What does the federal government have to do today to keep this oncoming recession from becoming a depression? Not only does it have to do something, it has to execute that “something” well. A poor idea executed well accomplishes something. A good idea poorly executed accomplishes nothing. That said, the gears of credit have to be oiled. That means strengthening confidence and the balance sheets of lenders.

The strengthening of confidence will come from bi-partisan legislation that addresses the problem. This is easier said than done. We have a short-term President with a 20% approval rating and a congress with a 14% approval rating. Getting elected seems to be more important than what’s best for the country. We’ve risen to the occasion in the past, and hopefully we’ll do it again. When America has acted as one, it has accomplished some amazing things in its short history.

The $700 billion Rescue Bill already passed by the senate was passed by the house and signed by the President on October 3, 2008. The highlights are to:

• Make $350 billion available immediately (Congress can say no to the remainder).
• Provide the government with warrants to obtain an equity stake in companies. This helps ensure that taxpayers share in future gains of companies that are bailed out.
• Limit excessive executive compensation for some companies. Any firm that sells more than $300 million in troubled assets to the government is also subject to more taxes.
• Establish an oversight board and special inspector general to act as a watchdog.
• Require the Treasury secretary to regularly report to Congress the details of all financial transactions under the bailout.
• Allow federal agencies to modify troubled mortgage loans.
• Expand the amount of government insurance on individual bank deposits from $100,000 to $250,000.
• Give the chairman of the Securities and Exchange Commission the authority to suspend mark-to-market accounting and requires the agency to complete a study on the effectiveness of this accounting method.
• Require the president five years from now to devise a plan to recoup any net losses.
• Give companies the opportunity to insure their troubled assets rather than selling them, although this is up to the discretion of the Treasury secretary.

Managed correctly this bill provides more than enough to grease the skids for making credit available. It also provides for lots of second guessing (constructive criticism excepted) and media sound bites. We need strong leadership to prevent politicizing the execution of this bill, and no new interfering legislation. Weak leadership from the federal government will prolong and deepen the recession. Interfering legislation will bring us closer to the slippery slope of a depression.

Now more than ever income property investors need to keep their eye on the ball, and that is jobs. The job condition in each area will determine the strategy for the income property in that area. NetGain’s pro-active due diligence program is more important than ever. It is the indispensable tool that all income property investors need for buying, selling, evaluating or developing the right investment strategy.

Pages: 1 2