Oh no....looks like the bailout needs a bailout

According to the Washington Post Geithner's anticipated bailout is already in trouble.

Just days before Treasury Secretary Timothy F. Geithner was scheduled to lay out his much-anticipated plan to deal with the toxic assets imperiling the financial system, he and his team made a sudden about-face.

According to several sources involved in the deliberations, Geithner had come to the conclusion that the strategies he and his team had spent weeks working on were too expensive, too complex and too risky for taxpayers.

You can read the entire story by following the link.

I wonder how long it will take for the geniuses in Washington to realize bailouts are not the answer. They may already know it. But since the government is actually run by lobbyists and special interest groups, many of them working for the banks and Wall st it doesn't matter if they know or not. All the legislation is getting passed is geared at keeping those banks and wall st firms from going belly up. All these plans will do is stretch this mess out over years if not decades.

The quick fix is to let the companies book the losses. If some banks fail so be it. If the large banks fail let the government take them over until they are solvent again. Then they can sell them and recoup some of the money. Let the foreclosures happen. Get people out of homes they cannot afford. Get people into homes they can afford by letting the prices of the homes correct to normal levels. If people have home mortgages at normal DTI levels they will have disposable income with which to spend and drive the rest of the economy.

What good does it do the economy when a bank sprinkles some magic mortgage pixy dust on an upside down homeowner and makes him a debt slave for 20 years. Sure they get to keep the house with a payment that will be the absolute max they can swing. Assuming they can sell at a profit down the line that then goes to pay off some hold back amount. Great, in 20 years you now have a middle aged or older family with zero savings and zero equity. Yea, that sounds like a plan to save America. How about they let the house go, rent for 5 years and buy another one that they can afford. In 15 years they should have some savings and some equity. Which plan sounds better?

But then again, I'm not an economist. But I could probably play one on TV....