Economics 101 For MSM, Hillary?

Adam Smith, cover your eyes. I'm about to reveal something that would be very upsetting to Mr. Invisible Hand, were he still with us.

AP, the world's largest news distribution service, and therefore, one would think, one of its best, led off a story on the housing market today with this gem:

After falling for six straight months, sales of existing homes posted an unexpected increase in February. But the median home price tumbled by the largest amount on record.

"But?!" Obviously, "because" is the right word. Anyone with even a modest understanding of economics knows that government programs and bailouts aren't going to be what starts bringing the housing market back. But lowering prices (and making more mortgage money available) will. In February we saw that: Prices dropped and people bought.

Meanwhile, Ms. Change (seen here signaling for eight more Clinton years), showed off that she's right there in the dunce's corner with AP, as she called for an "emergency working group on foreclosures" led by -- here's a new face -- Robert Rubin, her hubby's econ czar who helped the Clinton administration skate by on Reagan's robust economy almost until the end of Bill's second term, when it all collapsed.

Such a panel would recommend legislation and other steps to "help re-establish confidence in our economy," Clinton said in prepared remarks for a speech on the economy in Philadelphia. She and Sen. Barack Obama are campaigning heavily in Pennsylvania, which holds its presidential primary April 22.

Clinton also proposed greater protections for lenders from possible lawsuits by investors, a version of so-called tort reform more often associated with Republicans than Democrats.

Uh-huh. Washington DC can re-establish confidence in the economy; we all believe that ... just let us find our WIN buttons. And we're all sooo behind Hillary on her bright idea to stiff investors -- what do they do besides fuel the economy, anyway? -- in order to bail out financially dumb or greedy people who are stuck in bottom-of-the-barrel mortgages.

The failed mortgages are made up, in large part, of claimed income mortgages, and most of the failed claimed income mortgages are ones in which the relationship between the claimed income and the real income is tenuous at best.

In other words, they lied and Hillary cried.

Being used to covering for liars, Hillary wants to take care of these people so they can live to lie again. Why teach them a lesson when you can bail them out again and again, ensuring that they'll continue to vote Democratic?

Here's a better solution, and it's already done without the help of the junior senator from New York and her know-it-all buddies:

Government regulators are reducing capital requirements on Fannie Mae and Freddie Mac in a bid to add liquidity to the troubled mortgage market.

The Office of announced Wednesday that it has cut the government-sponsored mortgage investors' surplus capital requirement to 20 percent from 30 percent.

The office estimates that this reduction, in combination with the release of portfolio caps announced last month, should provide up to $200 billion of immediate liquidity to the mortgage-backed securities market, and allow Fannie Mae and Freddie Mac to purchase or guarantee about $2 trillion in mortgages this year. (source)

Unlike Democratic senators running for president, the housing market economists at the Federal Housing Enterprise Oversight understand that making more money available for mortgages will make mortgages cheaper and more plentiful. They also understand that this is a temporary fix, and capital reserve levels should return to 30% once things straighten out.

I am a part of the housing industry. I have seen many friends laid off and am watching as a couple friends hold on by their fingernails to their companies. It is not a good time for us -- but we all know that the last decade, which was incredible for the industry, would not have been possible if the already heavy hand of government were any heavier in our industry. So we also know that letting Hillary and her big government ilk have her way is not going to help in our recovery.

We were drunk in the good market and we're hung-over today. And no thanks, Hillary -- keep your snake oil hangover solution to yourself.