Avoiding 2003 recession created greater 2008 recession

Very good point. But, If we somehow avoid this recession(by major government intervention), we will be setting ourselves up for a catastrophe in a few years.
Bottom line is that the markets(real estate, financial, etc) need to correct themselves, before we can forge ahead.

The free market is a myth. Everybody knows our markets are regulated and many understand how these regulations contribute to our prosperity and the success of our financial systems.

Everybody also knows that leverage amplifies the gains and losses of investing. Everybody knows that leverage is a risky way of pumping up short term profit. Given this incentive to behave in a risky fashion it makes sense that leverage should be regulated. Indeed it is regulated with capital adequacy rules.

The financial industry found a way to avoid the regulations through the creation and repackaging of high risk mortgages and the sale of unfunded insurance against the riskiness of these assets -credit default swaps (CDS's).

Cheap money increased the profitability of leverage but lack of adequate regulation made it possible for the massive destruction of wealth we are witnessing right now.

It is being exaggerated by the fact that the "insurance" has proven to be unreliable (a polite term for "bogus") the real riskiness of the mortgage backed securities is putting financial institutions everywhere in breech of regulations. The feeling is that any bank could fail because most banks probably no longer meet their capital adequacy ratios.

Cheap money contributed to the calamity but lack of adequate regulation and the successful side-stepping of regulation is what made the crisis possible.

I am almost inclined to suggest that a "truth and reconciliation" process that all lenders participate in would be as valuable as a bailout. It would disclose the magnitude of the problem we are going to have to pay for and it would remove the fear of bank failure that is dogging the credit markets.

I agree, and I have also commented on this subject many times here on BloggingStocks. I believe Greenspan began lowering rates aggressively starting in Jan. 2001, in order to avoid a market crash after the dot com. bubble burst. But he cut rates too much & for too long, creating an imbalance making it far more advantageous to borrow then to lend. So, here we are, instead of having one problem to deal with, we now have three. Stocks losing value, real estate losing value, and Dollar losing value.

Soft landing? The maestro of the economy:

horns, strings, investment banks!

Whoops, bad hop.

When are people going to get around to why? They didn't do all this stupid stuff because of greed.

This was not about greed; it was about building a super majority.

"Homeownership's potential to create wealth is impressive, too. For the vast majority of families, the purchase of a home represents the path to prosperity. A home is the largest purchase most Americans will ever make – a tangible asset that builds equity, good credit, borrowing power, and overall wealth.

In 2004, more Americans achieved the dream of homeownership than at any time in our nation's history. Today, nearly 70 percent of American families own their homes – an all-time record – and minority homeownership has surpassed 51 percent for the first time in history.

That figure, however, points to a significant homeownership gap between non-Hispanic whites and minorities. In June 2002, the President challenged the nation to create 5.5 million new minority homeowners by 2010. Since the President's challenge, 2.2 million minority families have joined the ranks of homeowners, and we are on track to meet the 5.5 million goal.

The Administration is working to make homeownership more affordable and more accessible. Government should do everything it can to help families find the security, dignity, and independence that come with owning a piece of the American Dream. ..." - Alphonso Jackson, HUD, formerly W's neighbor in Dallas

Alphonso Jackson, what a joker.

Homeownership was, is and always will be just a hedge against inflation.

So what that 70% of Americans own homes. I'd rather rent than pay a $300,000 mortgage on a $200,000 home.

"Equity", good credit and borrowing power. What did that guy just finish reading Trump "The Art of The Deal"? LOL

Government intervention may lengthen the cycle but it can not stop the boom to bust. I originally posted this before ( about three weeks ago )the Scam Bailout, since then things have accelerated, but that only lengthens the recovery time. In about a year and a half, when the real estate market is at 50 percent, and DOW has stabilized at between 7800-8000, NASDAQ 900-950, S&P 700-750, it will be the bottom. Then it will be safe to go back. Until then it is a Day trader's market. Gambler's paradise. The bailout is just a waste of resources. In fact it will compound the problem. Much like the physicians of old who would bleed the patient, to give the appearance of action. The Scam Bailout is an action to give the appearance of care and concern, but will in truth deplete needed resources for healing and extend the time required for recovery. We are looking at a very rough 3 to 6 years, according to who is president and how much more Socialistic debt is added.