Rich Talks Real Estate

I understand that the appointment of the chairman of the Federal Reserve is for fourteen years and that we are stuck with Ben Bernake for quite awhile. Speaking today before the London School of Economics, Chairman Bernake asserted that the government may need to back the private banks to an undisclosed dollar amount in order to restore confidence in the economic markets. It appears that this is a split with Secretary of the Treasury Paulson and perhaps even his own previously espoused view on how to best spend the TARP money. This comes with President Bush having less than one week left in office. The timing is interesting as yesterday the President-elect had to ask President Bush to inform Congress of the intent to release the $350 billion remaining in the $700 billion TARP funds that were authorized in October 2008.

This is thankfully more in line with the original intent of the funds when they were authorized. You may remember a couple of months ago that outgoing Secretary of the Treasury Paulson announced his unencumbered intent to use the remaining $350 billion to bail out credit card companies, automobile lenders, and student loan lenders. The use of the funds to bail out unsecured lenders meant that any hope of ever recovering that money was lost. If that money was lost not only would taxpayers never see any of it returned to them, it would no longer be available as part of the rolling $700 billion to help shore up securitized lenders by purchasing bad mortgage debt. Helping to shore up securitized lenders by buying up this bad debt will eventually lead to lenders not being paralyzed by fear of default. With tighter guidelines and more oversight this is a way out of the current morass.