Sub Prime Follies

     Let me get this straight.  For years banks created a new class of loans to finance home mortgages.  These included ones focused on creating opportunities for home ownership to people who had little chance otherwise, and would have probably rented for their entire lives.  Another class of people were those who were willing to use false identities, misrepresent income, work in illegal collusion with appraisers and mortgage brokers to withdraw cash from false equity and the like.  It was a brilliant strategy and created huge fees in the form of front end points.  As a new customer acquisition strategy, it was akin to Cox cable offering discounted Internet for three months, or a free phone from the cellular carriers. 

     So here we are today.  The strategy backfired, liquidity dried up, and many banks and Investment houses now have strained balance sheets.  The fed is cutting interest rates, but that is just designed to create a spread to rebuild the financial institutions balance sheets.  It will not reach the consumer.  Now our wonderful politicians including the clueless non communicator Bush ( I am allowed to say this as I voted from him twice, and my dogs visit twice a day), are saying we should freeze these teaser rates to protect these poor consumers.  Never mind most should never have been allowed to buy in the first place.  But all this will do is lengthen to many many years the time it will take our financial institutions to recover. 

    What we really need are laws that require all marketers to make any discount on any product offered be good for Five Years.  This would only be fair, and would broaden the benefits to the entire population, and not just be a windfall for the few.

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