After Treasury Secretary Paulson promised to use the $700 billion Troubled Asset Relief Program (TARP), to buy troubled assets and toxic sub-prime real estate loan portfolios, he has bought zero, zilch, nada. What he has done, is to buy preferred stock and make loans to financial institutions, betting that they, in turn, would make loans to the business community and to homeowners who are close to foreclosure. Unless the federal government guarantees all or a major part of these loans, banks will not, for the good of society make these loans. How can any credible organization, in this case our federal government, promise to do one thing with "our" money, and less than 30 days later do another? It's beyond disgrace and disgust - it's next to criminal.

Next up at the government trough are the "Big Three" automakers, or I should say the "Jet Setters" from Michigan. Let us be clear, the "Big Three" are not America's automobile industry. Toyota, BMW, Kia, Honda, and other automobile manufacturers, who are located in America's South and Midwest, and who produce 54% of the cars that we Americans buy, are not asking for any bailout. GM, Ford, and Chrysler are asking for $25 billion. I predict that it will be $50 billion to bailout their dinosaur operations. By the way of history, this is the second bailout for Chrysler. Remember that auto icon, Lee Iacocca, coming to Washington in 1979. Loquacious Lee convinced Congress to bailout Chrysler with a loan to his company, where nothing changed except that they continued to lose market share by building cars that nobody really wanted. In 1986, the Big Three held 71% of market share for autos bought in the USA. Today, their market share has dropped to 45% and by 2011, it is projected to drop to 42%. In addition to making cars that don't sell, the Big Three's costs to produce their "Edsel" like products are nowhere near competitive with their American made foreign competitors. The average hourly cost, including benefits, for one employee at the Big Three is $74.00 per hour, compared to their American competition's hourly rate, including benefits, of $44.00 per hour. It is true that as of 2010, the Big Three will offload the cost of their employee retirement benefits by paying the United Auto Workers (UAW) to take them over in the union's trust fund. However, even then, the Big Three will be paying an average of $24.82 per hour, while their American competitors, who now dominate USA market share, pay $26 per hour at Toyota, $24.00 per hour at Honda, and $21 per hour at Hyundai. Finally, as of 2006, it took GM 32.4 hours to make a car, Chrysler 32.9 hours and Toyota just 29.9 hours. In short, how can the Big Three compete?

The facts are, that without a total restructure in their union contracts, a massive retooling of their auto assembly lines, and an entirely new fleet of products, that the public, here and abroad, will buy, the Big Three are doomed to extinction.

Having said all that, I believe, the Big Three will be successful in convincing Congress and incoming President Obama to write a check from "our" bank account for $50 billion. Politically, President-elect Obama and the democratically controlled congress, can't say "no" to the UAW who just put them all in office. The changes, in operation, that will be required of the Big Three, in order to get the bailout, will be minimal "eyewash" and, we can then count on the Big Three to be back to the government trough in the future. For the sake of we taxpayers and our grandchildren, I hope I'm wrong!

In closing out this section on BAILOUT FEVER, I want to create the "Bailout Pig Award." And the award goes to….The City of San Jose, California. It seems as though, the Mayor and City Council of San Jose, CA have applied for $14 billion of bailout funds. Now, one might say, why does San Jose need a bailout that is four times greater than their annual budget? The City of San Jose responded to that question by saying, "it's only our fair share." You see, the High Tech City of San Jose believes that it contributes 2% of the nation's GDP and therefore, they are entitled to 2% of the bailout. Now, there's a new wrinkle on "Share The Wealth!"

The point is, that when well meaning political campaign promises meet the reality of governing, the campaign promises take a back seat. I believe Obama, a far left U.S. Senator, based upon his voting record, and a far left presidential candidate, based upon his campaign rhetoric, will govern, for the most part, from the middle. His choice in Cabinet appointments, which I think are mostly pretty good, represent anything but "change". Rather, they represent experienced veterans of the Washington beltway.

The media is so hyping expectations for Obama, neither Washington, Lincoln, nor the Pope could meet them. When the Presidential Honeymoon is over, Obama will have more gray hair than an albino sheepdog.

Although the U.S. Senate seats in Minnesota and Georgia have yet to be decided, the democrat's dream of a filibuster proof Senate appear to be waning. They currently hold 58 votes, including two Independents, and they need to win both Minnesota and Georgia in order to get to the magic number of 60. That's highly unlikely. What this means is that, if Senate Minority Leader Mitch McConnell carefully picks his filibuster battles, he can act as a roadblock to any politically far left proposals. I say "carefully" pick his filibusters, because he needs to hold his small but potentially mighty senate republican caucus members in line, in order to pull it off. That is no small leadership task, as corralling them is tantamount to herding cats. Look for Obama to use the threat of a senate filibuster as an excuse to his far left constituencies, for not pushing a far left agenda.

New home sales fell 5.3% in October and new housing starts fell 4.5% compared to the previous month. October new home starts were the slowest since 1981.

While President-elect Obama and congress consider new bailouts and economic stimulus packages, they would be wise to focus their plan on the housing and home foreclosure markets. Historically, the housing industry has lead our country into and out of recession. The job losses in this recession have been relatively greater in the construction and financial industries than any other. Socially, to continue to permit a tsunami of home foreclosures is unconscionable. Currently, 46% of home sales are foreclosed properties. Truly, the housing market and homeowners have not faced such dire circumstances since the great depression. It was FDR who created the FHA and the Federal Homeowners Loan Corporation in order to save the American dream of homeownership and drive our national economy out of depression.

From what I have read, even the housing proposals by the National Association of Realtors (NAR) and the National Association of Homebuilders (NAHB) are too tepid. What is needed, in order to stabilize the patient is "shock therapy" not Viagra. I would recommend:

1. FHA insured loans up to $750,000 at 3% interest for 10 years to qualified first-time homebuyers who would make a 3% down payment and pay their own closing costs.

2. Any homeowner in foreclosure should be granted a 1 - 2 - 3 refinance loan. First the existing lender would take a 10% haircut on their existing loan(s) and then would be paid off with a FHA refinance. Next, the property would be appraised. The federal government would then make an FHA variable rate loan for the 90% remaining outstanding balance. The homeowner would be charged 0% interest on the difference between the outstanding loan balance, after the 10% haircut, and the appraised value. 3% on the next 3% of value and finally 5% on the remaining balance. The loan term would be for 10 years.

Rest assured, the foreclosure tsunami would quickly subside, unsold inventories would be minimal within six months, new construction jobs would reappear, first-time homebuyers, would jump off the fence, the move-up housing market would engage and our country would be well on to economic recovery.

For those who could and would find undeserving recipients of this proposed government largesse, I would say you are probably right; however, in the interest of the greater good I would be willing to accept the blame for the small percentage of non-deserving.

TROUBLE IN SACRAMENTO: After failing to get a lame duck state legislature to enact an answer to the state's $28 billion deficit, Governor Schwarzenegger has called the newly elected legislature into special session in order to deal with the fiscal mess. 39 freshman legislators will join their 81 lawmaking veteran colleagues to see if they can come up with an agreement. Schwarzenegger has proposed a long laundry list of new taxes and budget cuts to try to bridge the budget gap but so far, republicans have refused to vote for any tax increases without radical budget reforms. Impasse is likely to continue until meaningful budget reform is achieved.

Better than 70% of the state budget is "frozen" by mandates created by a whole series of special interests who have passed statewide initiatives to protect their piece of the state pie. Until that is reversed, budget insanity will continue to prevail. That will take leadership. This is not a job for "girlie men," quit your whining and step up to the plate Terminator Schwarzennegger.