Foreclosure Relief Measures Are Not Working
There are no indications that the much hyped $7000 billion bailout package and other foreclosure relief measures are working. Recession continues to be deep and long.
Pundits are suggesting that there are many other alternatives before the Treasury apart from the steps it has been taking. It is proposed that when a firm is too big to be allowed to fail then the thinking should be that then it is also too big to be saved. Alternatively by nationalizing it the infection will not spread. The shareholders and the management should be shown the door and the entire infrastructure revamped. The valuable part of the giant should be sold off as operating business assets to the highest bidder – maybe a bank that has not been overtaken by the credit froth. The rest of its parts should be liquidated. By doing so none will suffer except those who generated this crisis.
The plan is viable and possible. Sweden implemented it successfully during 1992. It is well to remember that the Treasury and Federal Reserve have in fact taken on all the risks on behalf of the taxpayers of the jumbo financial bodies. The latter two argues that had they not done so and if they had not propped up these banks there was the grave risk of credit being frozen. If they were not operating then who would lend money? But there is a reverse side of the coin. Giving support to the failed financial institutions and gifting them with huge credit has made business more troublesome and difficult for the people and the firms that had no hand in this imbroglio. Creditors are squeezing out of operation perfect solvent firms because there are not under the umbrella of the Treasury. With a surfeit of treasury guaranteed loans, customers are fleeing away from those that are not.
Instead of digging at the roots of the problem, those who are handling the bailout measures are doing their best to again inflate the credit balloon hoping to cut off recession. There are clear indications that the efforts are failing. The stock market has not seen such a bad year as 2008. Recession is showing no signs of receding. The bigwigs have created this problem as a “crisis of confidence” but actually they are crying out and saying, “please pay no attention to the problems we are failing to address.”
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