DAVE ZITTING'S BLOG

My colleagues and I agree that there is a solution that can be deployed by the US Treasury that will efficiently solve the $700 billion problem facing the government and our nation over the next few years. This solution is not only efficient to allow the Treasury to accomplish their goals, of stabilizing real estate values and financial markets, it can also be accomplished in astonishing speed and the public will not only accept the actions but will ultimately be the heroes due to their contribution as an essential ingredient in the execution of this much needed initiative – and mainly the middle class and low-to-moderate income families that have been perpetually stuck in the rental-pool of our nation's economy.

I am so convinced that this is the right thing to do that I will implore my readers to seriously consider the plan that I am about to lay out. I further implore that if you feel it is, in fact, the right plan to execute, to pass this message on to your friends and state representatives. Public opinion will be the driving influence to help the government do what is right. Why shouldn't the public have a say in the matter? We are the ones paying for it. Our voices must be heard and the nation's collective intellect will be what is needed to solve the nation's downfall.

This plan may seem extremely simplistic, but the more you consider it the more I believe you will recognize the layers upon layers of positive characteristics that will ensure maximum impact. Some areas may not seem fair to some, but has anything been fair in all of this? I intend to convince you that this is the only way to achieve the fairest outcome possible for all citizens of this great nation.

I apologize for the extensive foundation that I am laying to support this plan and argument. I ask you to be patient with me while I explain a few fundamental characteristics of the core issue – value.

• Fact: As long as real estate values are unstable, there is no possible way to solve this national dilemma.
• Fact: There is no possible way to stabilize real estate values as long as banks or the Treasury are forced to foreclose on defaulted mortgage loans.
• Fact: As long as the value of the paper that a mortgage loan is written on has no "marked value" real estate values will not have an ability to stabilize.
• Fact: These issues feed on one another to the extent that it is possible we could witness ten times the foreclosures, three times the unemployment rate and virtually no ability for the lower and middle class citizens of America to achieve the goal of home ownership for at least the next two decades.

The idea of "the haves" and "the have nots" would be drastically redefined will ultimately impact all of us either directly or indirectly. Just take a minute to think of friends, relatives or even your children that may not be able to buy a home and enjoy the "American Dream". There is something very special about knowing that you own a piece of land – and the home that you live in. It goes back thousands of years to the essential and fundamental human senses of safety, wellbeing, and comfort that are the very essence of our global social structure as human beings. We must do everything we can to preserve the ability for all economic classes to have access to viable home ownership, which has been a passion of mine for over two decades. We are out of time and it is essential that the government acts promptly and accordingly to ensure that our nation remains strong and a land of opportunity for the masses – not just opportunity for the few.

Forget, for a moment, all the terminology that you've heard and just envision a $700 billion dollar stack of mortgage loans standing in front of us. Before you can do this, you will first need to stand way back - because the stack of one-inch-thick legal files that make up a standard mortgage loan stacked flat on top of each other would make a stack taller than 10 Mount Everests combined. We're talking about a stack of loans more than 59 miles high. Boeing 737 typically fly, on average, about 6.5 miles above the earth – now times that by 9! Just take one single loan file off the stack and thumb through it. It's a legal-sized manila-folder, about an inch of paper resting inside publishing an actual human being's established economic and credit profile – a real person paying on one single real mortgage. Hold on to that file for a moment and we'll get back to it in just a minute.

I want you to imagine that you are looking way up to the top of this stack of files (you're going to need a telescope to do so), now picture the top twelve percent of the stack – the last 7 miles. This represents the amount of mortgage loans that are in default – but not necessarily in foreclosure. The rest of the stack is loan files that are performing or sub-performing (meaning payments are paid on-time, or almost on time). The entire stack is made up of real people, with real challenges. Yes, they should be responsible for their actions as these people did not have the ability to judge for themselves what their limits were. Was it the lender's fault or the borrower's fault? I think it was both – but this article is not intended to focus on blame, but more to focus on a solution. How do we get that enormous stack of loans paying on time and stay paying on time – and, ultimately, get the entire tax payer dollars paid back to them rapidly? Quite a task, if I do say so myself.

Now let's assume that the names on the loan papers within the file are Jack and Jill Everest. Let's assume that they are only one month behind on their mortgage, they love their home, they need a home for themselves and their children and would do just about anything they could to keep it that way. However, two major questions keep banging at their heads every morning, day and night. First, how much of this can we take? And second, what is our home even worth?

