Now What? Shoot the Wolf at Our Door?

We know why we sit in the financial basement, and we know that there is more debt with less equity that even the most astute economic analysts could have ever envisioned. But the Treasury Secretary, Henry Paulson, seems to think that if someone gave him a blank check, he’s the prescient guy to know what to do with $700 billion of taxpayer guarantees – yes, the same man who gave us assurances just a few weeks ago that the worst was over – without any court or administrative review. Crazy!

Yes, we have to act now, but remember the fallout when everyone panicked after the 9/11 attacks and we got a solution to every terrorist issue we faced with a very patriotic name – a travesty called the “Patriot Act,” a statute that was passed with almost no one in Congress having read this law. We need a bailout… the world is watching, and the economy cannot be jump-started without a lot of help.

But we cannot let one man act without accountability; there needs to be oversight that does not favor one political party over another. And we cannot waste any of that money rewarding corporate officers who pull the cord on their golden parachutes, even if they pull that cord before the bailout passes. American taxpayers need to own something for their efforts, stand to recoup and perhaps benefit from the investment in the companies and mortgages that receive that governmental help. Finally, we need to make sure that the ratio of equity to debt in future financing is carefully limited… back door debt and over-borrowing must be treated as the ridiculous structures they really are. This has to apply equally to companies in the mergers and acquisitions and business growth space as it does to people buying homes.

We need the government to take over defaulting mortgages as fast as they can, so that we do not further tank the cornerstone of our economic recovery – viable and sustainable home ownership. It is cheaper for us to allow people to pay what they can (lower the interest rates) and keep their homes rather than letting the market further destroy home values by allowing more defaults. The government has to insure that there is enough money in the system (“liquidity”) to create the ability for people to continue to buy and sell homes. No money…. no sales… no demand… the prices will continue to fall. This is not a drill… we have one good shot at fixing this or we will face a whole lot more than a recession.

I’m Peter Dekom, and I approve this message.