Bloomberg columnist Caroline Baum, others believe latest legislation from Washington won’t be enough to heal financial markets.
Excellent Op-Ed piece that appeared this morning on Bloomberg.com from columnist Caroline Baum. Baum takes a look at why Friday’s “emergency” legislation won’t be enough to solve the continued economic issues we’re faced with. Baum trots out a number of alternative plans that never saw the light of day as Congress rushed to enact the bailout bill last week. Interesting read.
Here’s what Baum says about Friday’s legislation:
There were much better ways to stabilize the financial system without turning the U.S. Treasury into the largest hedge fund extant. No one in Washington wanted to listen.
Former U.S. Treasury Secretary Paul O’Neill tried, only to have his calls unreturned. His idea was to guarantee the troubled assets instead of buying them, in the same way the government chose to guarantee money-market funds to stop the exodus. … Michael Aronstein, president of Marketfield Asset Management in New York, had another idea: Allow financial institutions to fund selected mortgage-related assets for a term of three years. “Get them financed in a way that isn’t volatile,” he said.
The legislation won’t arrest the plunge in home prices. There are too many homes and not enough buyers. To the extent that taking banks out of their bad assets gives them the wherewithal to make new loans, it may help at the margin.
At the same time, the economy is souring fast, and the pace of job losses is accelerating. Non-farm payrolls fell 159,000 last month, the ninth consecutive monthly decline. Private payrolls have fallen for 10 straight months. Rising unemployment will only exacerbate the problem.
You can read Baum’s full article here.
And you can find our version of a homeowner rescue plan here.
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