Second, we needed very badly to cut rates. We did it too late. But then we came up with TARP, which would keep people in homes and buy bad whole loans from Bank of America and JP Morgan and Wells Fargo. Then Paulson just betrayed them, one of the most amazing, unopposed turnabouts in history. It really killed the Comericas (Stock Quote: CMA) and Keys (Stock Quote: KEY) and PNCs (Stock Quote: PNC), too. They were going to use this strategy to create good and bad banks. They failed. (Oddly, Citigroup (Stock Quote: C) is much less affected, but it doesn't matter because it has so many other issues.)
Now the foreclosures are setting records. Probably more than 50% of the homes bought in the 2005-2007 period are worth less the mortgage. That means 8 million people should walk away from their homes. We simply can't afford it as a nation. We will have a second Great Depression. It could be worse than the first.
All of this is why the Obama administration has it in its power to figure this out. It simply has to offer a VERY BIG tax credit to go buy a house. With houses plummeting in value and mortgage rates at historic lows (fabulous tinder for a housing bargain bonfire) a $25,000 tax credit -- it will have to be that big because the average home will cost about $250,000, and you need to put down 20%, so you would get half of it back -- would make it so those who have been waiting, and there are many more people WAITING than needing to skip from their homes, will pull the trigger. It is so simple. It is so logical. But he has yet to see, like the previous president, that the fundament of the problem is homes. Yes, we need an infrastructure jobs program of huge proportions to stop unemployment, but that's hard. That's a hard thing to change. Just going and buying a lot of Caterpillars (Stock Quote: CAT) or giving money to Aecom (Stock Quote: ACM) and Granite Construction (Stock Quote: GVA) isn't going to cut it.
