Bailouts Options

[woody]

Since i don't see a topic for this. What do you all think of the bailouts going on right now?

[The Fanatic]

Hopefully the members of the house will do the right thing again and vote against this measure.

[Billy]

Hopefully the members of the house will do the right thing again and vote against this measure.

Generally, allowing your financial system to collapse is a bad idea.

[The Fanatic]

Generally, allowing your financial system to collapse is a bad idea.

Generally writing henry Paulson a blank check for money Americans don't have is a bad idea.

Throwing money at a broken system does not solve the problem, it only prolongs and delays the inevitable collapse.

This post has been edited by The Fanatic: Oct 1 2008, 09:17 PM

[Billy]

Generally writing henry Paulson a blank check for money Americans don't have is a bad idea.

Throwing money at a broken system does not solve the problem, it only prolongs and delays the inevitable collapse.

Other than large financial institutions buying bad mortgage backed securities (which they were misled into thinking were sound assets), how is the system broken? Why do you believe, especially after the crisis that is going on, this mistake will be repeated? I do hope you realize that we will not recover from this very quickly. You can kiss goodbye access to low interest loans, because if the largest part of our financial system goes under, the money will not be available to the little guy. Fewer car loans. Fewer home loans. Fewer small business loans. Fewer student loans. Lost jobs. Lots infrastructure. All of which that took 40+ years to develop. A lot of people are going to be affected by this and in a really bad way.

I don't know. Seems like a bad plan to me.

[nickluto]

Other than large financial institutions buying bad mortgage backed securities (which they were misled into thinking were sound assets), how is the system broken? Why do you believe, especially after the crisis that is going on, this mistake will be repeated? I do hope you realize that we will not recover from this very quickly. You can kiss goodbye access to low interest loans, because if the largest part of our financial system goes under, the money will not be available to the little guy. Fewer car loans. Fewer home loans. Fewer small business loans. Fewer student loans. Lost jobs. Lots infrastructure. All of which that took 40+ years to develop. A lot of people are going to be affected by this and in a really bad way.

I don't know. Seems like a bad plan to me.

Most of what you said was good. Much more informed than the average consumer/know-it-all, without a doubt.

A few quick addendums (not POINTS, since i am not refuting what you said :

-Large financial institutions aren't the only ones who are purchasing bundled "securitized" mortgages and, while the FMae and FMac mortgages definitely contributed to their downfall, they are not solely responsible for why these (Lehman Brothers, WaMu, AIG, et al.) institutions failed. The bundled mortgages used to be seen as "safe" investments. In the last 5 to 10 years, foreign investors have started to dip their dicks in the bucket to try to get in on these, so essentially what we are doing is creating not only a "destabilized" domestic market, but we are seeing effects internationally.

-Second, I personally believe (and take that for what it's worth...literally, you paid NOTHING for my opinion) that reforms need to be formulated at all levels of government. If my sarcasm meter is calibrated correctly (and if it isn't, I sincerely apologize), I think what you hinted at is that if the ship is righted, what makes you think this might happen again? Well, that's an easy answer and the reforms are just as easy. Don't loan money to people who have high default risk. Easy solution...right? But it's essentially the political death penalty if you say this aloud. The government made the mistake in the first place by instituting the CRA which encouraged the banking industry to relax their loaning standards so that they could effectively offer loans to "sub-prime" candidates with a clear conscience (and a government mandate). This made the financial market salivate as they were already beginning to look for different ways to rake in more profits. What it essentially comes down to is your political philosophy, which I will not judge. On one hand, the government was attempting to get loans to low-income peoples so that they could increase housing ownership in that demographic (a noble attempt with, unfortunately, false incentives). The other side would say that they were giving loans to people "unworthy" of borrowing money because of their inability to repay. I think if you read up on my posts you can gather which side I am on, but political slants tend to contribute to the clusterfuck, not help people understand it, so I will attempt to leave that up to the readers discretion.

The prescription is seems to be more forthcoming. If you want to increase housing ownership in the "lower-tier" of society (those less fortunate, I use quotes to underscore obvious political bias that you will hear politicians speak to), you simply need to increase their ability and access to assets, wages, income, and collateral; all of those necessary to secure a healthily risky loan.

How to do that is the $700B question.

-I'll agree that loans will be harder to come by in the future. When Fannie Mae and Freddie Mac were taken over by the government a few weeks ago interest rates dipped substantially, but will rebound and increase steadily in the future. Car loans will increase, student loans...are dependent on many factors that will yet to be seen. However, the mortgage loan industry is primarily fueled by the bond market, which has been doing remarkably well.

When the stock market dipped 700 points just a few days ago (and remember, it has rebounded somewhat) the average yield for a 3-month treasury bill almost approached ZERO! What does this mean? It means that all the scardy-pants that wanted to move their assets to less-liquid, ultra-safe investments did so in record fashion such that demand more-than overwhelmed supply. To me and you this means that more people wanted T-bills and bonds than there were supplied. Do you think that these people will be less scared in the future? Fear is what is fueling this whole bailout thing anyway. T-Bills and the bond market will be very good in the near-foreseeable future due to the very fact that people are scared. This means that the mortgage loan market will also be pretty decent. The caveat of this all?

You have be a quality candidate. If you are the average, hardworking American that really wants a house and has paid their dues and can afford one; you should be able to get one. No dice if you are of the "sub-prime" ilk. But that's what we wanted to get away from, isn't it? Eventually, the trend should serve to "iron out" the bad debt.

-However, yes, you are correct. Car loans are very closely related to the credit market. I don't think you need to be very fiscally savvy to figure out that the car sales industry has dipped anywhere from 30-50%. But I heard that next month they are re-opening the Toyota Tundra manufacturing facility in San Antonio. Who really knows?

---*Whether this "bailout" passes or not and whether or not we have a recession, I am always consoled by the fact that there will be a regressive trend back to the days of old where you really have to "earn" credit (or a loan, or a mortgage). I don't care about your political affiliation, but I think this is something that most people today really wish was the outcome. You DO need responsibility. You SHOULD act fiscally like an adult. And you SHOULD work hard to get what you believe is yours.

/rant