In a somewhat lighthearted and cheeky fashion in these dark times, I have prepared a handy checklist called "Why Your Idea to Fix the Housing Slump Won't Work", modeled after the quasi famous Why Your Post Won't Fix The Spam Problem.
Note that I am a progressive, but this site deserves to hear the opposing side of the anti-bailout and anti-massive-stimulus position. We aren't all Republicans in this camp. I just take seriously the proposition that very little can be done about the situation we are in, and massive moves may just make it worse. So, the best thing might be to beef up the FDIC to help bank depositors, get food stamps, unemployment insurance, and other social safety net programs beefed up (I mean really beefed up), prosecute whoever needs to be prosecuted, but generally don't interfere and see what happens over the next few months. I disapprove of the now now now! mentality.
[I posted this once before as a late-night diary, I am reposting during the day. If this is considered inappropriate, I will delete, but I consider it worthwhile enough to repost.]
This is a form about your post about saving the housing market and correcting the economic mess. I have taken the liberty to check off the appropriate boxes which indicate why your idea will not work.
Your post advocates a(n):
( ) executive
( ) legislative
( ) judicial
( ) vigilante
( ) IRS-enforced
( ) SEC-enforced
...approach to correcting the housing mess. Your idea will not work. Here is why it won't work. (One or more of the following may apply to your particular idea, and it may have other flaws):
( ) It futilely attempts to keep house prices higher than regular market value
( ) It involves the transfer of wealth from responsible to irresponsible and reckless people
( ) It involves the transfer of wealth from renters to homeowners
( ) It involves the transfer of wealth from the rest of us to banks, their shareholders, and executives
( ) It'll never pass the Senate
( ) It'll never pass the House
( ) Obama will never sign it
( ) Homeowners won't put up with it
( ) Renters won't put up with it
( ) Banks won't put up with it
( ) The Supreme Court won't put up with it
( ) Sheila Bair won't put up with it
( ) Tim Geithner won't put up with it
( ) Ben Bernanke won't put up with it
( ) China, India and/or Russia won't put up with it
( ) It assumes that mortgage-backed securities are actually worth a lot more than they are currently trading for
( ) It assumes that government workers are better at valuing assets than banks and private markets are
( ) It assumes you can somehow paper over several trillion or so in losses by throwing around a trillion or two
( ) It assumes that people will buy a house just because you offer them a tax credit, and that it is a good thing if they do
( ) It assumes that using the government to force abrogation of private contracts that were freely entered into by the participants won't have any negative side effects
( ) It assumes that home prices won't fall any more
( ) It assumes future economic growth that may not be in the cards
( ) It will run up the national debt
( ) It will cause massive inflation and ruin the economy
( ) It will cause interest rates to rise on US debt, ruining the economy
( ) It assumes that interest rates on US debt will stay close to zero forever
( ) It assumes that mortgage interest rates will stay low forever
( ) It fails to take into account boomer and other demographics
( ) It assumes that saving the stock market will save the rest of the economy
( ) It assumes the willing cooperation of other countries
( ) The current crisis isn't due to dilapidated infrastructure
( ) It assumes that protectionism won't make the situation worse instead of better
( ) It assumes the willing cooperation of investors in mortgage backed securities
( ) It assumes that forcing banks to lend money into a deteriorating economy won't make the situation worse
( ) It violates the "takings" clause of the Constitution
( ) FDR tried your idea, and the economy boomed... ten years later after the rest of the planet was flattened and sixty million people were killed.
( ) They tried your idea in Japan's market collapse, it didn't work
( ) They tried your idea in the 2000 tech collapse and look what eventually happened
( ) It will at best blow up another bubble that will just collapse even more catastrophically later
( ) It assumes that the people who have caused this situation will suddenly start acting responsibly
( ) It gives too much power to the Fed
( ) It gives too much power to the Treasury
( ) It gives too much power to the President
( ) People will riot if your plan doesn't go well
Specifically, your plan fails to account for:
( ) The continued effects of deflation
( ) Risk of massive inflation
( ) The deteriorating economic situation in the US
( ) The deteriorating economic situation in the rest of the world
( ) Static/falling real incomes
( ) The trade deficit
( ) The government deficit
( ) Incompetence at the Fed
( ) Incompetence in Congress
( ) Incompetence at the Treasury department
( ) Incompetence at the SEC
( ) Incompetence at the banks
( ) People in China and India who are willing to do close to the same work for 10% of the price and consider it a bargain
( ) The fact that sustainable housing prices are 2.5x-3x income
( ) The fact that rising interest rates drive home prices down even further
( ) The Constitution
( ) Various laws against whatever you are proposing
( ) Corruption at whatever institutions are involved with your plan
( ) T-bill price collapse risk and the risk of inability of the US government to fund its deficits
( ) Popular lack of understanding of economics
( ) Congressional lack of understanding of economics
And the following philosophical objections may also apply:
( ) Ideas like yours in other panics have been tried before and have failed.
( ) Asset prices and interest rates are best set by the free market.
( ) We should keep a balanced budget if possible.
( ) Feel-good measures do nothing to solve the problem.
( ) Responsible people shouldn't be asked to shell out tax dollars to support irresponsible people.
( ) You can't dig your way out of a problem of excessive spending by excessive spending.
( ) The Fed got us into this mess and your idea assumes they will be able to get us out.
( ) Insolvent institutions should be allowed to fail instead of being endlessly bailed out by the government.
( ) You can't solve problems by printing money.
( ) Protectionism will create more problems than it solves.
Furthermore, this is what I think about you:
( ) Sorry dude, but I don't think it would work.
( ) This is a stupid idea, and you're a stupid person for suggesting it.
( ) Nice try, assh0le!
(The last part included for humor's sake as it is part of the original text, I would never tell this to a fellow Kossack :).