Close the Stock Market Before We Get "ENRON'ED"

A company called "Enron," as you will recall, with solid stock prices got decimated after its bad debts were revealed- sort of what's happening to many of our banks (upon revelation of its financial scandal- Enron stock went from $90 per share to less than 0.50 cents). These banks have/had such corrupt leadership to utterly ignore the precipice they had gone to with loaning trillions of dollars to unqualified borrowers- and where much of that lending could only have been paid back as long as real estate prices continued its climb.

The financial action plan being discussed this weekend mainly focuses on throwing a gob of trillions of dollars into the world markets- to recapitalize banks, buy bad debt, hoping banks will stay afloat and even begin extending credit again. As Luko News Review wrote earlier in the week- it's still missing the "KEY" to this crises being resolved. Real estate prices are the KEY, and banks will NOT extend credit on collateralized assets (the vast majority of bank lending) when those assets are free falling. How does a bank loan Mr/Mrs. X a $200,000 dollar mortgage on a home when the bank knows that home is going to loose another 20-40% of its value in the next two years ? Answer- THEY DON'T. If banks ask customers to put 30-40% down payment on the homes they want to buy- the banks will have few customers. The drop in home owner equity- as well as investor equity in real estate over the past two years has wiped out many more trillions than the recent drop in the stock market. With less equity, a crashing real estate market will severely depress purchases- which accounts for 2/3rds of the American economy. With that ugly picture- banks will and are holding back major credit extensions to businesses which rely on that cash flow to operate.

Get back to the original problem, the real estate crash, which we all know started this mess, and you'll have the first sign of a recovery and stabilization in the markets. Remember, the stock markets are already closed on weekends and holidays, keep them closed for at least another week.