The Spectacle Blog

Later That Same Day

By on 10.3.08 | 6:23PM

Later that same day (see post below), I added this: If you want to reassure 14 million homeowners that they have just a bit of relief and thus some hope, and if you want to avoid a panic that feeds on itself as mortgage companies declare bankruptcy, a tiny rate cut might just be the right solution -- IF it is understood, because of a clear Fed statement, that it does not signal a long-term lack of concern with inflation.

What it comes down to is this: A whole bunch of people bought their first homes about four years ago when rates were absurdly low, and made the mistake of getting an adjustable rate mortgage. (This does NOT apply to me, by the way, thank goodness.) They are now realizing they can't make their payments, and they need to sell. But buyers are a bit wary. It is amazing what even a quarter-point can mean to a new home buyer. It could make the difference between buying or not. If they buy, they get an asset, and the over-extended seller gets out of a bad deal rather than being forcelosed upon or declaring personal bankruptcy, or whatever. Which is why yesterday would have been a good time, as Cramer said in his rant, for a little help from the Fed.

And the next day, in another post, this: My goal is to help the homeowners and potential home buyers -- the individuals, not the lender/profiteers -- AND to guard against a generalized panic that would harm not just the lenders, but the fairly innocent bystanders such as the builders and construction workers who they employ, and, from there, all the others down the line who would be affected. Also, note that I am not suggesting a bailout of the lenders -- the typical Democratic response, which is what Bush in the past two days has so rightly rejected -- but a VERY modest move by the Fed to stabilize the economy as a whole.

In January, I wrote this column. The closing lines: "Stagflation could make its ugly face obvious as early as this summer.

And nothing, nothing at all, would do more to assure an Obama or Clinton victory in the Fall, with horribly liberal policies on economics, defense, and judges sure to follow."



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