The Race to the Bottom

I give you the Authority under which the Treasury hopes to capture the Mortgage loss for the American people. I just scan through this Act, and find the document wide open to devious practice. The Secretary can appoint financial institutions as financial agents without Review or Bond, can establish Contracts without relationship to previous Contract law, lack of defense by Private Parties in the conquest of Private Contracts with ability to alter the terms of said Contracts, obtain $700 billion in Taxpayer assets to purchase Mortgages (undefined in Act) irrespective of the desires of the Holders with ability to alter the terms of the Agreement in any way desired by the Treasury without any Private recourse to previous American law, and the Treasury can alter, amend, extend, or increase the liabilities of the Holder without recourse to law. The ability I find most threatening is the open power to confer subsequent Ownership upon any financial agent or institution at will, without resort to supervision by Congress or Court.

One can read the covering article and find many of the objections to the Act which will be presented by Congress. What I find most objectionable remains the ability of the Treasury to amend the Ownership rights of the Contracts without Court appeal. I would far prefer a limitation placed on the Treasury, where actual Control of the Contracts had to be farmed to Private agents by Bid; said Agents subject to both Mortgage Contract law, and where they were left to earn their own Profits from the deal. There remains a vast threat to Property rights when Governmental agents are allowed both the Right of Conquest, and the freedom to Control without Private appeal to the Courts. It is even more desirable that the Government agency not be allowed to draft Private Profits from the Process. The worst aspect must be that voiced by some Commentators, who have suggested it could be a form of alternate taxation. The later is burden placed upon Private Equity holders, and should be an imposition only upon specific law.

Here is an article which examines if the new Government interventions will work to restart the financial end of the economy. Alan Blinder mentions that the whole Crisis is the result of declining Home prices; a Concept I disagree with, the decay in financial institutions was bound to result in a Crisis even with increasing Housing prices. Another element resides in the increased degradation of unoccupied Housing, much higher than the rate for occupied Housing, especially under distress evacuation of Foreclosure when close-down procedures were not followed. Financial Groups have not been utilizing due care in the preservation of Housing. The Housing is not worth what it was, if it ever was! Financial Groups are additionally directing their losses overall to their Mortgage units, to unload all their liabilities, especially by the Mortgage sector purchase of inner-Agency liabilities from private holdings of Group officers. Nothing I can find suggests that this vast absorption of bad debt by Government will restart the liquidity of the economy; stymied by the poor performance of the rates of debt reduction. I don’t think that Credit will return to normal function, until about 7% of the existing Debt is reduced by repayment or default. lgl