Seven-tenths of a trillion dollars - more than the country has spent on the war in Iraq - should go a long way toward unfreezing the economy. But it won't flow directly to consumers. And deeper economic trends are not encouraging.
Hard as it is to believe, the mortgage pain to date came even as the economy was technically still growing. If the economy reverses, workers will lose jobs and consumers will pull back. And more homeowners will start missing mortgage payments.
America is not in the aftermath of a mortgage catastrophe. The catastrophe is still happening. Across the country, tens of thousands of homes will begin foreclosure proceedings this month. Rock-bottom, "teaser" rates on tens of billions in mortgages are set to adjust upward in the next two years, putting new pressure on homeowners, according to an analysis by Credit Suisse.
Home prices are still falling. The number of empty houses on the market isn't.
And the bailout language about helping homeowners is more political decoration than substantive policy. The plan gives federal managers the authority to reduce interest and principal liabilities for homeowners on any mortgages the government purchases directly.
But this will often be impossible. Many toxic securities are derivatives that don't include ownership of the mortgages themselves. In that case, government should "encourage" other parties to modify the terms, says the bailout law. You will be excused for emitting a loud hoot at this point.
Yesterday's report that the nation lost 159,000 jobs in September reinforced the belief of many analysts that the country is already in recession. The economy has shed jobs every month this year for a total loss of 760,000.
This, too, stresses homeowners and hurts the financial system Washington is trying to fix.
Ugly as it is, the bailout had to be done. We needed something that looked like the Resolution Trust Corp., which isolated rotten savings-and-loan assets in the early 1990s.
But it won't be the last move. The Federal Reserve will certainly cut short-term interest rates again. Another expensive consumer stimulus package is probably in the cards.
Try to look up, not down.
