I am amazed at the inability of Washington, old timers and newbees, to "see" the solution to our current economic woes.  I have been in the business almost 30 years and saw this coming.  For years those of us in the Business for any length of time, have been asking for more oversight on the lenders.  We get "pre-approval letters" that aren't worth the paper they are written on.  The do not disclose conditions required to obtain the loan or any of the details that directly affect their ability to buy. 

Then they added the hybrid loans to the mix, and all us in the "bus" asked how can these buyers afford these expensive homes?  We found out, they were being pushed into loans that were affectively time bombs.    As you can see by this time line of issues not being addressed, it was a foregone conclusion, trouble was on the way. 

The Love of Money being the "root" of all evil, you can see that sheer greed was behind it all.  The melt down began with the risky hybrid mortgages creating loans that grew daily, with a shrinking economy, refinancing (the proported key to all real estate problems) could not be done.  Even though the Feds were reducing the rates to Member Banks (those responsible for this mess), the Banks were not passing along the savings to the consumers, but instead kept rates higher, and spent the money on bonuses, jets, trips, houses, yachts & hookers. 

When the loans became unmanageable, they just started foreclosing, never seeing beyond their pile of money.  The foreclosure mountain soon became out of control, the avalanche began.  Once the lack of loans (purchase money loans, and refinances) hit the fan, it was too late.  The colapse began.  Lenders had to lay off secretaries, loan officers, loan processors: appraisers had to lay off office people: home inspectors lost & got out of the business, repair people, roofers, brick layers, framers, plumbers, electricians, cement companies, home improvements companies & their employees, garden centers & landscapers & their employees, restaurants that served lunch & their employees, dry cleaners, all retail outlets & their employees, movie theatres, and the list goes wide and deep.  From the Real Estate industry comes most every job for the middle class America. 

Rising cost of everything came from greedy investors who bought properties and resold them immediately for profit, artificially driving the prices up.  Came from greedy CEO's who have been raping the American people for years with Billion Dollar Annual compensation and bennies out the yang.  These CEO's drive up the cost of automobiles, goods and services so they could live like Royalty while we scrape to buy what they have to sell. 

Yes, this had to happen to reveal the underbelly of the American way of life.  Now we need to follow that money trail back up the line, and plug the whole before we begin filling the hole.  Stimulating spending when so money have no jobs, makes no sense.  Tax breaks to those with no incomes...I don't think so!

Plug the Holes:

1.  STOP all foreclosures for a minimum of the next 2 years.                                   2.  Recast all loans to no more than 4.5%.                                                                 3.  Require all lenders charge no more than 4.5% for the next 2 years.                4.  Require all loans go tho underwriting prior to prequal letters issued.            5.  Current inventory of foreclosures be repaired, cleaned & process expedited.

This would get rid of toxic ity of the assets.  There are no toxic assets only toxic decisions.  This would require those that created the mess, sold the loans to people, be responsible for their actions.  They would get their money, just with less profit (lower interest rates).

This process would create mor jobs than any tax cuts, stimulous checks or infrastructure plan could possibly create.  Call your congressional leaders and let them know you want a STOP to foreclosures & lower the interests.  http://www3.capwiz.com/congressorg/home/

Here is the TIMELINE Washington hopes we don't remember:

1980:  The Depository Institutions Deregulation and Monetary Control Act, a  financial statute law passed in 1980, gave the Federal Reserve greater control over non-member banks.  Among other tings it allowed institutions to charge any interest rates they chose, and lowered the mandatory reserve requirements banks keep in non-interest bearing accounts at U.S. Federal Reserve banks. http://en.wikipedia.org/wiki/Depository_Institutions_Deregulation_and_Monetary_Control_Act

In 1999:  the Gramm-Leach-Bliley Act repealed 1930's legislation that had separated commercial and investment banks. Commercial banks, where people deposit their paychecks and do personal banking, have regulation. Investment banks didn't have that "fettering" as Republicans saw it.

2005:  Washington, D.C., April 12, 2005 ��" The Securities and Exchange Commission today instituted and simultaneously settled an enforcement action against the New York Stock Exchange, Inc., finding that the NYSE, over the course of nearly four years, failed to police specialists, who engaged in widespread and unlawful proprietary trading on the floor of the NYSE. The Commission found that the NYSE violated Section 19(g) of the Securities Exchange Act of 1934 by failing to enforce compliance with the federal securities laws and NYSE rules which prohibit specialists from "interpositioning" and "trading ahead" of customer orders.   (They were left to their own devices even with this information).  http://www.sec.gov/news/press/2005-53.htm

2005:  30% interest rates: Sound business or loan sharking? Laws against "usury" go back to biblical times and were adopted by states starting in the 18th century. The concept was simple: People in dire need of money will pay just about any interest rate to get it. So society moved to protect them from sleazy lenders who threaten to break legs.  http://www.usatoday.com/news/opinion/2005-03-10-bankruptcy-our_x.htm

2005:  NEW YORK (CNN/Money) - The Federal Reserve raised the target for a key short-term interest rate by a quarter of a percentage point for the 10th consecutive time Tuesday. The move was widely expected on Wall Street, as several recent economic reports have indicated that the economy remains relatively strong.   http://money.cnn.com/2005/08/09/news/economy/fed_rates/index.htm

