Washington Insights:
The Madness Behind the Method

Please don't think me harsh in my assessment of the mortgage situation. The homeowners who will ultimately end up in foreclosure, for the most part, bought with no money down or refinanced to extract equity to spend elsewhere. So...when the sheriff puts the lock on the door (we expect more than 2 million foreclosures this year!), they walk away having put no skin in the game.

I might suggest that the lenders allow foreclosed homeowners to remain in the homes if they can afford a fair market rental rate. Many banks' REO (real estate owned) portfolios are already bulging with foreclosed homes with many fewer buyers available because of tightened credit standards. Why not let the banks make a few rental dollars on what they once again "own"?

A Bad Omen

Beware of the resulting hype from this rate cut. We've heard and will continue to hear from all corners of the media and, most of all politicians, about how much better off we will all be.

Now you know the truth, which is that neither political party can afford to have you think that the economy is in trouble. Why? Because....perish the thought...you might actually expect Washington to do something if the economy is lagging!

But the plain truth is that neither party can fix this mess without making tough choices...choices that would not garner votes during the next re-election campaign, which is already under way.

Let me give you a little tip to fully measure just how dumb the latest Fed move was: Watch gold, commodity and oil prices soar and the U.S. dollar weaken even further in the coming weeks.

If that's what continues to happen, I'm afraid the outcome will be all-but certain: A lack of guts on the part of the players in Washington has put us on a path to greater inflation and 1970's-style interest rates.

Rest assured, Ken and I will continue to watch the situation closely, and we'll be here through it all to help you make the smartest moves with your money -- even if the folks in Washington aren't making the smartest moves with our tax dollars.

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