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Dom's Thoughts On the Bailout

$700 billion dollars is being misdirected into the credit markets to restore American's confidence in the banking system that in large part caused the problem by making loans available to people who could not afford to buy  homes at all time high prices. This large infusion of cash into  the banking system will never cure the problem. The problem is based on the law of supply and demand. As a result of all the foreclosures there is a glut of homes on the market. When the supply far exceeds the demand, prices must fall to attract buyers. The root of the problem is decreasing home values. Lenders do not want to loan money to buy real estate when it is depreciating in value and people do not want to buy real estate today that will be worth less tomorrow. So what should the Federal government do to stabilize home prices and reverse depreciating home values?

They should make better use of the $700 billion dollars and start buying houses on the market. This will decrease the  inventory which will eventually cause home prices to appreciate which will entice people to start buying again rather than waiting until tomorrow when the price will be higher. This will generate the needed demand and when demand exceeds supply, prices increase.

The housing sector led us into this financial crisis and it will eventually lead us out of this crisis but the government must intervene and eliminate the  excess inventory which the banks inadvertently caused. What will the government do with all these houses? There is plenty of need for affordable housing in this country. The government can fix the houses up and rent them out to families in need and low income families. The taxpayers would be better served by holding title to real estate rather than  worthless mortgage paper which is what the $700 billion is currently buying. The real estate values will eventually increase and over time the government can sell the homes in an orderly fashion for a higher price and pay down the national debt. Amen.

Dominic J. Mancini
133 Fuller Road
Hinsdale, Illinois 60521
(630) 325-2580 fax (630) 325-5169

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