There's an interesting viewpoint in Time Magazine today that goes to the heart of this financial crisis we are all living through. And it cuts to the heart of the crisis:
"Because the American Recovery and Reinvestment Bill of 2009 has not been passed and signed into law, there is still some time to talk about how it could be improved and to criticize what is not yet set in stone. Instead of spending this money for infrastructure projects to create jobs, it should go immediately to inject capital into the failing real estate market. Instead of purchasing toxic assets with TARP funds, the government should now begin to purchase residential and commercial real estate that is for sale to stop the destruction of property values. Last month the value of housing in the top 20 cities fell more than 18%."
When we look at the fundamental cause and effects of the crisis, it all seems to come back to falling demand and pricing of residential property, leading to the destruction of personal net worth and over-leveraging, inability to make mortgage payments, foreclosures and mark downs of assets (loans and foreclosed property) by financial institutions, less capital to lend, loss of confidence, and a downward spiral from there. The government then steps in with bail-out money but that is no where near enough to stem the tide.
Why don't we deal with the fundamental issue of falling demand for property--residential and commercial? Why are we flailing around with magic solutions for effects rather than the cause? And, over time, what would you rather our government own--toxic paper or American land?
Article reference: Memo To Congress: "Buy Land, They Ain't Making Any More Of It"