The first question is due to the fact that their rate was just dramatically raised and they can barely afford the payment, which is drastically impeding their lifestyle. The second question has arisen simply due to the fact that the borrower heard that the government just purchased their Mortgage Note for pennies on the dollar (anywhere between 50 cents to 80 cents on the dollar). If the actual Mortgage Note is only worth cents on the dollar, what could their home actually be worth, and in turn, what are they fighting for? This is, in fact, the Genesis of the issue at hand – what is the value? There is a major disconnect and misunderstanding of "financial paper value" and actual "real estate – or real value". It's very simple – if a bank is motivated enough to raise cash by selling assets (Mortgage Notes) at a massive discount, we shouldn't abandon the idea that the actual real estate that acts as collateral behind the Mortgage Note has dropped as well. In fact, the value of your home is based solely off of one simple notion – what will someone else pay for your home if you put it up on the market? Now, when there is a large supply of similar homes in your area, and at the same time there are only a handful of potential buyers – sellers must provide incentives or reduced prices to win the buyer. This is simple "supply-and-demand" in action, which is the other side of the coin in this turbulent real estate cycle. If the homeowners, Jack and Jill Everest, finally give up based on an inability to perform on the new or adjusted terms of their Mortgage Note, or simply misunderstand the "true value" of their home and abandon ship – this increases the supply of homes on the market (more choices for the home buyers) and ultimately plays into further real estate price declines.

Look back at that massive stack of mortgages that is the 700 billion pound gorilla in the room (and the room is the Treasury Department). What if every single one of those mortgages, including Mr. and Mrs. Everest's, had an interest rate of less than 1%? Remember, these are real mortgage loans, real people – people that want their home. I can pretty much guarantee you that most of the loans would perform until the home was sold (average in the U.S. within 8 years – and we'll touch on that further as we go on), or until every single payment has been paid and the Mortgage Note is paid off. Wait a minute – we just found something here that is very important, and that is the actual value and principal balance of the Mortgage Note! We've all been hearing, "these Mortgage Notes are only worth so many cents on the dollar" – and that sentiment is, in fact, the poison that will take us all down. Forget the notion that the Treasury needs to sell these mortgage loan assets for more than they purchased them for – that is ridiculous – it just can't happen! What the Treasury must do is stabilize the actual principal amount of the mortgage itself by creating a way for the borrower to successfully perform on it. Look, everyone pretty much has the notion that at some point in time the value of their home will go back up in price and everything will eventually stabilize. But what the problem is now, if Mr. and Mrs. Everest lose their home – is it will be 15 to 20 years before they will ever be able to qualify for a home again – and that is an epidemic just months away from becoming reality – regardless of the government's intervention.

By stabilizing the individual borrower and helping to create the ability for this massive stack of mortgages to be paid on-time by modifying their current interest rate to less than 1%, the Treasury will, in an instant, nail "value" to the wall – they would be able to prove that the value of a $150,000 mortgage is in fact worth $150,000. Who cares what it would sell for in the secondary market – just DON'T sell it! If the borrower is performing on the full balance successfully, the US Treasury has a responsibility to the tax payers of America to service these mortgages until the borrower sells their home or reaches maturity. Of course families would keep their homes for much longer with a rate of only 1% or less – but I would argue that at least sixty percent of the portfolio would payoff or mature within the first ten years – and the rest would trickle down over the remaining twenty years. This would guarantee a lot of things;

1. A drastic decrease in foreclosures,
2. Tax payers would eventually get at least the original $700 billion back over time – par is a good thing,
3. Millions of families would have new found discretionary money that would, no doubt, bleed into the economy – and I am talking trillions!

For the first time "trickle down economics" would be a useful economic stimulus emanating from middle and lower income families instead of the customary higher-income corporations.

You may be wondering – what if the borrower still can't afford the house payment even at a 1% or below interest rate? This is where it really gets interesting. My first job in mortgage lending back in 1988 consisted partly of processing the paperwork on what are known as "FHA Fully Qualified – or Simple Assumptions". A borrower wanting to assume another person's mortgage (buying a home from family, friends or neighbors), if the terms of the underlying mortgage on the property was better for the new homeowner than the current market rates and terms, they could request that the servicing mortgage lender allow them to "assume" the underlying mortgage. In this case, I often witnessed the current owner relinquishing the current equity, if any, and allowed the new owner to assume the mortgage with no down payment – or very little down payment. The cost of the actual assumption, if memory serves me, was about $550.

