There continues to be a lot at stake.  The FDIC is once again pushing the idea of a mortgage loan guarantee plan that would provide $1000 to servicers to cover loan modification expenses and backstop the loans should they re-default in the amount of 50% of the losses.  Those eligible would be 1.4 million loans 60 days or more past due and 3 million loans projected to be delinquent by the end of next year. 

Hank Paulson’s announcement to adjust the game plan took many by surprise by infusing capital directly into banks in the form of preferred stock positions in those institutions as opposed to buying up toxic mortgages.  The move was prompted by the frozen commercial paper market which has not allowed big business to raise capital.

I see the largest and most immediate problem as two fold.  1)  We can’t let the Auto Industry go down.  The systemic risk would be massive.  2)  We must help people stay in their homes by restructuring the debt.

I am a free market capitalist, but we need to be practical here. We can’t let GM and F fail and then live with the results which in my opinion would be far worse than throwing them a lifeline.  It bothers me to no end that those that have been fiscally responsible should have to bailout those who overextended themselves with mortgage debt.  Certainly, there were predatory lending practices, but many people just “rolled the dice” and got involved with loans they knew were risky.  Why not extend tax credits to real estate investors to incentivize them to work off the bloated real estate inventory and begin to return the housing market to equilibrium.

We need leadership NOW!  GM won’t last through the end of the year without help.  Is it right to bail them out!? Let me end by saying that there have been times in my life when I have been absolutely right but ended up losing the battle.  At this point, it’s not so much about being right or wrong but rather what is needed.  You don’t ask a soldier who just took shrapnel in his/her leg whether the war is right or wrong, you apply a tourniquet to save a life.  Robin

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