In one of the most memorable sequences, Bullwinkle plays a magician to an audience of one--Rocky. The exchange goes something like this: "Hey, Rocky! Wanna see me pull a rabbit out of my hat?" "Sure!" "Nothing up my sleeve! [as Bullwinkle rips off the sleeve of his tux and shirt] "PRESTO!" Only instead of a rabbit, Bullwinkle has a grip on the head of a roaring lion. Always quick with a quip, Bullwinkle mutters, "No doubt about it. I gotta get another hat!"
You might be wondering why Bullwinkle is in a mortgage blog. If you have been following the foibles of our Treasury Secretary Hank Paulson of late, then you will see the connection. Paulson, along with Fed Chairman Ben Bernanke, went hat in hand to the Congress asking for $700,000,000,000 to help with the foreclosure problem. [I did not abbreviate the number for illustrative purposes.] Paulson indicated that having a blank check for that amount and maybe more later would allow the government [us] to buy troubled assets [bad loans & securities tied to them] and then when the market improved, they could be sold at a profit and funds returned to the government [us]. Met with some skepticism, the House of Representatives listened to their constituents and turned down the request. After a few days of groveling and arm twisting and minor changes, a deal was reached.
But then, the money [only $350,000,000,000 was released] started to be used to shore up financial firms in other ways. Acquisition of other banks for some. Capitial infusion for others. Twice in the case of insurance giant AIG which still ended up spending lavishly on a corporate function. And now, everyone from car companies to municipalities are lining up with their hand out for some of the magic beans. And our Fearless Leader [Paulson] is back before Congress saying that the TARP [Troubled Asset Repurchase Program] might be too complex to be used for the initial purpose [the rabbit] and instead the monies would be needed to prevent financial disaster by using it for capital infusion [the lion].
To his credit, House sub-committee chairman Dennis Kucinich, has been grilling Treasury, calling them on the about face and strongly suggesting that the balance of the funds may indeed be directed to HUD which would be used for the purposes intended--foreclosure intervention and relief. Although it would be best for investors to take their lumps for poor investment decisions and lenders to take them for unwise credit decisions, it is apparently not going to play out that way. Hopefully, Congress will get an earful from constituents, and will turn a deaf ear to Mr. Paulson. The fat cats may not like it, but things are tough all over. Maybe dividend suspensions, bonus elimination, and other cost cutting measures should be considered instead of being awarded with taxpayer dollars for being incompetent.