I saw an interview with Mort Zuckerman yesterday. I believe he is publisher of US News and World Report, and a guy I have a lot of respect for. Unfortunately, he scared me half to death. I have been worrying about a problem I have not heard well mentioned until he brought it up during the interview, and that is the problem of home owners owing more on their houses than their current value. According to Mort there are about 20,000,000 mortgages in the country where the owner owes at least 20% more on the house than its current value. In addition, he calculates that 15 trillion in wealth has evaporated with the downturn in stock values and home values. He doesn’t even calculate the reduction in auto values and residual losses taken by lenders. These are probably minor in the big picture. He also states that even though the bailout package was sold based on freeing up the credit markets, that has not been the case. He says banks are moving to shore up their banking operations as their first priority and are still taking a strict approach to the granting of credit. He didn’t mention anything about the funding being used for “exec comp”, something I hope is closely monitored.

Another analyst pointed out that that U.S. auto makers are among the worst managed businesses on the planet. According to him they pay their rank and file workers too much, over pay their executives, marry their business to unrealistic expectations and then cannot respond to market changes. He thinks bailing them out sends the wrong signal to business, that you can run a crappy business and have the government bail you out if you fail. I don’t see that the gov’t has a choice, but they need to get off of this CAFE thing and tax gasoline like the other developed nations. We are currently back into a another period of cheap gas and this will tend to blunt investment in alternative ideas in energy, fuel, and transportation. This is exactly where gov’t intervention IS required.

All of this evolves into the discussion of “corporate welfare” vs doing things to help the underprivileged and what can be afforded. Obama will have his hands full. In his spare time, he can heal the middle east, stop the war in Iraq, hang bin Laden, cure cancer and obesity, etc. etc. etc.

dr