$700 B Bailout

[BleedBurgundy]

Originally Posted by firstdown

What laws where broken. Just because someone did a poor job and gave out a bunch of bad loans does not make it illegal. Is your stock broker breaking laws when he invest your money in poor stocks an you loss money? No. Have laws been broken? At this point we don't know but I'm sure we as tax payers will pay for a big long investigation into al of this.

Paying for an investigation into this is the one thing I approve of them spending my money on. If this was just a matter of a big "mistake," that's one thing, not that it removes accountability. BUT- if it turns out (and it will) that these firms were intentionally employing shady business practices that resulted in the collapse we've seen, I want those responsible held accountable. Jailed, assets confiscated, the whole 9 yards. Will it happen? Not in a million years. Maybe one or two examples will be made, but by and large I can't see any true measure of punishment coming down on "all" of those responsible.

[FRPLG]

Originally Posted by 12thMan

Well one of the issues they're having is actually pricing the bad loans. In other words determining how much they're worth or how worthless they are. So from an accounting standpoint it's tough to add that type of asset to your sheets.

Their are all types of challenges with this crap.

The cost of insuring the loans would almost certainly be less than 700 billion. If it costs 500b then we saved 200b. The caveat has to be that the gov't gets the properties that defaulted. Banks get thier money. The gov't gets the houses and sells them off.

[FRPLG]

Originally Posted by BleedBurgundy

What kills me is the ZERO Accountability that has been observed in this situation. Everybody just talking about what a crisis this is and no one wants to go after those responsible. The only plausible reason for that is that our legislators ARE some of the ones responsible, either by direct intervention or inaction due to lobbying.

EVERYONE was responsible. Banks, legislators and regular people. We all share in the blame on this to varying degrees.

[dmek25]

Originally Posted by firstdown

I'll bet take that bet about congress taking loans from Fannie or Freddy. How much?

over the last 10 years lobbyists from Fannie and Freddie have dished out approx. 170 million to anyone that would listen. let me guess, you think the old maverick hasnt touched any of that tainted money?

[firstdown]

Originally Posted by dmek25

over the last 10 years lobbyists from Fannie and Freddie have dished out approx. 170 million to anyone that would listen. let me guess, you think the old maverick hasnt touched any of that tainted money?

I was not even thinking along those lines. I thought you were saying they borrowed money from them but now I see your talking donations it makes more sense. The Maverick did some 4 to 5 years a go introduced legislation to have more over site on Fannie and Freddie which did not get passed so he did try.

[BleedBurgundy]

Originally Posted by FRPLG

EVERYONE was responsible. Banks, legislators and regular people. We all share in the blame on this to varying degrees.

Not this guy. I didn't over burden myself with bad credit and I didn't buy a house I couldn't afford. So, uh, no. But, I do agree with you in principle that there is a lot of blame to go around. I don't want idiots who lied on loan applications or simply purchased a home which was obviously above their income level to be bailed out either. I'm sorry, but the way I was raised was that if you make a mistake, you pay the consequences. I know, that's so passé.

[dmek25]

Originally Posted by firstdown

I was not even thinking along those lines. I thought you were saying they borrowed money from them but now I see your talking donations it makes more sense. The Maverick did some 4 to 5 years a go introduced legislation to have more over site on Fannie and Freddie which did not get passed so he did try.

i would like to see a link. because Sen. McCain has been one of the biggest proponents of deregulating. which in turn was part of the cause of this mess

[That Guy]

bill clinton (who i'm not a big fan off) had a really good idea of what's going on from what i saw on the daily show... about reviewing the loans to see if a lower payment could save the loan from failing outright, about loaning with interest or taking part of the upside, instead of just handing them free money for screwing up royally.

interview starts at the 9:30ish mark if you want to skip straight to it, 11:00 for actual bailout bit:
The Daily Show Full Episode | Tuesday Sep 23 2008 | Comedy Central

[Slingin Sammy 33]

I may be completely off on this, but it was explained to me by a guy who's heavily into the market and real estate this way: The loans that the banks have on their balance sheets have a value, because of the housing bubble and sub-prime lending frenzy loans that were valued at 100% of value are now valued between the banks at about 10% of value. The real value, all things considered should be about 50-70%. If the Fed comes in and buys up these loans at their current value of 10-20%, holds them until the market corrects and trends upward, then resells them at their "real" value of even 50-70% then the Fed (us taxpayers) should make money. Again, I don't know if this is correct or not.

The real problems I have with the bail-out are; the company officers with golden parachutes. I would like to see a very low cap on their buy-out packages. Give them a choice - accept the bail-out and cap or don't and expect to be Federally prosecuted for whatever charges the Feds can throw at them. The other problem is what saden brought up about accountability. It can't be with one person or office within the Fed. It must be some sort of independent/bi-partisan group providing the oversight. As much as I don't like gov't regulation, in this area it's desperately needed.

[mheisig]

Originally Posted by FRPLG

EVERYONE was responsible. Banks, legislators and regular people. We all share in the blame on this to varying degrees.

