We ran a good Associated Press piece this weekend about what has to happen before the bailout works its magic on the economy:
Experts say the most important thing that needs to happen before the $700 billion bailout even has a chance of working: Home prices must stop falling. That would send a signal to banks that the worst has passed and it's safe to start doling out money again.The story also contained this. See if you can find the part that made me nervous*:
The problem is the lending freeze has made getting a mortgage loan tough for everyone except those with sterling credit. That means it will take several months or longer to pare down the glut of houses built when times were good - and those that have come on the market because of soaring foreclosures - before home prices start appreciating.
Housing is a critical component to the U.S. economy and by extension the availability of credit. Roughly one in eight U.S. jobs depends on housing directly or indirectly - from construction workers to bank loan officers to big brokers on Wall Street. A turnaround in housing prices would boost confidence in the wider economy and, experts hope, goad banks into lending again.
"Housing traditionally does lead the economy through a recovery. I think it's going to be critical for a sustained recovery in this cycle, too," said Gary Thayer, senior economist at Wachovia Securities.
In the meantime, people like Alicia Elliott are adjusting to a new American reality: Life without credit.
Rep. Barney Frank, D-Mass., the Financial Services Committee chairman and a key negotiator over the past weeks, said the measure was just the beginning of a much larger task Congress will tackle next year: overhauling housing policy and financial regulation in a legislative effort comparable to the New Deal.
In the meantime, the Treasury Department is moving swiftly to get the plan started. Treasury Secretary Henry Paulson said Friday he did not wait for final approval of the measure to begin preparation. He has been lining up outside advisers as his staff works out details on a multitude of complex issues.
* That's a trick question. All of it scares the hell out of me.