Lancaster County PA Realty Check: September 2008

Apparently the powers that be have decided, belatedly, to do something about the profligate mortgage policies of the past.  The government will spend an estimated $700 Billion to buy up bad loans purchased by institutional investors.

Senator Everett Dirksen of Illinois used to say in the 1960s, "A billion here, a billion there - pretty soon you're talking about real money!"  This new plan makes a billion dollars sound like pocket change.

Some of the loans made in the past six or seven years have been made to so-called NINJA buyers - No Income, No Job, No Assets.  No matter.  If a buyer could fog a mirror, he or she could get a mortgage.

Now the chickens are coming home to roost.  In spades.  Could this train wreck have been seen coming years ago?  Of course - but for political considerations, both parties lobbied to make the American Dream of home ownership available to more and more people - even those with little ability to afford it.

Since no government project ever costs as little as initially estimated, this bailout will probably end up costing a trillion dollars.  Can we even get our brains around how much a trillion dollars is?  If we tried to pay such a debt by each contributing $10,000 out of our own pockets, it would still take 100 million of us to reach a trillion dollars.

I'd like to see some of the tens of millions of dollars pocketed by Mssrs. Raines & Johnson, former heads of Fannie Mae and Freddie Mac as those instutions went bankrupt, returned to the Treasury.  I'd like to hear an explanation from Christopher Cox, former senator and now head of the SEC, as to why he ignored the writing on the wall.

Part of the reason gasoline reached $4 a gallon was because the American dollar is losing value on the world market.  Think another trillion dollars printed, from assets that we don't have, is going to further erode the value of a dollar?  You're darn right.  We're all going to pay for this, one way or another.