You can’t solve a problem until you identify its essence.  That is one of the challenges facing policy makers trying to get our economy back on its footing.

One of the root causes of the recession is the overhang that we are suffering through as so many bad mortgages slowly deplete the balance sheets of our banks. The troubles on Wall Street have spread to Main Street.  Many of our communities have fallen hard and fast.

It was a time of fast lending.  It was a time of loose underwriting.  The share of subprime mortgages (more…)

Housing starts fueled by subprime loans appear to have reduced demand for mobile homes.

That is the conclusion of economists at the Congressional Budget Office, who in November  2008 put together a nice analysis of the demand for new housing for the next four years.

“Some subprime loans for permanent-site single family homes were undoubtedly made to borrowers who would have otherwise lived in mobile homes.”

So chalk up another victim in the subprime housing crisis – the manufactured housing industry.  The evidence in the marketplace is apparent, as builders like Champion and Fleetwood are struggling to keep their shares lists.  Mobile home placements dropped to (more…)

Today it looks like Secretary Paulson will relent.  An early report says that he is going to concede on the issue of CEO pay.  In the arrangement, financial institutions that seek the federal government to purchase their distressed assets must agree to an as yet undetermined set of restrictions on the pay of their CEO and their boards.

This follows on some general outrage about executive compensation.  One report shows that CEOs earn, on average, about 275 times what their rank and file employees make.  That’s a high number, much higher than in the era of industrialized economies with their labor unions.  It is much higher than before globalization.  With NAFTA, GAAT, and the rest, certain jobs and skillsets have been able to be utilized across greater spans.

All of that is to say that there is alot of reason for people to be upset about CEO pay.  Yet it seems like its the wrong remedy for this illness.  Again, the problem is the way that these mortgages have been underwritten and subsequently sold.  The problem is subprime lending.  The problem is within securitization into things like collateralized debt obligations, i/o strips, and the like.

CEO pay is a fine thing to add to a bill that redresses those wrongs.  But we are making a big mistake if that’s the thrust of the reforms that critics of TARP focus upon.