Subprime bail out:
I don't have a strong opinion on this as arguments on both sides are very good IMO. It may fail, but I doubt it. I think the bottom line is that is smooths out what otherwise would be a free market disaster. Unfortunately, it sets another bad precedent, some will wrongly benefit, and taxpayers will pay some portion of it.
Although the Subprime bail out is a major issue that has a direct effect on the financial/liquidity crisis, it really isn't of major relevance to the housing collapse IMO.
I don't care if every single subprimer is made whole tomorrow at 8AM, it has nothing to do with the major issue to housing ------ VACANCY RATES. The inventory of homes is at staggering numbers today without a subprime and foreclosure collapse YET. It will take years to work that inventory off. Until it does, housing prices will continue to drop.
I will admit that if you had a ton of subprime dumped onto an already beleaguered housing market, it would make it worse, but generally only worse in very specific areas where tons of subprime was marketed. It would obliterate those areas, but I don't think it would have all that much affect nationwide on housing.
Naturally, you can argue that if the sub prime mess were to make the financial/liquidity market worse (ie dry up lending even more, or for even longer) that would exacerbate the housing recovery. Of course, that is also true, but that's a function of RECOVERY. We are a LONG ways from recovery - as we are nowhere near the bottom of the median housing price drop IMO.
Len
Warren Buffet: 5 minutes and 17 seconds of pure, unadulterated, bulletproof, flawless logic.
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AI
