United States housing bailout?

[rastler000]

I went through a remodel where nothing was left untouch and was corrected to the latest code. Not to forget, we never replaced any item with inferior products and spent quite a bit of money [over 200K dollars] investing into the house. Now, our home as depreciated to the point of selling it off and we are not looking ever in purchasing a home again for now.

When Clinton took office, Social Security was in the black and the federal employees were given bonus to keep it that way. Clinton, as Arkansas Governor, used the teachers and state worker pension funds to pay off some of the state problematic budget debts. Know one even knew beyond his office of close knitted workers what transpired until the next governor took office. Then as president, he robbed from Peter [social Security] to pay Paul [nation’s debt] to look good before the people. Where is Social Security now? Beyond repair! Too much was taken out of the coffer in order to save it. The only bailout for this disaster is too give to the private sector and allow people to make that choice for themselves whether or not they should give any money to this failing system.

Getting back to the man who was irresponsible, at this point it is quite clear, he cannot even budget his own checkbook, let alone any state/federal budget. You can clearly see I am not aficionado of this man or his wife. History will someday reveal the truth on many things that transpired with this nation...

I think there is plenty of blame to go around but I do realize that a lot of folks need "somebody specific" to blame to help with the acceptance.

As far as the question in general; nobody bailed me out when I went through some pretty tough times a few years back. So I am not a real fan of bailing anybody else out. Let the situation play out. If we have a recession, or even depression so be it.

[Hemidakota]

Ben? Any thought on what was passed in this version?

President Bush applauds historic $700 billion financial bailout bill, says he will sign into law.

[prisonchaplain]

IMHO, the bottom line is whether the economy could have kick-started out of an irrepairable decline, without intervention. Sometimes short-term massive borrowing can prevent a bankruptcy. I'm hoping we follow up with the necessary changes, because this deal appears to be done, and we've all bought in, whether we wanted to or not.

We're commanded to pray for those in authority. Now more than ever, will we stand in the gap, and provide the spiritual cover our nation so needs?

[Moksha]

You are right about this unprecedented transfer of wealth, from us to the money lenders being put into place.

Here is hoping that Congress put in a few provisions to make this looting of the treasury not so deleterious.

[BenRaines]

Here are my thoughts.

The passage was needed if nothing than a moral boost. Emotionally and psychologically the mind set of the American people was that we were in a major recession or near a depression. Interesting how every time we have a downturn in the economy everyone is ready for it to return to the Great Depression. Economic cycles happen and recessions happen. The key to provide market and economic stability is to not let them be to deep and truly not to let them be to steep on the upside either.

For banks to be able to lend to sound financial corporations, medium sized companie, small new businesses and to Main Street, new term that defines all us Joe Lunchbucket types the credit markets needed to be freed up.

Based on all that I have seen this should be a good step in the right direction. It still needs to be implemented. It will not change the stock market today or next week. It will not cause a bunch of new jobs to be offered next week but it will or should start us on the way back to an improved economy.

I do not like all the added pork that needed to be added to get the votes it needed to pass but that is the way the US govt works, unfortunately.

My feeling has always been if you don't like the way your representative votes then vote them out.

There were a lot of people responsible for getting the economy in this jam. I was reading an article today that the current administration was trying hard in 2005 to reign in Fannie Mae and Freddie Mac but there were people who fought hard and won for less regulation. I will let you all do the research so I will not be pushing candidates.

It will be interesting in 30 days how the vote goes and then what that administration does to spur the economy on.

I do not think higher taxes will create jobs and boost the economy, unless you are looking for a government job.

Ben Raines

[Hemidakota]

After some lengthy reading from several investment firms and media watch, the question for now, is the stock markets an early warning signs of something even worse to come? Until recently, our country and the global economies were roaring for quite length of time. But while we suffer with the aftermath of a sub-prime mortgage feeding frenzy, prolonged market uncertainty, record home foreclosures and the declining value of the dollar worldwide, we are now facing record losses in almost every aspect of investments, retirement funds, savings, mutual funds or stocks, and not forgetting, property value drops are becoming harder and harder to swallow.

What was affected on both coast lines is now hitting everywhere in nation. Looking at the last Case-Shiller home price index, which tracks housing prices [largest cities] throughout the country, home prices plunged 12.7% in this year from 2007. We never seen this since 2001 when they started the report. Even Bloomberg recently noted that home sales were down 18 percent nationwide in early spring time this year versus the same time in 2007.

