It’s always nice to hear the words, “You were right.” Last weekend, during a family visit, my brother-in-law came out of nowhere with that statement. For a moment, I had no idea what he was talking about but he refreshed my memory with a previous conversation we had about that the problem with the government bailout. My main argument was focusing on the banks and that the bailout was “top down” and “not bottom up.”
Specifically, my brother-in-law, Howard mentioned that the Cash for Clunkers program was the first program in the federal bailout where money was actually going to the people and then trickling up instead of, in theory, trickling down.
My brother-in-law had previously recalled that I have been long advocating that the funds for the real estate bailout not go to the banks, but that the funds go to individuals. In this case, the individuals would then be obligated to use that money to pay down their mortgages and thus provide the banks with a reinfusion of funds that would then be required to be used to make new mortgages to other homebuyers.
At least until now, the real estate bailout has focused on providing funds to the banks who were free to use that money to unfortunately pay lavish bonuses and purchase other banks. The funds, of course, were supposed to be used to lend money to homebuyers, but as we all know, to a large extent that has not happened… as of yet.
Thus it is a bit ironic that the Cash for Clunkers program has already run out of funds and while the House has approved the measure, the Senate has not yet agreed to a replenishment of funds. In all likelihood, the Senate will replenish those funds because of the sense that the Cash for Clunkers program is not only helping the car industry but is helping everyone in the economy. In fact, arguably, the Cash for Clunkers program is indirectly helping the foreclosure problem since many of the sales people in the car industry were likely facing foreclosure if their commissions did not return. With the Cash for Clunkers program many of these salespeople are now at least getting some money back in their pocket and have a chance to get back on their feet.
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