Right on.

The banks were stupid enough to make sub-prime loans to people that they knew couldn't afford them in the long run, and the people taking the loans were stupid enough to do it in the first place. It's rampant greed on the part of everyone involved. As much as people want to bitch about the high-paid CEOs, there should be equal bitching about the idiotic people who took these loans in the first place. It takes two to tango - the banks share half the guilt.

Now the federal government is forced to step in and start fucking with the market. It terrifies me when the government suddenly owns 80% of one of the largest banks in the country.

There really is not "good" solution to all of this - it's robbing Peter to pay Paul, we're just trying to figure out which one to rob and which one to pay.

I CPA that I'm good friends with says that he thinks the best solution is for the government to repeal a substantial number of the corporate taxes that are in place for about two years. The lessened tax burden allows the banks to recover and start backing their own loans. It's more of an easing of the pressure than a bailout. Of course then you have to deal with decreased tax revenue for two years which is it's whole own problem.

[FRPLG]

Originally Posted by BleedBurgundy

Not this guy. I didn't over burden myself with bad credit and I didn't buy a house I couldn't afford. So, uh, no. But, I do agree with you in principle that there is a lot of blame to go around. I don't want idiots who lied on loan applications or simply purchased a home which was obviously above their income level to be bailed out either. I'm sorry, but the way I was raised was that if you make a mistake, you pay the consequences. I know, that's so passé.

No I totally agree. And I am one of those who has a reasonable house bought at a reasonable price and a nice 30 year loan I can easily afford. Trust me, it is gonna piss me off if we let all these people with 800K houses on 70K year incomes keep their houses when they never should have bought them in the first place. It is THEIR fault for buying the house and it is the BANK's fault for giving them the money to do it and it is our gov't fault for not maintaining proper regulatory control to stop either of groups of idiots for letting this happen.

[FRPLG]

Originally Posted by mheisig

Right on.

The banks were stupid enough to make sub-prime loans to people that they knew couldn't afford them in the long run, and the people taking the loans were stupid enough to do it in the first place. It's rampant greed on the part of everyone involved. As much as people want to bitch about the high-paid CEOs, there should be equal bitching about the idiotic people who took these loans in the first place. It takes two to tango - the banks share half the guilt.

Now the federal government is forced to step in and start fucking with the market. It terrifies me when the government suddenly owns 80% of one of the largest banks in the country.

There really is not "good" solution to all of this - it's robbing Peter to pay Paul, we're just trying to figure out which one to rob and which one to pay.

I CPA that I'm good friends with says that he thinks the best solution is for the government to repeal a substantial number of the corporate taxes that are in place for about two years. The lessened tax burden allows the banks to recover and start backing their own loans. It's more of an easing of the pressure than a bailout. Of course then you have to deal with decreased tax revenue for two years which is it's whole own problem.

I listen to Dave Ramsey. Look him up if you haven't heard of him. He is looking more and more like a genius nowadays.

One factor he was discussing stems from the fallout of Enron. This is a cautionary tale about trying to control business and the way they conduct their business.

Anyways, after the Enron debacle a huge new law was pass called Sarbanes-Oxley. Most have probably heard of it. It has a lot of provisions trying to legislate ethics.

One regulation it implements is that publically traded companies have to restate their assets value on a daily basis. Good idea. But it forces them to use market value. This is sometimes a good idea and sometimes not. In the case of the mortage industry it is a very poor stipulation.

Say a company like Merrill-Lynch owns 30B in bonds secured with sub-prime loans. This means the values of the loans is 30B and the value of the houses those laons are for at one point added up to 30B. Nowadays with a downturn in the market those houses are worth say 25B.

But the market value of those bonds may only be 10B since they involve poor loans. So ML has to take a 20B loss in states assets because the market value is so much lower. This hss caused the market for these types of securities to tank and essentially seized up the market. If the gov't would lift that provision for a the time being then ML could have increased their stated assets by billions and freed up the market to work a little more naturally.

A case of the gov't implementing something that seems good but has terrible unintended consequences.

We need to be careful about how we legislate fiscal responsibility. It doesn't work sometimes and can lead to an even worse problem.

[jsarno]

I HATE this decision. Here I am, making wise decisions, and I have a credit rating of over 750, my wife nears 800, while others make poor decisions with poor credit ratings. Some of this problem came due to the fact that the general public's credit ratings have been dropping over the years, and in order for Mortgage companies to survive, they had to take these chances. What I do not understand at all is the fact that when I first bought my house, I had to pay PMI (private mortgage insurance) cause my loan was more than 80% of my house's worth. So if I defaulted, it would have been covered by the PMI. What the hell happened to that?

[FRPLG]

Well AIG is one of the main PMI insurers and that is basically what brought them down. I think Matty can speak more intelligently to this since he works for them.

[BleedBurgundy]

Originally Posted by FRPLG

Well AIG is one of the main PMI insurers and that is basically what brought them down. I think Matty can speak more intelligently to this since he works for them.

See, it's Matty's fault.