Not a "bailout" -- "An Asset Purchase"

So you think that EVERY home owner is going to default on their mortgage? That the homes that are the collateral for these loans are totally worthless?

Make no mistake, I think EVERY head of Fannie Mae, Freddie Mac, Lehman Bros, AIG, et al., including members of congress who were "in the know" should be stripped of all their assets and their US citizenship and ridden out of the country on a rail.

Having said THAT... The 700 Bil will buy hard assets (hopefully at a nice discount) and if congress is smart enough to lower the interest rates on these shakey loans, the home owners will continue to make their payments and in time not only do I expect all the money to come back, but if properly handled (yeah I know, can we trust them...) the taxpayer's should make a profit on the deal.

The root cause of the current financial crises lies in the desire to make home ownership available to people in lower income brackets. This idea was (to my recollection) first put forth by Jack Kemp who was the Secretary of Health and Human Services under Ronald Regan. The belief was that home ownership would help them to be more stable.

After that time, Freddie Mac and Fannie Mae began buying loans from lending institutions who loaned money to home buyers with lower credit scores.

The next big event was when Bill Clinton signed legislation that allowed Banks and Financial Institutions to cross lines and offer products that since the Great Depression had been limited to one or the other. Suddenly Banks could sell securities and Financial Institutions could make home loans.

During the Clinton administration, Freddie Mac and .Fannie Mae were encouraged by a Republican controlled congress to continually lower their standards for buying lower credit scored loans. Alan Greenspan, former chairman of the Fed warned against this practice as did many others who saw and understood the depth of the problem. Which continued to grow year by year as the banks and financial institutions developed their new co-operative product "Mortgage Backed Securities" which were sold to Freddie Mac and Fannie Mae and then to investors and between financial institutions.

FIVE years ago, the Bush Administration actually drafted legislation for congress to limit and cut back on these practices. However congress, led by Democrat Charles Rangel in the House, would not allow the bill to come to a vote.

The "gold rush" of the housing market, between 2003 and 2006 exacerbated the problem to the extreme. Now, lower income people were reaching higher than ever before with the hope and dream of finally hitting it big, wealth through real estate. Freddie Mac and Fannie Mae were the catalyst for this frenzy, buying ANYTHING that the banks or financial instutions offered them, giving the banks and financial instituions NO ACCOUNTABILITY for the bad loans.

Do we need reform? YES.

Do we need to bail out these foolish financial instituions? YES. If we do not, WE THE PEOPLE will be hurt the most. Our investments and our retirement plans will deteriorate. We will not be able to borrow money, we will loose our jobs and our businesses. It is a distasteful thing to have to do, but we have to do it for our OWN sakes.

Do we need to install stricter regulations to prevent this from happening again? YES.

Do we have responsibility? YES - WE THE PEOPLE are the borrowers, we had responsibility to not over extend ourselves. WE THE PEOPLE are the lenders, we had the responsibility to act in a prudent manner. WE THE PEOPLE elected the politicians who created Freddie Mac and Fannie Mae to interfere in financial and real estate markets.

Will we get our money back? Probably. Most of these loans will not default. They will be purchased by the government for less than full value and so the ones that do not default, will make up for some or all that do.