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The Tycoon Report on the Mortgage Bailout
By JLP | December 5, 2007
A reader of AFM sent me an email with an article by Dylan Jovine, who writes The Tycoon Report. As many of you know, I’ve been pretty vocal (and lots of you have too) about this mortgage bailout plan that Washington is trying to push through. Dylan’s rather long piece compares this crisis with stock market panic of 1907. For the most part, I agree with what he says. That is, until he says this:
Half of the people I hear screaming at the top of their ignorant lungs would have you believe what the politicians are spinning to you — that this is a bailout of good old fashioned American homeowners who simply got taken by the big bad fat cats on Wall Street.
If you believe that, then I have a bridge to sell you in Brooklyn.
The other half of the people screaming at the top of their ignorant lungs would have you believe that this is a bailout of the fat cats themselves. I can’t tell you how many op-ed pieces I’ve read from writers claiming that Treasury Secretary Hank Paulson, who is the former CEO of Goldman Sachs (SYM: GS), is running the financial Trilateral Commission, and he’ll make sure the rest of his Wall Street fat cats don’t get crushed by the mess they made.
I’d like to believe that. It sure sounds good. But the truth is that this bailout isn’t about either of them. And like I said, neither is it about me.
This bailout is about saving the system itself.
First off, I don’t like being considered ignorant if I’m skeptical of this bailout. Secondly, I don’t think either one of those points addresses the concerns of me or most of the readers of AFM. I think that this bailout is strictly political. The Bush administration is trying to do something so they look like they’re “doing something.” Bush’s hands are tied on this deal. If he doesn’t do anything, the Democrats will use it as a way to show that Bush doesn’t care about struggling homeowners. If he does do something, people like me will call it political. Thirdly, this IS ABOUT ME and YOU!
I think Dylan fails to see that this bailout isn’t going to do anything but prolong the pain. Temporarily postponing interest rate resets is just that - temporary. Eventually the dust has to settle and that means some people are going to lose. Housing prices may fall significantly. However, there will be people to buy those houses if the price is right. Things will get back to normal until the next big idea comes along.
Finally, this will be my last subprime post unless a reader sends me another email. LOL! I don’t want to beat a dead horse but sometimes the topic is too important to pass up.