Now What?

Okay. We got our subsidy check. We got our housing bailout. Now what?

George Bush signed the housing rescue plan into law yesterday. It provides an explicit government guarantee for Fannie and Freddie debt and provides assistance for homeowners in financial trouble and first-time homebuyers.

Apart from keeping the Agencies in business, what does this package do? It’s not like the Federal Government had a bunch of cash sitting around to put to use. Indeed, the Federal Debt ceiling was raised 800 billion dollars to $10.6 trillion just to accommodate the plan.

We should know by now that you can’t borrow your way to prosperity. Oh sure, many a start-up business was capitalized with credit cards and a second mortgage. But the US economy isn’t running out of a garage. Unless we do something to provide incentives to invest and grow, the adjustments will just continue.

I don’t think we’re headed for a recession. But we won’t solve anything by throwing tomorrow’s dollars at today’s problems.


Douglas R. Tengdin, CFA
Chief Investment Officer
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