The current proposed $700 billion dollar bailout is nothing less than a raping of the American taxpayer and the downfall of the United States capitalism system. With that off my chest, I must admit I was wrong when I made an earlier entry about the mortgage mess having happened before. This time it's way worse. 

I started wondering how we found ourselves in this mess. Outside of the normal greed and corruption motives, I found that the Federal government actually caused this issue. It all started in the late 1990s when the government told Fannie Mae to ease the credit requirements for potential homeowners. The move was designed to allow more minorities, who happen to have worse credit, to buy homes. As the New York Times said at the time:

Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites. 

On the face of this I cannot begin to protest. We bought our home in 1998 and I am sure the easing of the down payment and credit requirements helped us qualify. The difference is that we bought a house we could afford and we didn't go with an ARM. 

Anyway, the program was wildly successful. More people bought homes, home prices rose and everyone was happy. Happy until ARMS readjusted, the economy took a downward turn and people started defaulting on their mortgages. 

My question about this is didn't anyone see this coming? Obviously, the Federal government didn't see it coming. One person saw it coming and his name is Peter Wallison. He's a fellow at the American Enterprise Institute. Here is what Wallison said in the same New York Times article:

From the perspective of many people, including me, this is another thrift industry growing up around us. If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.

Emphasis mine. Wow. He really nailed it. Maybe he should pick lotto numbers for a living. 

So, we find ourselves in this mess, but how do we get out of it. Congress is working on a bailout plan, but they suck at this stuff. I don't think there's ever been a Federal program that didn't include pork. Of course, we'll all be fed a line that it has to go through with billions extra for "special projects" and "middle class relief." Seriously, does anyone believe this anymore?

Why don't we look to Sweden? What? Yep, the hardy nordic folk have been through the same exact situation we find ourselves in. In 1992 their economy collapsed, home values plummeted, unemployment soared. What did the Sweedish do? No, they didn't hand over money or buy debt. They made the banks write down the debt, took partial ownership of the institutions themselves and made the shareholders pay. 

Wait a minute. The Swedish actually held the owners and management of the company responsible? Yes. 

It's not too late for the United States. The Swedish Embassy actually held a seminar entitled, "How to Tackle A Financial Crisis: The Case of Sweden in the 1990s" on September 9, 2008. Maybe if we ask nicely, they'll hold another session for Congress.