Thursday, April 3, 2008

Senate to Bailout Homebuilders

Our hardworking Senators (just back from a break during the largest global financial crisis we've seen in awhile) have furiously crafted a plan to help homeowners struggling to stave off foreclosure. Of the $15 billion allocated towards saving the housing market, $6 billion has been tagged to save the ailing American Homebuilder. Homebuilders will now be allowed to carry back losses 4 years instead of 2 in order to get tax rebates to the tune of $6 billion. Because really, of all the poor suffering Americans who need help getting out from under the suffocating mound of negative equity, the homebuilders should be our first priority. Let's just review exactly what the homebuilders did during the boom. If you look at their balance sheets and cash flow statements, you will see that the majority of them borrowed heavily to finance purchases of land so they could build spec houses to capitalize on the frenzy in the housing market. They made oodles of money, their executives were paid handsomely, insiders sold their stock and of course, they paid taxes. Management chose to ignore the well-known fact that homebuilding is an extremely cyclical business and they decided to make the most money they could possibly make, leveraged to the hilt without any thought to what would happen in the downturn. My question to my loyal readers is the following: What exactly is wrong with letting some of these jokers go out of business? Honestly, if our government had an extra $6 billion sitting around, maybe I'd be okay with giving them a tax break. But we don't, so our government needs to start prioritizing. I, for one am writing my Senator! Needless to say, this is not the first time she's heard from me.

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