The Golden Age is Upon Us, Thanks to Our Leaders

Golden not as in wealth and prosperity, golden as in shower :)

As I was saying in an earlier post today, prognostication is tough. My "neighbor" and one of my favorite writers, Alan Abelson, has been sounding the cry of the imminent bear market for years and, well, we may be really, really close but we're otherwise still waiting.

But as to what may be the first act, Abelson has this to say:

What better proof is there that the mounting credit crisis and its vast potential to do damage to the economy and your average Joe and Jane's well-being is a clear and present danger than that even the White House has been forced to evince alarm and pledge to provide aid and comfort to impecunious homeowners. So much for the president's stout resolve, voiced on more than one occasion over the past six years, not to change his mind because it would "mean arguing" with himself.

Flip, flop, flip, flop, flip, flop, flip, flop, flip, flop, flip, flop, flip, flop....

Making the about-face all the more abrupt is that Mr. Bush a scant few weeks earlier fingered as the culprit for the subprime disaster and the tsunami of delinquencies and foreclosures it has touched off the failure of folks to read the fine print in their mortgage agreements, leaving the distinct impression that the solution for the dispossessed is to consult the nearest ophthalmologist.

And yes, it's unfair that Our Beloved Leader thinks every imbecile is blessed with an Ivy League education like his own. And check out the photo at the bottom of this post; Our Beloved Leader certainly can't bother to read for himself. It's part of Dick's job, that and telling Our Leader what he thinks. No reading, no thinking... it's OK for the President of the United States, not for relatively unsophisticated people who want to own homes....

On Friday, however, in a change of script that was as surprising for its timing as for its substance, he allowed as how the Devil (his nickname for Uncle Sam) might be enlisted to ease the pain of the delinquent and foreclosed masses. And the crowd, at least on Wall Street, went bananas.

Which, just conceivably, may have been the real point of the exercise.

***

A hedge-fund manager quoted by Barry [Ritholtz, the canny market watcher and proprietor of the eponymous Ritholtz Capital Partners] sums it up rather persuasively: "I don't see anything in Bush's plan that will change the insolvency of the home buyer. The 'system' is illiquid (and that 'problem' was addressed by the central banks two weeks ago), but the 'borrowers' are insolvent. Nothing I've seen yet changes that fact. Nothing. Besides, has this administration, which doesn't believe in government programs, ever done anything well bureaucratically?"

Softening the tax bite on mortgage write downs and allowing homeowners who are delinquent by more than three months and who have a decent credit history to switch into a Federal Housing Administration loan carrying a lower interest rate will effect modest fixes, but are no big deal. Certainly, given the wretched condition of housing, the inexorable decline in home prices and the prospect of a huge resetting upwards of adjustable-rate mortgages over the next 12 months, with a big spike in March '08, we're talking Band-Aids rather than serious relief.

(Link for photo.)