Sunday, December 14, 2008

Does anybody know what's going on?

All right, I'll give credit where credit is due: Senate Republicans, thank you!

And I'll blast away when the situation deserves it: President Bush, if you use TARP funds to keep the UAW afloat, shame on you. Don't let the door hit you on the way out.

To me, here's the operative question about any bailout activity: where's the market for recovery?

In the auto industry, I don't think there is one for the Detroit 3.

Here's why: everybody and their dog who was so inclined to get a new vehicle got one in 2002, when you could literally get a new car for zero down and zero percent interest. And heck, I bet more than a few households got two new cars during that timeframe.

So fast forward to 2008: in the middle of this recession, what are the chances that people are going to want to trade in their perfectly good 6-year old car for a seemingly neverending car payment?

I don't pretend to think that I speak for everyone, but I know that as much as I would love to upgrade my car (really, I could use some better gas mileage), I'll pay the extra dough in gas if it saves me a car payment. And our family vehicle, which is practically a different generation of minivan due to numerous upgrades now available on the market, is going to be driven into the ground before we replace it. That's how much I want to avoid a car payment during these tough economic times.

So even if GM and Chrysler find a way to stay afloat AND make quality cars that are competitively priced. . .I just don't think there are enough people out there to buy 'em to help the company become solvent.

It's just money being thrown away.

Just like TARP.

Can you believe we're almost through the first $350B of TARP? Do you feel stimulated?

Has there been a huge uptick in activity in your local real estate market? Heck, has there even been a foundation laid for better real estate days ahead?

I know that TARP wasn't designed SPECIFICALLY to help homeowners. . .but I'm pretty sure that most people in the U.S. thought that homeowners would get some benefit from it.

Again, it comes back to markets. TARP was supposed to provide funds to creditors, the goal of which was to loosen up a stagnant credit market. A downstream goal of all this was to get money into the hands of interested real estate buyers, thereby helping to get movement in that market.

So the banks have their money. . .but the problem is that nobody can get a loan. Gone are the days of 100% financing, so now buyers have to have something to put down to get into a house. Gone too are the days of people having equity in their current house that they could use to help "upgrade" into another house. AND with the market having lost so much value in the last 5 months, there aren't a lot of people out there with money saved up to put into a house note.

So, to recap: plenty of inventory, complete with some pretty good deals out there in certain places, and some good rates to be had. . .and yet still no activity.

That's because there are no buyers.

$700B spent on making the banks feel better about the bad loans they were forced to make. . .and not a lick of improvement to the economy.

There may be government actions that can help in this situation. Check that, there ARE government actions that can help in this situation. But the answer has got to be as direct to the source of the problem as possible. "Trickle down" doesn't work, remember? Isn't that what the Dems would have you believe?

SO. . .if the problem with the real estate world is foreclosures, then the government--if it has to do anything--should only consider helping those in closest danger of losing their homes. And not through any intermediary, such as the mortgager: either the money goes straight into the pockets of the distressed homeowner, or it doesn't go.

AND. . .with the auto industry, IF something just has to be done, then it should only address the problem of the UAW. That is the one element of the Detroit 3 that is costing them the chance to be competitive--anything else is just window dressing. If the UAW won't make concessions, then the government proposes a situation whereby Uncle Sam pays the $30-odd an hour difference between the UAW workers' pay and the non-union pay in the plants down south. Let Congress vote on the bill, and let the people hold the representatives responsible for their vote on that ridiculous piece of legislative garbage. I have a funny feeling that the House's desire to do "something" for the Detroit 3 would change dramatically if the legislation was crafted in terms that actually describe how the only beneficiary of the deal would be the UAW. But let's face it, that IS the only party that makes out in any bailout deal.

And that's why there should be no deal. And that's why there should be no tapping into the second $350B of the TARP until a plan is identified to get the money to actual homeowners.

Yes, the government can help here.

I just don't think they will.


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