floridauser

There's Still a Better Bailout Available

Since all the trouble rests with tumbling home prices, resulting in massive CDO losses, why not act at the source? Stop issuing new residential building permits until unsold housing inventory is absorbed. Since new house sales are only a small fraction of all sales, this would take some time. Certainly, such a plan would be an unamerican, anti-capitalist program, just like the one being proposed by Paulson to rescue nearly bankrupt financial institutions. However, it would likely be much cheaper to temporarily compensate the new home builders and their suppliers for lost income than to rescue these behemoth banks. About 500,000 new homes are sold yearly at an average price of just over $200,000 resulting in an approx $100 billion/year subsidy. This should have the desired effect of stabilizing the housing price freefall and the value of CDO's. A gradual return to normal permitting could be allowed in several years. The US is simply overbuilt and this can be remedied in time by a growing population if no more inventory is added.