Now I ask you – (on Treasury held mortgages) for the group of borrowers that still cannot afford the mortgage even at a rate as low as 1% – how fast would they become consumed by the public if the public was able to assume these mortgages at a 1% interest rate with an extremely low payment - and zero down payment? All that they would be required to do is to qualify under the most liberal lending terms in the world (FHA lending guidelines) and come up with the $550 assumption fee. I've tested the acceptance of this theory with anyone and everyone I have come across – colleagues, family members, people I've sat next to on airplanes. They all say the same thing, "sign me up – I will take one now"! And guess what – they would not only qualify, they would cherish and pay every payment on a once in a lifetime opportunity for millions of families to buy a home – there very own piece of America – the American dream! Why do we need to allow this "bail out" and national problem to make it virtually impossible for many Americans citizens to improve their living standards and or buy a home, when the government has an opportunity to allow, for the first time, these same citizens to be the heroes and save our nation's real estate values?

I spent about an hour making a list of friends and family members that I knew that would benefit from this initiative and take advantage of such an opportunity, and I came up with 11 families – just me! If you think about it for a minute yourself I believe you will have a similar outcome – even if you would not utilize the program yourself. Millions of families would rush to apply for such an opportunity – and a great number of Americans would, no doubt, qualify.

Let's spend just a few minutes on fulfillment of such a program. A huge problem with this $700 billion bail out package is that no one, even the Treasury themselves, even know how they are going to deal with all of the paperwork and management of the behemoth task of purchasing these mortgage – but more servicing them and trying to sell them back into the secondary market at a profit – or break even. However, the plan I have suggested above allows for many working parts to naturally work in harmony – it practically solves itself. For one, there are many mortgage lending fulfillment operations (hundreds of them in fact) that could aid the Treasury in the assumption process and earn the $550 assumption fee as a revenue source. The Treasury could also make a demand on the financial institution that they purchased the loan from to complete the assumption paperwork. If the institution had the ability to make the mortgage in the first place, they sure as Sunday can complete the assumption paperwork. In addition, there should be no appraisal requirements on these transactions – so all the credit package consists of is the borrower's credit, income documents and proof of the $550 fee.

Please remember that we are fighting fire with fire here. In addition, this is not a new concept. The FHA had, in the past (not sure what the HUD Repo terms are now) been selling thousands of homes per year to the American public under their "HUD Repo Program", whereas potential homeowners bid on the property and the winner takes all – as long as they could qualify under FHA income with very liberal credit guidelines and agreed to the value being what they agreed to pay for the property – even if it was purchased for more than the home is worth. It was a hugely successful program – and this was another one of the programs that I processed in my early days in mortgage lending back in the late 80's and early 90's. Why was it so successful? Simple - because people were able to buy a home with only a few hundred dollars for the "processing costs" and basically take over the property. The FHA figured that anyone willing to buy the home that had a stable income was better than the home being vacant – regardless of what the loan-to-value (LTV) was at the time. They were right – and it drastically helped to stabilize markets!

The public has lent $700 billion to the government so that they could buy a whole bunch of these mortgages from banks. If they buy them and the value continues to fall, and there is no one interested in "stabilizing the value" by staying in the home, buying the home and ultimately performing on the Mortgage Note – the values will continue to fall drastically (both the financial paper and the real estate values) and, at the end of the day, the American tax payer will lose in two extreme way. First, the Treasury will not be able to stabilize the paper value, or keep people in their homes that can't afford them – and that $700 billion will start to drastically devalue and dwindle. If this happens, there is no possible way that the government can "give it back", as they have made so clear in promises. And second, as more foreclosures in your neighborhoods occur, the buyers will have more choices, there will be more supply on the market and ultimately the prices of real estate will continue to fall. Basically – your largest asset, your home, will go down in value. So I ask you these two questions; first, do you want the money back that you lent the government to solve this problem? And second, do you want to vote for a program that allows the people in this massive pool of mortgages to stay in their homes, mow their lawns, pay their payments and drastically help keep the foreclosure numbers down?

