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Friday, October 10, 2008

Meltdown

Steve Taylor’s old song is an apt description of the financial mess our country finds itself in this month. The stock market is almost half of its all-time high. When do the stock brokers start jumping out of the windows instead of facing the disgrace? When do the Democrats that arranged this wholesale theft of the financial markets finally get theirs? Now we know the real legacy of Bill Clinton.

“For whatsoever a man soweth , that shall he also reap.” The “greatest economy ever” was the claim of President Clinton. Now we know how he did it. Financial institutions were forced into making bad loans in the name of affirmative action. No down payment, no proof of income, no proof of citizenship, just sign the papers. Does it bother anybody besides me that five million of these bad mortgages were to illegal aliens? Dire Straits had a song many years ago about “money for nothing and your chicks for free.” That’s the Clinton legacy in a nutshell.

Now the housing bubble has burst and many people are confronted with reality they always knew. The pyramid scheme has finally collapsed. The funny thing is that this is a cakewalk compared to the collapse of Social Security that is about two decades away.

The other factor that is amplifying this whole mess is something Congress did about a year ago. They changed the way that companies have to report losses on assets that they own. While it is technical I will give you the layman’s version of what they did.

Suppose that you bought a house for $400,000. Because of the housing bubble bursting it is now worth $300,000. As long as you continue living in the house and making the payment, everything is fine because the issue is not current value but the value when you decide to sell the home. If you hold onto the house, hopefully the value will increase and you will not take a loss if the market recovers before you sell.

However, under the new rules enacted by Congress, your lender is in a much different situation. On the books your lender must now show a loss of $100,000! There is really no loss because the mortgage payments are being made and the property is not for sale; however, the new Congressional rules say that it must be shown on the lender’s financial statement as a loss. This has turned otherwise solvent institutions into bankrupt lenders. Effectively, the Congress has turned the housing collapse from a 9/11 attack on a segment of the economy into a hydrogen bomb detonation in the middle of the economic heart of the country.

As I’ve said before, if Republicans were to blame for this mess there would be hearings every days 24/7 until the election, but there are no hearings, no subpoenas, no investigations of any kind. There is only more government programs and money to the same people that created this mess in the first place. Reward the failures, it’s the Democrat way.

The only question is can the Dems fool the voters for another month without being exposed for who they are?

Posted by william on 10/10 at 03:07 PM
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