How Ken Griffin would spend your money
Kelli K asks, in the comments, for a bit more detail on what exactly Ken Griffin was proposing this morning when he said that the government should socialize housing-market losses. He did use those words, but didn’t go into a lot of detail; later on in the panel, he talked about one idea which may or may not have been one of the proposals he had in mind.
Griffin said that the economy won’t recover until the financial system does, and that the financial system won’t recover until the housing mess is resolved, and that the housing mess won’t be resolved until the huge overhang of unsold real-estate is dealt with, and that the huge overhang of unsold real-estate won’t come off the market unless and until people start buying houses again, and that people won’t start buying houses again unless they can come up with downpayments, and that people clearly can’t come up with downpayments because the US savings rate has essentially been zero for most of the past decade. So Griffin’s proposed solution was for the government to provide low-cost, full-recourse 20% downpayment loans to anybody who wants to buy a house. Yes, he said, no-money-down house purchases were what got us into this mess to begin with, but we kinda need them in order to get out of the mess too.
I’m not sure this idea really works that well, because homeownership rates move slowly and aren’t going to rise overnight just because of a downpayment assistance program. But in any case, that’s (one of) Ken Griffin’s big idea(s). In general, of course, everybody has their own pet idea for how the government should spend a few hundred billion dollars in an attempt to shore up the economy. The trick is to find the ways of spending money which are (a) politically feasible; and (b) get the most bang per buck. And that’s almost impossible, given the anger in Congress these days.