I know it's a big pill to swallow. It is not fair for the responsible citizen that didn't borrow too much, or accepted a risky loan program and has always paid their payments on time to condone a program that rewards the citizens that did not practice such self-control. It took me a lot of soul searching to answer that question for myself – and I almost did not write this blog. I would never expect anyone in the US to simply think this is the right way to do it. This is an obvious solution – and by no means would I ever ask the public to accept it without some contempt and frustration. If the government is going to jump in, borrower $700 billion from the public and try to solve this problem – we had better let everyone involved go all the way to make the maximum impact in this bail out initiative. If they sit around and try to figure out how to market these mortgages and don't do something fast to keep people in their homes, or try to get others in the home on the same mortgage – there are some big troubles still ahead. Remember the 59 mile high stack of mortgages. This will not simply go away now that the government has purchased these mortgages – or working on a plan to do so. What's the next step after that is completed? The answer to that question is totally unknown – especially to the Treasury Department itself. The plan above is the only way to stabilize the value of the paper and the real estate that it is written on. With millions of people staying in their homes and others buying these homes on "FHA style fully qualified assumptions" – trillions of dollars of spending would trickle into the economy – saving jobs and improving the nation's current uncertainty. This plan makes sense. It will work if only it could become a reality.

I ask that you consider this plan for a few days before you pass judgment on it. I believe you will find the same acceptance of it that I and many other good citizens I know have done with vigor. Once you have – we then need to act! Public opinion will be a huge driver in the decisions that are made in Washington , DC when constructing and executing their plans to deal with this $700 billion dollar challenge. If we all send this article to our friends, neighbors and relatives that value their current equity and would like to see millions of good citizens have a "one-time-only shot" at home-ownership (that could also be passed on to their children) –  I believe this message can be sent far and wide. We need to write to our congressmen and urge them to share this plan with the Treasury Department. If there are enough US citizens demanding that a program such as this at least be considered – they cannot afford not to act on it, or at the very least seriously consider it.

I appreciate your willingness to read this lengthy article and proposal. If you reach out and grab a loan file off of that huge stack you will find that these are real people, with real problems. These problems will not simple "stay in the stack", but will actually spread into every neighborhood in the nation and burden the world economy for decades if the right steps are not taken. I believe that if this plan is executed there are very few negatives that will come of it, except the unfair aspects that are no doubt an ugly reality. But, the alternative reality is a much bigger pill to swallow – and with that pill I assure you none of us will have a choice. Pass this onto a friend or relative and make our voices heard!

First, I would like to make a clarification in my last blog article (The Acceleration Though the Turn Will Make All the Difference), in that I should have added an “S” to the word Fed (Feds) – relating to both the Treasury and the Federal Reserve.

The President recently signed HR 1424, “Emergency Economic Stability act of 2008”, creating a new office by the government titled, The Office of Financial Stability (OFS). OFS, attached to the hip of the Treasury and the Federal Reserve, will now oversee the Troubled Asset Relief Program, (T.A.R.P.). There are more than a few people that believe the name of the initiative should have been something more like the Captured Rancid Asset Program, (C.R.A.P.). Much of this sentiment is due to a misunderstanding of these assets, how they are valued and what the process will be for managing the $700 billion allocated thus far. Yes, a lot of these assets can be defined as crap, but I, for one, am very happy that the T.A.R.P. initiative has been approved (for the sake of the US and global economy) and now all that we need to do is successfully activate the mechanism – however, this is much easier said than done, of course.

Everyone seems to be a little confused about how the government will ultimately buy these troubled assets at a price that doesn’t “break the bank”. They actually buy them to ensure that the T.A.R.P. initiative is a successful program and ultimately frees-up the frozen credit markets. At the same time they pay a price that will allow the government to sell the assets for a profit at some point in the future. The issue itself is, in fact, price – Mark-To-Market – and that is at the very heart of the matter. The Genesis of the price is the actual piece of real estate, or collateral, that the Mortgage Note is attached to. The Mortgage Backed Security (MBS-Bond), for a lot of people, looks a lot more like a Magically Backed Security with all the media hype and the recent government intervention. However, this isn’t exactly the case and I would like to spend some time on the subject.

Think of it this way. If a Mortgage Note had zero value, that would mean the real estate it was collateralized by had zero value as well. If the government forecloses on a mortgage, then they will then have an opportunity to fix up the property and sell it to the public for a specified price. Whatever the property sells for is what the market price is. So, getting down to the brass-tax, there is a real value tied to each and every Mortgage Note that will be purchased and managed by the OFS.

