United States housing bailout?

[skalenfehl]

165 economists and more experts say the bailout is a bad idea. Do you agree? Before you vote, inform yourself:

Stop The Housing Bailout!

[Jenamarie]

Well, it's already failed, so this a bit of a moot point now.

House votes down massive bailout measure - Economy in Turmoil - MSNBC.com

(boy, I'm such a downer in threads, aren't I? )

[BenRaines]

I personally think bailout is a bad word for what is being offered. It is an attempt to buy illiquid assets. Mortgage securities are not trading right now because no one wants to own them. 90% of the mortgages in them continue to pay their monthly payments. If you could buy these for 20-40 cents on the dollar you would be considered a genius when they come to maturity. Something that is yielding 7% purchased at 50 cents on the dollar would be a yield of 14%. This would get them off of the banks books, where they have to show them as a 0 value, mark to market and no market.

If the legislation is approved it will be the first step in a return to normalcy in the credit markets.

Ben Raines

[skalenfehl]

Jenamarie, that was round one. They'll try it again. Ben, the money to buy those assets will come from us, the tax payers. 700 billion dollars means between $2,300-$3,000 per man, woman and child in America. And we probably won't see that money ever again. It is you and me, the average person on Main Street who is bailing out the greedy fat cats on Wall Street.

[Jenamarie]

Look at the Dow right now though. It's had it's lowest drop EVER since the bailout failure was announced.

We're either going to lose this money in our taxes, or in our retirements, jobs, and the economy as a whole. Many banks right now are extremely limiting the amount of loans they hand out, no matter how "safe" the borrower appears. If banks stop handing out credit, then many small business will fail (many of them rely heavily on credit the first few years, until they start making a steady profit). The housing market will drop even more, because even people with good credit won't be able to get loans to purchase a house, even a modest one with payments they can easily afford. The economy will stagnate and then very likely drop into a recession that will effect practically everyone, and not just the fat cats.

[skalenfehl]

Hmm... I'm one of those small businesses. Still, I'm not convinced that's the way to go. Those of us who did it right have to pay for those who were irresponsible in their loan applications. We'd be sending the wrong message.

And those who can't buy a house can save for a down payment like the rest of us who did. Those who are trying to start a small business will have to wait, just like I have to wait for things to pick back up while my wife and I supplement our incomes with more work because my own business is almost dead in the water. This is about people being bailed out who already had homes, but by flipping houses, making investments and moving up into bigger homes that they couldn't afford, caused the burst in the economic bubble.

People won't be left homeless. But how about moving back into the houses that they started out in before the exploitation? Under the proposed bailout, responsible people will have to give money to liars, gamblers and predatory lenders. No thank you.

[funkymonkey]

We have put our first home search on complete hold until this settles. What we qualify to borrow has dropped by 30 percent in the past 30 days. I'm gonna keep throwing my money into rent.

[a-train]

<---- Celebrating the first good news I've had about the economy in a long while. Just say "NO" to propping prices up! I wrote a thank you letter to my Congressman.

-a-train

[Jenamarie]

Here's a news interview with my state's Rep. (well, one of them ) who voted yes on it. He explains some parts of the bill I hadn't heard about. In the bailout that failed, there was a provision that WALL STREET would have been held responsible if the govt. didn't make a profit off of this in five years! Very interesting.

Video | KING5.com | News for Seattle, Washington

[a-train]

In the bailout that failed, there was a provision that WALL STREET would have been held responsible if the govt. didn't make a profit off of this in five years! Very interesting.

Yeah right, and NAFTA created a huge trade surplus with Mexico.

-a-train

[Jenamarie]

Did you click the link?? It talked about fines that Wall Street would have had to pay if a profit wasn't made.

[skalenfehl]

And that's the issue I have--holding the tax payer harmless. And I don't mind saving up again. People just need to learn again to live within their means.

[checkerboy]

Did you click the link?? It talked about fines that Wall Street would have had to pay if a profit wasn't made.

If you believe that they really would have paid them had the circumstances demanded it, I have some swampland to sell you. At subprime rates even!!!

[Jenamarie]

I really just think this bail out is a necessary evil. I don't like the price tag, but I like less the idea of what will happen to our economy if something isn't done. There's going to need to be change either way, and business and homeowners aren't going to come out of this unscathed, but it could get a LOT worse if something isn't done.

[skalenfehl]

I hear you there, Jenamarie. Still, it seems to me that those who will be hurt directly will be those who irresponsibly overextended themselves. The rest of us will creep along as we have always done, saving here, spending a little there.

Still, I'm sure there will be a bailout of some sort. Just so long as the right people end up paying for it. Does anyone else have a problem with Nancy Pelosi? "No more golden parachutes!" Give me a break. Why don't they push for prosecution of those crooked CEO's? I'm remembering the movie "Fun with Dick and Jane" right now. Remember how that turned out? That's how the bailout should be handled!

[Jenamarie]

I agree that I don't want to see the CEO's coming out of this with nice little severence packages, and I know the Dem's have been trying (don't know if they've been successful yet) to put in just such a provision into the bill.

But also, a LOT of innocent employees stand to lose their jobs if these agencies aren't bailed out. Just with Washington Mutual who went under this week, their headquarters is just two hours from me, and by the end of the month all 5,000 employees there will be out of a job, with maybe a few rare exceptions.

