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Thursday, February 19, 2009

Bailout nation: Billions and billions served
“The more you spend, the more you save.”
Who knew that that tried-and-true advertising line would become the preferred strategy for turning around the economy, bulldozing the housing crisis, and replenishing the banking sector?
While those crises have spawned progressively more expensive fixes, we’ve outdone ourselves this week.
President Obama signed into law the $787 billion economic stimulus plan. The automakers requested $14 billion more in federal aid. And yesterday, the president unveiled a $75 billion foreclosure plan and committed $200 billion more to Fannie Mae and Freddie Mac.
Shock and awe, for me. Aw, shucks, for the markets apparently.
But the economists and policy analysts I talked with, while applauding the Obama plan as “thoughtful” and “ambitious,” reminded me of the scope of the problem.
The Homeowner Affordability and Stability Plan is designed to aid a maximum of 9 million households at risk of foreclosure. But housing prices continue to fall and credit standards continue to tighten.
Moody’s Economy.com estimates about 26 percent of the 52 million U.S. households with mortgages owe more than their house is worth.
Susan Wachter, a Wharton real estate professor, said she liked the Obama plan’s “systemic approach” in that it addresses the need to slow down foreclosures that are preventable.
Sharon Price, director of policy with the National Housing Conference, said the plan shows the federal government finally “leveraging the influence” it now has over the financial industry.
However, Joseph Brusuelas, a Moody’s Economy.com director, said he’d expected a “more aggressive plan” and that the amount committed was “not large enough.”
For my part, I’m glad to see more details in this plan than the vague trillion-dollar framework offered by the Treasury Department last week to aid the banking sector.
But I come back to the staggering amounts we’re committing to rescue everyone and everything. Even the world’s richest country can’t afford a “nothing can fail” strategy for too many years.
Posted by Mike Armstrong @ 2:30 AM  Permalink | File Under: Financial Services | | Real Estate | 4 comments
Comments   
  • Comment removed.
  • 0 like this / 0 don't   •   Posted 8:53 AM, 02/19/2009
    at least those who took on too much of a mortgage to live in their mcmansions will be able to stay there...go obama.
    — democratsruinedthecity
  • 0 like this / 0 don't   •   Posted 9:59 AM, 02/19/2009
    Lesson Learned: STOP PAYING YOUR MORTGAGE NOW! Only idiots pay their bills because if you don't, now the government will pay banks to lower your balance and interest rate! If you keep paying like a responsible person, you are ineligible for assistance. Also, quit your job and thus, pay no taxes but you will then receive a $$ credit from Uncle Sam! I love this country! Does any Democrat with a job now understand that the Socialists are now turning their sights on your income and wealth to "transfer"? It was all fun and games when the dumb Republican made such easy targets, but now they are coming after everybody. Kinda like the October Revolution in 1917. Seemed like a good idea at first, and then ...
    — Trugbydog
  • 0 like this / 0 don't   •   Posted 10:44 AM, 02/19/2009
    Bush started the bailouts! Remember when all there buddies on wall st needed that 700 billion or the world would end? It is a Constitutional issue! What the goverment is doing is illegal! Transfering public funds to private industry is un-constitutional! Wake up sheep! This is what the Constitution was to prevent!
    — hexyscores


4 comments
About Mike Armstrong
Mike Armstrong, a business editor and writer for nearly two decades, is the Inquirer's business columnist and PhillyInc blog editor. Contact Mike via e-mail or at 215-854-2980
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