Now, let’s take this up the chain a bit and start to reflect on the actual value of the Mortgage Note itself. Even beyond the real estate value that is backing the Note, each loan itself is an asset of sorts and has a value based on what the market is willing to pay for it based on the type, performance history, and available liquidity for it in the secondary market to transfer such loan assets around the financial system. As we are clearly aware, the liquidity that allowed for these type of loans to transfer around the globe pretty much dried up – and, in turn, they became stuck on the bank’s books – clogging the kitchen sink so that nothing could flow at all. Now the government is artificially “making the market” and ultimately providing the financial system with new liquidity to allow banks to sell the paper down the line. This does not only start to unclog the drain, it also allows for the market, and the bank, to set the new price, due to the fact that one of the missing components in valuing the asset has now been provided – and that is the liquidity to allow the loan to move into the secondary market – and that artificial market is now the OFS.

The Mortgage Note has a minimum value regardless – there is no question about that. Now, if you have a Mortgage Note that is held up on a bank’s books with a principle balance of $100,000, the home is worth $100,000, it is performing (meaning all payments are being made on-time), and there is no way for the bank to sell the loan into the secondary market – the bank then decides if it will simply keep the loan at an unknown value (due to there not being a secondary market and an unknown real estate factor due to a possible declining real estate market in the area). This, however, is problematic to the bank for a number of reasons. The two most difficult challenges are; first, Mark-To-Market calculations imposed by GAAP accounting regulations (General Accepted Accounting Principles) and the reports that ultimately need to follow to the regulators, etc. and second, the bank cannot tie up the cash and desperately needs it to lend to its customers; freeing up much needed liquidity for the commercial paper market, student loans, car loans, credit cards – you name it. The action taken by the government has literally created an ability for the banks to set the price, and have an outlet to sell the paper to ultimately free up cash. If the government did not create this artificial market, the banks that would be forced to sell the paper at any cost to free up liquidity and would ultimately be forced to sell the paper well under its actual real value. We’ve all been hearing the statements flying around about 65 cents on the dollar. This basically means that, based on the scenario above, the bank would be forced to sell the $100,000 Mortgage Note to someone, or some entity, for $65,000 – or much less depending on the bid. However, even in this scenario, the Mortgage Note, or the Mortgage Backed Security Bond (MBS) still has value – and finding the value has been the essential problem as of late.

Now that the government has made a commitment to create a market for the banks to sell the paper to – what will happen next? I think there is something very interesting and unpredicted in the near future that could stall the process a bit and not allow money to flow as fast as I, and everyone involved, would like. Think about this for just a minute – if the bank now can effectively mark the value – what happens if the value is high enough for the bank to balance its books, raise capital, and ultimately hold onto the Mortgage Note without selling it to the OFS for a loss? I don’t have the answer to that question – and, in fact, I’m still trying to figure out if that is a good thing or a bad thing.

On the good side, I would imagine that it makes it possible to double the effectiveness of the $700 billion pile of funds that the OFS will use to free up the markets. Or, it could cause a delay in the freeing up of liquidity due to banks not being able to give up that newly captured value on the books. You could argue that it is a good problem to have. I would guess that the media is going to flip from statements such as, “banks are in trouble due to not being able to value certain loans on their books”, to, “banks are troubled now that they can, in fact, value certain loans on their books”. I hope this does not slow the process of getting money flowing around the world to stabilize the economy and get all businesses in a stronger position to financially manage their going concerns with much needed bank lending support. If it does slow the process it may only be temporary – but, again, I hope that the delay doesn’t make us all a day late and a dollar short. Small businesses are being strangled by this whole mess and can’t wait much longer for a breath.

At the end of the day, mortgages do have value and a MBS is not necessarily a Magically Backed Security. I predict that the next set of challenges in this whole mess will be that these loans in question will now actually have marked value and then the tough decisions and bidding wars will begin to take root. No one really knows how long it will take for this to stabilize and what new challenges will arise – but I assure you there will be new and unforeseen potholes in the road ahead simply due to the fact that we have not exactly been here before and there is no effective way to deploy foresight in an artificial market. It is essential, however, that the government gets this right – which I believe they can. But for this market to ever be real again, the OFS needs to get in, help set the price, buy a bunch of these loans, clean them up and sell them back into the market – then GET OUT. The faster this can happen, the more stable the “real market” will become. The public and the business world need to be able to feel that it is on solid ground when relating to value. That is just not going to happen as long as an artificial secondary market is in place. However, as soon as the OFS steps out and all Mortgage Notes are being sold in the public market – at that time I think we will be headed down the right path.

