The senate yesterday approved a bill aimed at stimulating the housing market. According to the AP: "The plan contains $4 billion in grants to local governments to buy and refurbish foreclosed homes, new authority for states to issue bonds to be used to refinance subprime mortgages, and a temporary $7,000 tax credit for people buying new homes or properties in foreclosure."

So the Senate decided that local governments should get $4 billion to get into the real estate "flipping" market. They will buy these homes, fix them up and then re-sell for a profit? Is that the business government is supposed to be in?

Most local governments have problems fixing potholes and keeping streetlights working, and our wise senators believe that they will solve the housing crisis?

The real problem right now with foreclosed homes is that the banks refuse to bite the bullet and sell these homes for lower prices. I have spoken with a few people in the real estate market trying to buy foreclosures and they all said that the banks aren't prepared to take a loss. So now here comes the senate and says let's give $4 billion to local governments and they will overpay the banks for these properties. Great, so in an election year the US Senate has basically screwed prospective home buyers, choosing instead to bailout the banks.

What a surprise.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 4/3/08