Greenspan

I read the other day where Alan Greenspan was talking about the mortgage crisis and suggested that the government inject more capital into the home loan system.

He said maybe a tax break or government spending would do the trick.

He was so close to an answer that it was frightening.

How about this tax break? Let’s say that personal savings accounts are tax exempt. Let’s get people saving again. Let’s introduce a whole new generation to the value of money by encouraging them to save a little.

Most people under 40 think “saving” means moving your balance to a credit card with a lower interest rate.

And we’ve now learned that manipulating interest rates cannot go on forever. Who knows what the “real” value of money is? No one, because the feds have tinkered with the rates for so long. I’ve seen 16% interest on home loans. I’ve considered myself lucky to get a 10% 30 year fixed. And we didn’t refinance every six month, either.

Were we fools back then? Well, the mess we are in suggests the MBAs don’t have all the answers either.

As for people losing their homes, the fact is they never owned those homes! There are so many interest-only deals out there and loans based on the future value of the home that there isn’t any equity.

For the benefit of the economy in general we will do something. We can only hope it is the bare minimum. But we are in an election year.