As if leaving a half-trillion dollar budget deficit for the next administration wasn’t enough.
This morning, President Bush signed into law a $300-billion bailout for Fannie Mae and Freddie Mac. He had threatened to veto the bill because it included $3.9 billion for local communities to purchase and maintain foreclosed homes. But he signed it anyway.
Now, you may well ask, “What choice did he have?” And that’s a good question. It’s certainly true that Fannie Mae and Freddie Mac cannot be allowed to fail. Far too many Americans have home mortgages in which one of these two government-sponsored corporations have financial stakes. And something like one in five hundred homes in America is in foreclosure.
What’s wrong with the “tough love” angle? Would the foreclosure of .2% of homes going to have that significant an impact? Overall prices would drop, yes, but once the inventory resulting from the foreclosures gets sold off, that will be that. The market correction simply needs to happen, be done with, and then the rest of us have to pick up the pieces and move on. The system has already been shocked. This is closing the barn door after the horses have escaped.
When you have a bandage that needs to come off, you have to rip it off even if it’s been stuck on a bunch of hairs. Yes, it’s going to hurt. But since you know it’s going to hurt, the best thing to do is to rip it all off at once, take all the pain at the same time, and then it’s done. Isn’t that the same situation we face with the housing market correcting itself?