When the sub prime crisis broke, everyone was concerned with the cause and both the short and long term fixes so we could all get on with our lives. None of the aforementioned discoveries ever happened. We all became distracted by other catastrophes in our country and, eventually, in most of the free world. Our government quickly came up with the answer to problems: money (ours). We gave large amounts to almost anyone and any business or organization that asked for help. Two words popped up that showed how willing we were to change to make things better: transparency and oversight. Nothing was going to be hidden and someone would keep an eye on everything that was going to be done. We all yelled "Eureka!" and things were going to get better very soon. As Lee Corso, former football coach and one of the hosts of "Game Day" is known to say, "Not so fast, my friend!"
Before we could count to a trillion we had our first crack in the plan. Treasury Secretary Paulson convinced us a $700 billion bailout was essential, with the money going to buy troubled mortgages. This would get the credit markets working and real estate hopefully turning around. We agreed and Paulson's first act was to divert the newly authorized funds (see: "What's in a Name") and the two aforementioned terms apparently were missing. That was only the beginning. AIG needed money - about $80 billion to survive - and ended up with a lavish weekend outing costing some obscene amount, and their advance from us increased to $150 billion. "How" and "why" were my first two words when all was brought to light. Again the magical above referenced two words seemed to be out of sight? All of the money that was being spent, especially on Wall Street, was to free up the credit markets and get them working again. Yet even as I write this article we still do not have, among many things, a viable jumbo mortgage market in this country. Again I ask, why?
Roger Schlesinger
Roger Schlesinger's Mortgage Minute is heard on hundreds of radio stations and daily on the Hugh Hewitt radio show and Michael Medved shows. Roger interacts with his hosts and explores the complicated financial markets in order to enlighten his listeners and direct them along their own unique road to financial freedom.
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