Avoiding the 2008- 09 Housing Meltdown?

                 

The government could have done the following at the first signs of financial distress in the real estate market of 2008/2009. This is not hindsight. I had the suggestion in my blog at the time.

                       

The method was to have government buy up at bargain prices all the unsold tract homes in bubble-infested areas, such as Arizona, California and Florida. This would not have been a bailout for the builders. They would have suffered losses on their over-zealous behavior.

                       

It would have dried up the major excess

supply of real estate and stopped the ongoing, adverse psychology that kept reducing values of the rest of the nation’s perfectly good real estate that was not too overvalued. The cost would be relatively very low, compared to the many billions and even trillions the U.S. has expended.

                       

The federal government, through one or more of its agencies, could also have guaranteed all the loans of its banks, the way the FDIC insures deposits. Fees would be charged the banks for the guaranty.

                       

No bailout funds from taxpayers, no phony stimulus funds which really amount to political slush funds. No poor psychology that makes banks wary of making loans to small business; thus more job creation.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Blogger Backgrounds?

                    

Should any viewers need an update about the background that goes into my comments:

                       

A blogger about Wall Street ought to intimately know the subject:

I was a senior investment analyst for a major Wall Street firm, where I was an original investment researcher.

                       

In addition, I was a top public company officer and director and independent business operator, as well as a past freelancer for such publications as Barrons® Trusts & Estates®, the Financial Analyst®, and a number of business and retirement journals.

                       

I am the only researcher to have studied and then further documented and individually investigated over 1,600 strategies used on Wall Street. And I have looked at their pros and cons and other characteristics as they apply to professional and average investor use.

                       

What works best is the disciplined use of strategy with original purchase, not seat-of- the-pants decisions in midstream. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

                   

Banks’ Securities Trading

                  

Paul Volker, a former head of the Federal Reserve Bank has, in the past, suggested restriction of proprietary trading among banks or bank holding companies. But when pressed, he has had no firm idea of what really describes proprietary trading activity.

                       

There have already been regulatory restraints, much of which now have been fobbed off by banks to other entities. However, there is no real lessening of risk.

                       

It is difficult to delineate trading by banks for accounts and for themselves, as Mr, Volker knows from his experience. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Financial Regulation Psychology

              

Meltdowns happen when you get an over- regulated attempt to spend yourself out of a financial tangle while psychologically pushing citizens and business into an ever- deepening funk.

                       

I have felt that most regulators and politicians fail to understand psychology that drives the way people affect everyday economics.

                       

What to do, in practical terms, to get out of a recession?

                   

Cut taxes permanently and watch how that creates jobs and spending because of the psychological uplift. Clear doubts for business and the consumer and natural instincts will resolve recessions before they fester into depressions. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Financial Disasters

                 

I have often commented on aspects of the 2008/2009 financial meltdown, and how the severity of this Great Recession of the 1930s could also have been prevented, had there been a “hands-off” attitude by government. Instead, we got heavy- handed, ultra-expensive, political attempts.

                       

I bring this up once more because of the Federal Reserve’s continued easy money policy.

                       

The Fed has allowed itself to become a tool of administration fiscal policy and shows little independent monetary policy for its intended purpose. It helps guarantee future financial upheaval for this country unless an effort is made politically to change matters. We cannot depend on current Fed policies.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

           

Federal Reserve Power

                 

The government has given even more power to the Federal Reserve; the agency has had excessive power up to now.

                       

The assumed problem is the possibility of any banking institution failing and then dragging down another.

                       

Unfortunately, the regulators have historically never been good at this, and I doubt they ever will. The Dodd-Frank legislation has merely made it more impossible for big banks to fail. That spells out more senseless bailouts. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Government Aiding of Banks in 2008-09

                   

Government dependency is difficult to get rid of when you accept its aid. The result becomes worse than an addiction. Even when you want to repay that incurred debt,

                       

Apart from the fact the bank management were controlled within a government straitjacket (which is a characteristic of a fascistic and not a capitalistic free government), banks who accepted 2008- 2009 financial aid were restricted in how they pay bonuses and compensation to top executives.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)