears their balance sheets are in such turmoil.
In addition, how about those mortgage holders who did their due diligence and making payments on time, who have performing loans? We don’t get this benefit? Bernanke seems to favor debt forgiveness over default, but it's the shareholders of the banking institutions debt, not Americas. It seems Bernanke wants to reward bad behavior. In fact, he is not the only one.
With that in mind, why would anyone without internal integrity ever pay off a loan since portions may be forgiven. In economics, there is a ripple effect and in this case, it could damage liquidity and economic psychology beyond repair.
The Fed Chair has had an embarrassing couple of months but this absurd idea seriously questions his competency, and that type of thinking has no business as Federal Reserve Chairman.
1 comment:
BAHL, great observations on the fallout of his comments yesterday, and being in the mortgage industry I can tell you, once you start down this road, getting a loan will be all but impossible. If a bond holder doesn't feel his bond will pay as planned, do you think he'll invest in more, the capital will dry up for bonds and hence, the money to lend will vaporize. It's hard to see families loose their homes, but many of those that are loosing their homes are investors, speculators that got caught in the run-up and are now dying under mortgages that they should have never signed. Taking responsibility for their own decisions and suffering the consequences is all part of the capitalist system that has created in this country more Billionaires than any country in the world and a standard of living envied by so many.
I don’t think Ben was asking us, the tax payer, to buy these mortgages as the Hilda-beast is advocating, but just the mere mention of this, and with his status, makes his words yesterday a sign of his growing pessimism about our economy. Coming from him, this can cause devastating injury to our economy, and as it did yesterday, send shivers down the backs of bond holders and people in the mortgage industry.
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