From Bloomberg this morning as stocks tumble:

“This is a systemic financial crisis, there is no end to it,” Nouriel Roubini, professor of economics and international business at New York University, told Bloomberg Television. “It’s a vicious circle between a contracting economy and greater credit and financial losses feeding on the economy.”

President Bush reminds us that the system is “basically sound”:

WASHINGTON (AP) - President Bush urged lawmakers on Tuesday to move quickly in putting into force legislation designed to help prop up mortgage giants Fannie Mae and Freddie Mac while declaring the nation’s financial system to be “basically sound.”

My thoughts?

Well - I don’t think the government should move too quickly on the Fannie and Freddie bailouts. I don’t trust them to get it right this quickly. Too many variables, too many unknowns. Take a deep breath, try to really understand what the best solution is to this problem. The last thing you want to do is panic. At the end of the day it’s investors who are losing money right now - and that’s the game they play, and the government can come in at anytime in the future with a more sensible plan and rescue the market. I just want to caution against hastily put together plans.

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I came across an interesting post at The Liscio Report called “Presidential economics: Do parties matter?” And as I read through it I came across some interesting analysis and I realized there may be come misconceptions about which party really does what. Democrats are believed to be fiscally irresponsible, spenders and Republicans are supposed to be fiscally responsible and small government. Which should technically result in bloated budgets with lots of deficits for Democrats and trimmed outlays with balanced budgets for Republicans. I know in recent years fiscal responsibilty has been thrown out the window, but that seems to fit the pattern and does not appear to be an anaomoly.

Take a look at this chart:

This is not what I would have expected. Democrats lowering the budget deficits and Republicans increasing it for the most part? Are we being misled here then? Do the parties have a branding issue? This is how the authors explain it:

Though the picture so far is of the Republicans as the party of austerity and the Democrats as the party of stimulus, there’s a surprise when it comes to changes in the federal deficit: Republicans are more liberal with the red ink than Dems. On average, a Republican in the White House has meant a shift of –1.9% of GDP in the government’s budget balance (i.e., towards smaller surpluses or bigger deficits), while a Dem has meant a 1.5% improvement in the budget position (or 1.8%, if you start in 1949, thereby omitting the huge World War II deficit). And in this case, the average is a faithful representation of the distribution, with only one Democrat in the minus column and only one Republican in the plus.

Some of this reflects different tax policies, with Reagan and Bush 43 cutting, and Clinton raising income taxes. But it also reflects the partisan difference in GDP growth.

Read the whole thing. Certainly makes you think, doesn’t it?

Hat tip: The Big Picture

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Okay most everyone knows what I think about this massive bailout package Congress is about to pass. In case you missed it, I think it’s a sham. Seriously. A big sham. How else do you explain this to the 30% of tax payers who are not homeowners. How about the 80%+ homeowners who pay their bills on time, buy what they can afford and read before they sign? Yeah. How about these tax payers.  Mr. and Mrs. Renter who lives within your means how about you pony up some dough so that we can clean up the mess our Wall Street pals and a few over excited folks made over there.

Okay.

Take a deep breath.

Aaaaaaaaahhhhhhhhhhh!

Now. Here are some of the details of the $300,000,000,000.00 mortgage rescue plan currently being “debated” in the Senate. From the Dallas Morning News:

They would receive a refundable tax credit of up to $8,000, or 10 percent of the home value, on purchases of unoccupied housing.

As part of a regulatory overhaul of Fannie Mae and Freddie Mac, the mortgage finance giants, the bill would permanently increase to $625,000, from $417,000, the limit on loans they can purchase from lenders in expensive housing markets. That would make it easier for borrowers in those areas to obtain mortgages at discounted rates.

Later on in the same peice it says:

The Senate bill would provide $150 million to expand counseling for borrowers to prevent foreclosure and establish stricter lender disclosure rules to make plain the maximum monthly payment for an adjustable rate loan.

The bill also establishes an Affordable Housing Trust Fund, to be financed by $500 million to $900 million in fees from Fannie Mae and Freddie Mac. Initially, the trust fund would cover any expenses related to the foreclosure rescue plan, meeting a demand by Senate Republicans that taxpayers not pay for the program.

Under the refinancing plan, only borrowers seeking to remain in their primary home would be eligible, shutting out real estate speculators and owners of vacation homes. And lenders would first have to agree to cut the principal balance of loans to roughly 85 percent of each property’s current value, a substantial loss in many housing markets.

Arizona Mortgage Team has a great post with all the details too.

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