Real Estate Marketing & Beyond
In today's report to congress, I could not help but notice two things. First, Fed Chairman Ben Bernanke was essentially admitting that his program to solve our economic problems with more spending is not working out very well. And it was painfully obvious that some if not most of the congressmen/women on the panel had no real clue about our present economic calamity, as was indicated by the silly questions some of them were asking.
Ben Bernanke © trackrecord - Flickr.com
While I don't want to get into deriding specific members of congress, if you watch a replay of the telecast, you'll see what I mean. Mr. Campbell, for example, seemed to be somewhat intimidated by Mr. Bernanke, and seemed to squirm in his chair as he stammered through questions like (paraphrasing slightly), "Are we protected from a default in Greece?" I believe Mr. Bernanke was straining to contain a grin as he explained to the congressman that "if we have a controlled default things will be OK, but if we have a uncontrolled default, things may not be OK".
Huh? Wow, there's a meaningful exchange there. No wonder we have a problem. Are these things ever controlled?
Thinking back on 2007, Mr. Bernanke told congress that the subprime crisis was contained and under control, and posed no threat to the greater economy. Then in July of 2008, just two months before the market melt-down, Bernanke, under intensifying pressure still maintained that there was no real threat of a melt-down. By July the housing market was already in a full blown melt-down, with foreclosures well on their way to record levels. It seemed that everyone knew it but the chair of the Federal Reserve, and then Treasury Secretary, Hank Paulson.
Hey Congress, here's a revelation for you - The Emperor has no clothes! While I am sure that Mr. Bernanke would fix the world economy tomorrow if he truly knew how to do it, the obvious fact is that he can't. And it's equally obvious that continuing to play this game of economic charades is getting tiresome.
Today's headlines will say that Bernanke said the "recovery is faltering". What a surprise. I'm being sarcastic of course. Every single home owner in America already knows that there has been no real recovery, certainly not where housing is concerned. I guess they are running out of ways to pretend that a recovery is actually happening. So now it's "faltering".
After seeing the new rules that the Federal Reserve is implementing under Dodd-Frank, higher down payments, tighter qualifying criteria, interfering with private investors and seller financing, requiring mortgage licenses for investors who want to sell homes with seller financing, and even giving consideration to garnishing wages of defaulting mortgage borrowers, I have no idea why we expect the government or the Fed to solve the housing crisis. Take advantage of it? YES, but Solve it? Not by making it harder to buy and sell homes. Yet that is essentially what they are doing. In recent weeks I've published several articles about the negative impact of Dodd-Frank, and the need for localized solutions.
If the government really wanted to make it easier for housing to recover, they would bring back the home buyer tax credits, make it easier to borrow, not harder, and come up with a plan to allow investors big and small to pick up the pieces of the foreclosure mess, instead of adding piles of new regulations via Dodd-Frank, and making the housing business more difficult in general. Indeed, with the trillions they've spent so far, we could have brought every mortgage in america current, and eliminated the foreclosure crisis over night. A QE III is probably inevitable, but it's merely throwing good money after bad and more of the same old same old.
