Hedge fund manager and author Andy Kessler recounts the recent history of the U.S. failing to rid itself of toxic assets and proposes some solutions to today’s economic and financial market ills in this Wall Street Journal op-ed($) today.
• QE toxic. The Fed’s quantitative easing has been focused on buying Treasurys as well as packages of high-quality mortgage assets. It’s time to go back to the original TARP and start buying toxic assets directly from banks, no matter the price. If they become insolvent, set up the Treasury to inject capital a la TARP2 and allow the Federal Deposit Insurance Corporation (FDIC) to implement a quick-turnaround, prepackaged bank resolution and receivership. Clean those balance sheets up for good, else we relapse into financial crises again and again.
• Import buyers. Someone has to step up and buy those 1.5 million extra homes in inventory. I would wager there is a backlog of high-paying jobs for educated foreigners well beyond what H1-B visas allow to trickle in. In the name of financial stability, create a million visas for qualified immigrants, say, those with a masters or Ph.D., and watch home prices start to rise.
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There are so many price distortions that markets, let alone business leaders, are confused as to what is real. So they sit on their hands. The only way out is to let prices go to where they need to go to clear the overhang. This is especially true of housing and the housing assets clogging up bank balance sheets. Next time banks are under fire (and I hope we are not heading toward a next time), buy them out, fire management and restart the franchise with a clean bill of health. We are starting to see what the alternative is.
That sure sounds like a better plan than the one that we’ve been working to over the last couple years. As an addendum to that last item, it sure would be nice to get the banks out of the business of selling houses because they seem to be much more content to sit on them at their “mark to fantasy” prices than sell them, a development that, left unchecked, could result in another lost decade following the one that we just started.
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Let’s see if I’ve got this right.
Have the taxpayer buy more toxic crap from banks at any price (more wealth transfer from taxpayers to wall street)
Bring in a million more visa workers to compete with Americans for high paying jobs, in an already disastrous employment scene, to help property values rise. hugh?
Let house prices fall to reflect true market conditions.
Whereas I’d agree with no. 3, it seems clear that this dude is totally stoned. Maybe one of those immigrants can take his job.
This country is overpopulated as it is, and this guy wants to stuff more people in here?
I’m a regular lurker, but I have to say, WTF!!!!!!!
!. Cleaning up the balance sheets is a good thing, but that has to follow the cleanup of the board room and top level execs. Otherwise, you just have what amounts to state sanctioned looting of the economy by the captains of finance.
2. The idea of expanding the H1-B program is non-sensical. Corporations use the H1-B program to get below market rates on their technical employees. The H1-B program has the effect of lowering middle class salaries, which does not seem to jive with the goal of buying expensive properties. Yes, the H1-B program requires the employer pay prevailing wage, but that’s not what happens in reality. Additionally, the vast overhang this guy speaks of is largely is places where technology related jobs aren’t. Think the inland valley of California, Nevada, and Arizona. Think of my town of Pagosa Springs which is in the middle of awesome rural no-whereness.
This guy should stick to running his hedge fund. Yeah, great job for seeing the obvious problem. No points from me as far as a real world strategy for fixing it.
Funny, why all those clowns who want to import millions of PhDs never want to import MDs and JDs? Even knowing that we have real shortage of MDs, and there is no shortage of PhDs (based on wages and unemployment rates)? Even though importing MDs would lower our huge medical costs?
I guess to keep the wages of their MD and JD buddies sky-high, lower PhDs’ wages below the floor, and totally discourage Americans to enter productive occupations.
Disgusting scumbags.
Good idea get those smart guys in the US, but if they are really smart they wont buy a house. SO what they do in the Bahamas is make you purchase a home worth over 500k and then you can get residency. If you go bankrupt, they throw you out.