I am pleased to see that the Senate has passed the Financial Crisis Bill. I will be bold and suggest a prediction that the House vote is already a foregone conclusion – done and done. This just has to happen.    

Once we have the green light, the Fed can do this the right way with the competency to mange this properly by bringing in the business acumen from the private sector to ultimately aid in what will be a very elaborate auction system. The assets that will be purchased from the government need to be purchased in a way to allow it to sell into the markets, once stabilized, at a profit – and that is the opportunity for the Fed in tandem with the challenge.  

Mark-to-Market is a tricky issue – but we can deploy the proper intelligence to act – and act in time. Can the Fed accomplish this? Yes, I believe it can. In decades past, the government had very sophisticated national asset auctions that took into consideration every variable relating to geographic values, credit model characteristics, asset types, socioeconomic issues – you name it. As a nation we have the competency to do this right and we have the experience from the past that can be pulled out, dusted off, and deployed yet again.  

Moving forward, we need to accelerate faster into “the right turn” (emphasized in a previous post, My Ten Cents). The commercial paper market is the key to getting the ball rolling.  Made up of money from Main Street and global markets, the commercial paper market keep money flowing into institutions with investment vehicles which is then lent back out into the business world. When a Goldman Sachs stands up and says, “We need $100 million to do X”, due to its size, reputation and ability; the commercial paper market steps in and provides the needed liquidity. In addition, when a small business steps up and makes the same request, it also has the ability, based on its credentials, to borrower from this ocean of funds to operate on a daily basis.  

There are two sides to this issue – businesses need to borrow money at interval times to operate, and in addition to that they need to take cash on hand and invest it in ways that will provide the best yield – which are investment vehicles beyond a regular checking account providing FDIC insurance coverage. With that said, if a business is not comfortable putting their money into a fund outside of a FDIC insured account, it ultimately chokes off liquidity flowing into the commercial paper market. The problem now is that the ocean has turned into a pond. 

As you can imagine, if money is not coming into the commercial paper market it cannot go out to businesses and provide the essential short term liquidity to cash-flow operations. Without the Fed’s intervention and Congress finally agreeing to approve the initiative, the commercial paper market would be completely frozen shrinking the pond into a puddle or simply drying up all together. In this scenario, only the businesses that have enough cash on hand to operate without short-term financing survive. Even this minority will eventually fall onto massive problems simply due to the fact that the entire economic supply chain is disrupted and the smaller business down the line that supplied the minority with cash on hand, with raw materials, or endless other necessities, is not able to stay in business due to the small businesses’ inability to cash-flow operations. There is no escaping the catastrophic negatives that would be imposed on the world economy if we did not support the latest initiative to support the flow of financing for all businesses -- large and small.  

Now that we have hit the gas pedal as we make the turn, it is essential that we are not timid in the process. Before businesses, public, or world markets will start to place their money into uninsured financial vehicles (money flowing into the commercial paper ocean, pond or puddle); they will watch to see when the Fed starts to pump money into the mechanism first. If this goes as planned, the Fed will have a BIG pile of money sitting around and it is essential that they act fast to show a commitment to expeditious action to provide liquidity to flow into the commercial paper market. 

So, who acts first? It is essential that the Fed jump starts the process and fast. Main Street needs to feel comfortable and confident that money is flowing properly. Once a large or small business sees that liquidity is flowing, they will ultimately jump into the equation and the pump will be primed and money will flow accordingly.  

On another note, but obviously connected, I like the idea of creating a higher FDIC insurance cap to $250,000 – who doesn’t? However, this does create motivation to reduce money flowing into the commercial paper market – but to what extent? Who knows – we shall see.  

I believe that the Fed can make a profit on this package and that the housing prices will stabilize as we properly adopt current action and help support the liquidity that is so essential to capitalism. As businesses are stabilized and money is flowing properly; businesses will become stable and successful, hire additional employees, and provide higher pay.  

It’s simple. If people have money to spend, they will spend it. And they will spend it on real estate. There are amazing bargains to be enjoyed and demands will begin to increase. With these demands, prices will inevitably start to climb at some point. I predict this will occur (if current plans are executed properly) by the end of 2009. As prices climb the government will have an opportunity to bleed these same assets off at greater yields – and this will come back to all of us as tax payers.  

The next steps are essential – but more important is the timing and commitment by the Fed and the entirety of world markets to adopt new confidence and invest into the great ocean of money that makes the world go around.