A Re: to an Email

The following is the response to an email I was forwarded from the office of Rep. Duncan Hunter.

My own thoughts on the financial crisis lead me to believe that, left to their own devices, the markets can adjust, but not without paupaerizing the better part of the country. This is not because everyone is somehow guilty of monetary shenanigans but simply because the institutions in question have stakes all across the board both here and abroad and they don't know exactly who owns what. So unless we can quickly establish exacting who owns what debt with the highly securitized properties, we're going to have to take broad actions that wind up sweeping good assests and people along with the questionable.

Crisis managaement: first establish what the most damaging problem is and cut it off before it can continue to spread. In this case we're talking about bad real estate debt; everything else is being fed by that. The fact is, many people aren't able to meet their obligations because they're bankrupt, in the technical sense. How this came to be is not immediately relavent so don't waste time wringing hands over slippery slope moral arguements. The practical problem to be solved is getting the housing crisis stabilized. let these people go the bankruptcy court and have a judge write down the principle. Yes the lenders are going to lose money in most all if not all cases but, keeping in mind that a great deal of that loss is money that was invented anyway, we are forced to acknowledge that this is necesary. Until we can get a real sense of what exactly is worth what, we're going to continue fueling the other problems with uncertainty. We have, as the saying goes, taken strong poison; strong medicine is called for.

After getting a floor under the housing market, what's next? In short, people have to be able to meet these newly modified obligations and that's difficult if not impossible when the economy is shedding jobs. In the short term, we need to have extended unemployment benefits so that poeple have time to get into new jobs and careers. That will help in many cases but, only if new jobs are available. So, we need to make sure jobs are there to be had and there is only one employer that we can, as a nation, force to hire: The Federal Government.

The idea that the government should be the employer of last choice has been a toxic, debilitating philosophy responsible for a crippling brain drain in the public sector. Now we are in a situation where it is possibl the only choice many people have. Nobody likes the idea of wasting money but there is a great deal of work in the public interest that can be used to keep people employed and earning an income until the economy fully turns around. The pay can be kept comparatively low in order to encourage people to move back into the private sector later, but public employees are infinitely preferable to unemployed entitlement collectors. In short, we can get somehting for our tax dollars or we can get nothing.

Once people have a stabile situation where they can meet their obligations, know they'll have a job in the morning and can save a little the banks will start to relax credit restrictions. We won't see the kind of massive consumer debt financing we did previous to the bubble and strict regulatory steps need to be taken to ensure it doesn't happen again. Still, once the banks see that the general public has a stabile income and a savings base, they'll be willing to provide the loans needed to finance new business and that will, slowly, lead to increased hiring in the private sector.