2005:  Crude oil struck a new record, near $71 a barrel Tuesday, while the average national price for unleaded gasoline hovered at about $2.60 a gallon, up 39 percent from a year earlier.  Economists fear Katrina could cause a national gas crisis - Aug. 31, 2005

2005:    When Paul Espinoza decided to refinance his mortgage for the home he owns along the southern edge of Temecula, he decided to go with an interest-only package in order to reduce his monthly mortgage payment. He saw immediate benefits ---- his monthly payment was reduced roughly $700.  "You clearly have short-term relief," said Espinoza, who has owned his home near the Pechanga Resort & Casino for roughly 10 years.  But there was a catch. While Espinoza was pleased about being able to whittle down his monthly payment, what he didn't realize when he signed his new loan documents was that the principal would actually climb.  That, he said, was a shock because he expected the principal to hold steady.  "The cost to you is really the amount that the principal goes up over the period of the loan," said Espinoza, who felt that he wasn't made fully aware of that possibility by his lender when he arranged for the new deal. "I'm curious why this isn't mentioned by loan officers."

2005:  Federal student loan interest rates��"subject to change every July 1st��"are calculated according to a statutory formula based on the 91-day Treasury bill, plus a margin. As a result of today’s Treasury bill auction, the new Stafford loan interest rate for students��"who are in school, within their six-month grace period, or in deferment��"is projected to be 4.70 percent, up from 2.77 percent. The rate for borrowers repaying Stafford loans issued since July 1998 is projected to be 5.30 percent, an increase from 3.37 percent. PLUS loans (Parent Loan for Undergraduate Students) for parents will be set at a new rate of 6.10 percent. The U.S. Department of Education is expected to confirm the new rates shortly.  https://www.wellsfargo.com/press/20050531_StudentLoan?year=2005

2005:    Rising Costs of Home Equity Lending Helped Spur Demand for Cash-out Refinancing Option  (as a Realtor, I saw lenders offering up to 110% cash out).   McLean, VA ��" In the third quarter of 2005, 72 percent of Freddie Mac-owned loans that were refinanced resulted in new mortgages with loan amounts that were at least five percent higher than the original mortgage balances, according to Freddie Mac's quarterly refinance review. This share is unchanged from the second quarter of 2005.

"Interest rates on 30-year fixed-rate mortgages remained low, averaging 5.76 percent, in the third quarter while the prime rate, key to home equity lending and lines of credit, rose to 6.75 percent," said Frank Nothaft, Freddie Mac vice president and chief economist. "The sharp rise in the cost of home equity lines of credit and the expectation that mortgage interest rates will go higher over the next year induced homeowners to look towards the refinancing option to extract home equity for home improvements or other investment purposes now."

"We are forecasting that home equity extraction from the refinancing of prime first mortgage liens will result in an extraction of $204 billion in 2005, up from the $142 billion converted to cash in 2004," noted Nothaft. Freddie Mac expects home sales to hit a new record again in 2005 as low fixed mortgage rates combined with teaser discounts on adjustable-rate mortgages maintain affordability, even as home prices rise.   http://www.freddiemac.com/news/archives/rates/2005/3qupb05.html

2005:  Upside-Down Interest RatesBad news for the U.S. that is worse news for the world.  By Daniel GrossPosted Friday, June 3, 2005, at 6:31 AM ET:  Though it sounds like something out of quantum physics, the yield curve is actually a fairly simple concept. It describes the relationship between interest rates on long-term and short-term U.S. government bonds. Interest rates on the shortest-term bonds correlate very closely with the interest rates set by the Federal Reserve Board. Long-term interest rates, by contrast, are influenced by many more factors, ranging from China's purchase of debt to investors' optimism about inflation and growth. Typically, bonds that mature further in the future pay higher yields��"compensation for the risk of locking up money for a longer period.   http://www.slate.com/id/2120161/

2005:   Of the world's largest 150 economic entities, 95 are corporations (63.3%) according to data released this month by Fortune Magazine and the World Bank. Wal-Mart, BP, Exxon Mobil, and Royal Dutch/Shell Group all rank in the 25 largest entities in the world, above countries that include Indonesia, Saudi Arabia, Norway, Denmark, Poland, South Africa, and Greece. Wal-Mart, with revenue of $287,989,000,000 ($287.99 billion) for its last fiscal year, is the largest corporation on the planet and ranks number 22 on the list. The United States is the world's largest economy with a total 2004 economic output (GDP) of $11,667,515,000,000 ($11.67 trillion) according to the World Bank.  http://news.mongabay.com/2005/0718-worlds_largest.html

2006:   GAINESVILLE, Fla. ��" Florida’s consumer confidence fell eight points in February to 87, reflecting pessimism about higher gas prices and rising interest rates, which are beginning to hurt housing sales, refinancing and home equity loans, economists report.  Because there was no last-minute fix by Congress, six times more households this year than last year may qualify to pay the Alternative Minimum Tax, which can mean a dramatically higher tax bill, McCarty said. Most people likely were unaware of that until they started tax preparation for 2005, he said. As many as 15 percent of returns may qualify for the AMT this year, versus less than 3 percent last year.