Also, small businesses are likely going to be downsizing because they can't get credit, so that's even more people unemployed.

Innocent people are losing jobs left and right, not just the guilty parties.

I'm glad to see that this financial crisis is teaching people to be more conservative with their money, and I don't think the bailout will prevent that attitude from dissipating too quickly, but it's hard to be financially conservative when you have no money to spend. And I think it will be harder for CEO's to make such stupid decisions again, if the proposed bailout provisions that increase the regulations of those investment companies make it through. They've obviously shown that they're too irresponsible to handle DEregulation.

[skalenfehl]

It's unfortunate that many WaMu employees were laid off, but WaMu wasn't a very straight shooting lender either. Maybe the organization grew too fast? Read some of the feedback. There are too many unfortunate casualties. Hopefully Washington gets it right this time.

Washington Mutual lays off 2,500 workers - Topix

<---- Celebrating the first good news I've had about the economy in a long while. Just say "NO" to propping prices up! I wrote a thank you letter to my Congressman.

-a-train

My congressman voted no also and relates why:

Representative Rob Bishop

See who voted:

Voting Results

[Moksha]

My representative, Jim Matheson also voted no. KSL said several days ago that the majority of Utahans were against this bailout.

[Moksha]

U.S. lower house rejects bailout in shock vote, fear seizes markets

The Dow lost 778 points, its largest point decline in history, and posted its biggest daily percentage slide since the 1987 stock market crash. The benchmark S&P 500 also had its worst day in 21 years after the House voted down the bailout plan by a count of 228 to 205.

Latin American stocks tumbled 13 percent, their biggest decline in more than a decade.

The failure of the bill, which would have let the Treasury buy up bad mortgage debt from struggling banks in an effort to kick-start much needed lending, was seen as crucial to shielding the economy from an even deeper slowdown.

World stocks, as measured by MSCI's all country world index, lost about $1.7 trillion for the day.

The bailout's demise comes after U.S. bank Wachovia was forced to sell most of its assets to Citigroup in a deal brokered by the Federal Deposit Insurance Corp.

That followed fast upon fresh signs that financial market turmoil was spreading around the world. European authorities in recent days were forced to step in and rescue a group of banks in Britain, Belgium, Germany and elsewhere.

Global money markets remained paralyzed, even as central banks, including the Federal Reserve, pumped cash into world markets in an attempt to boost liquidity.

[Palerider]

Yeah right, and NAFTA created a huge trade surplus with Mexico.

-a-train

good ole NAFTA....the plan that was suppose to be good for America.....it was good for me.....1996 my job went to another country....:)

[Hemidakota]

The bailout this round should be those who are consumers and not the banks. In another words, buy out the foreclosures and offered it back to those families at a discount.

[Jenamarie]

One idea floating around right now is to allow Bankruptsy judges to renegotiate morgage terms for people filing bankruptsy (which, if you're in foreclosure, you're probably bankrupt as well). They'd only be allowed to do it for five years, and then the laws would revert back to how they are now, but it would allow more people to keep their homes, and help level out housing prices, with fewer bank-owned homes on the market for dirt cheap.

[BenRaines]

There are many parts to this problem. I am with Skal that those who have a problem on the Main Street level are many who never should have purchased a house in the first place. Most jumped on the buy a home bandwagon not because they were ready to buy a house and settle down but they did not want to miss out on the next get rich quick scheme. So while unscrupulous borrowers were going to unscrupulous real estate agents who were contacting unscrupulous mortgage brokers who were going to unscrupulous lenders who were selling the mortgages to unscrupulous brokerage firms who were then selling them back to greedy investors, banks, municipalities, pension funds, main street people the day came where it has now come to roost and either the whole financial system melts down or the government buys severly discounted securities from banks in the form of discounted CMO and CDO securities and gets them off the banks books so they can begin to lend again, hopefully this time more prudently and get the economy back on track.

Right now fear and the unknown rule the economy and that needs to be put to rest. Housing costs need to get back to 60 dollars a square foot and not 200-300 dollars a square foot.

This was not a government problem but a greed problem that has now become a government problem.

Ben Raines

[BenRaines]

Seems everyone wants to make the banks the bad guys. Who owns the banks. Main Street owns the banks. Grandmas who depend on the dividends, pension funds, State Teachers retirement plans, etc. The banks are not owned by fat cats on Wall Street but by mom and pop who have trusted their local bank.

Ben Raines

[Jenamarie]

Seems everyone wants to make the banks the bad guys. Who owns the banks. Main Street owns the banks. Grandmas who depend on the dividends, pension funds, State Teachers retirement plans, etc. The banks are not owned by fat cats on Wall Street but by mom and pop who have trusted their local bank.

Ben Raines

Exactly. Take a look at your 401k if you have one. It's likely gone waaaaaay waaaaaaaay down in value just since yesturday. And while this may be fine for me and many here on the boards who have a few decades between them and retirement, if you were planning on retiring this year, you're more than likely going to have to rethink that. People, responsible people, are losing TENS of THOUSANDS of dollars on their investments. And even if you diversified and didn't put your eggs all in one basket as far as retirement funds go (not everything tied to the stock market) you still just lost a whole lot of eggs.

These are people's LIFE SAVINGS that are being hurt, not just some "fat cat" CEO's pocket book.