Smart Decisions?

1 Comment

    • ON: Sat Apr 5th 02:10 AM
      Commented on:
      Homebuilders Hands in Congress' Pocket?
      The Basics Identified: Market cycles have been around as long as there have been markets. For anyone to think that the run-up in home valuations seen before the "housing bubble popped" was sustainable had not done their homework - it was never a matter of "if" but "when." The market valuation correction was and always will be the part of the free market system that provides economic equilibration. Therefore, the market has behaved as it should have.

      The Problem (three fold) Identified: First, lenders that practice due diligence (and knowing the above basics) should never allow their lending behaviors to support failures to develop into the level that we are now seeing. Second, borrowers (especially for their primary residences) should only borrow to the extent that their cash flow and equity levels allow a high probability that their loan can be serviced (this needs to be driven and guided by lenders too.) Finally, the government has to provide the fundamental limited framework that prevents greed (read mismanagement) from both the lenders and borrowers to distort what should be an efficient market into a national fiscal debacle.

      Making of Continuing “Federally Assured Fiscal Debacles”: The current federal government is planning on spending billions (of your and my money) inefficiently and ineffectively to “help solve” the housing crisis. First, by bailing out banks that used poor judgment in their lending practices (they should be treated as any insolvent business and utilize the equity of the firm, and if that is not enough, go into Chapter 11 or 7. Also, with an additional nine billion dollars slated to go to the large home-building companies, the government is supporting an already failed, inefficient key player of the housing problem.

      Solutions: We need to understand the problem, have an effective resolution (free market correction) and have limited government-enforced guidelines to prevent this situation from escalating into such an enormous national fiscal risk. The housing market cycle will cycle again – let’s be smart and make good decisions for the future of our children and our country!





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