The news is clear, the housing industry is in crisis, so what’s the government’s problem?

Implications: Wall Street has abandoned housing and the mortgage markets, the default ratios are up, consumer confidence is way down, wages are not keeping up with rising costs. The litany goes on through the press. Rarely do you see a positive note in the news as everybody is on the bandwagon now. The only recent positive note I can recall originated from an investment advisor who cited normal obsolescence and destruction as indicating a shortage in the housing stock. The analysis seemed a reach much like the published pleadings of the NAR, Mortgage Bankers Association and NAHB. Investments are being made in accordance with the realities such as Citigroup’s purchase of the remains of Ameriquest and B of A’s discounted purchase of its position in Countrywide.

Analysis:

In contrast, there is a worrisome feel to recent government actions in regards to the losses being incurred. The government through the Fed appears ready to chase the illusions of the housing market by stimulating the business past free market standards. The current administration has been notably unwilling to abandon its lost positions in both housing and Iraq. The domestic auto business is no longer interesting to the government as the ultimate economic mover and shaker as the Bush programs have relied on housing as the generator for its terror and Middle Eastern war programs. We definitely have a need to abandon the far reaches of consumerism and concentrate on new industries and modern infrastructure. There appears to be no more to be gained by investing in expansion of housing or the war in Iraq. We’re possibly pursuing the wrong program in our military efforts and the housing business has as much overcapacity as the auto business.

It appears that the populist movement and the opposition party are waging an effective campaign to get us out of Iraq. Wall Street and other elements of the financial markets will counter the administration’s need to continue its support of losing positions in housing. Among the industrialized nations, the historical lessons learned from the Canadians and Japanese and our own involvement in the failed business Savings and Loan business model should point our way and our need to abandon support of this business as well as the speculative aspects of the commercial property markets. To continue to avoid biting the bullet here today will only bring increased pain tomorrow.