Then we have nightly media gainer, home foreclosures that have exploded this year, which was running over 100% per quarter, this was according to Realty Trac Agency; now experiencing the pinch of a housing gold rush turned crisis debacle. What makes this housing bubble aftermath extra severe, during the real estate buying frenzy era, investment homes and condos, lenders would accommodate desperate homeowners with sub-prime loans and false hopes in affording new property at sky high prices. Or worse yet, incredibly leveraged, speculating weekend investors hoping to snatch up cheap properties and then sell them for double digit gains to benefit from residential property's seemingly endless appreciation.

But with homes no longer a cash cow it once was and easy credit now a thing of the past, facing now longer unemployment lines, as the scores of companies that were built to support the housing bubble are now crumbling. We often think that construction and supporting companies may seem a small slice of the overall nation’s pie, but, in fact, it was the 43% of new jobs generated in this country since 2001. When we calculate what has transpired in the last seven years, which equates to almost half of this country new jobs.

The real question now, have we hit bottom yet? Will frenzy continue to push our country's economy into now, a depression? Bearing in mind the housing and mortgage debacle is beginning to unwind before us, if you haven't noticed, in and out of the church, foreclosures are hitting the streets as fast as the sold signs that we were accustom in seeing just a few months ago. Looking at the media stats, the number of homes foreclosure for last year was up 80%, higher than it was 2006. It should be even higher for this year as some have speculated. Watching the nightly media coverage, no one is talking about is that evidence suggests we haven't even seen the worst of the mortgage crisis yet. We still are facing additional 30% mortgages in the next two years. Not to mention, all those crumbling industries that housing supports, all of which rode the housing wave on its way up, will also feel the effects of the fallout. When will it all end?

[Hemidakota]

Update from CNN: -- Economy shed jobs for the 9th straight month in September - down a massive 159,000. Unemployment holds at 6.1%.

[a-train]

My Congressman stood up and voted NO both times this ridiculous "bailout" was up for vote. Here is a taste of some of the things added to the bill that passed:

$2 million for the makers of wooden arrows

$192 million for the rum industry

$478 million for Hollywood

$10 million for efforts to promote riding bicycles

$148 million to support the wool industry

-a-train

[a-train]

Update from CNN: -- Economy shed jobs for the 9th straight month in September - down a massive 159,000. Unemployment holds at 6.1%.

Meanwhile, these crappy businesses that are dumping these people are getting a check from the treasury.

-a-train

[Hemidakota]

A-train, what is the purpose of the 'pork barrel initative' for Hollywood?

[JohnBirchSociety]

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.

Interesting play on words, "...keep their homes..."

They don't own the property, they are still paying for it. Therefore, it is not theirs at all.

I feel bad for people who will have to move to another place to live, but saying "keep their homes" misqualifies what is actually happening, and makes it seem like millions of Americans will lose homes they actually own.

[JohnBirchSociety]

Supply and demand. If the supply is low, and the demand is high, then they can charge whatever the market will bare, and if people, like Funky, are willing to pay the higher rent to hang onto their homes (understadably! moving bites!), then that's what the landlords will charge.

And with gas prices and such going up, I can understand why the landlords would like having that extra money. So a tenant's lease is up for renewal, and they throw out the new rent figure and say "sign here, or move out". There's plenty of others waiting in line.

Actually, that is not exactly accurate.

With Fiat Currency, rather than real money, the supply side of the equation accelerates in price, greater than it would under real money and a free market.

Supply and Demand are skewed under a Fiat Currency System.

For example, the price of Gas is up from years ago at a rate that has far outpaced the rest of the commodities we buy. One reason is demand vs. supply. But the main reason is that the value of our Fiat Currency "Dollar" has gone WAY DOWN globally (because we have printed more than imaginable) therefore, the "Dollar" cannot purchase what it used to.

In fact, under Fiat Currency, Supply and Demand can be static and prices still spiral upwards. They must. That is the nature of Fiat Currency.

If we had real money (see my thread on what real money is), this would be nearly impossible to accomplish.

[BenRaines]

All the the items you mentioned A-Train are extensions of tax breaks they have already been getting that are being extended. They have to make money to get the tax break. No checks are being mailed out. You have to dig deeper than just the top of the articles.

While the housing market has not bottomed out I think that the mortgage debacle has reached its peak and is slowly getting better. We are not talking about house values going up. We are not talking about people now having money to make their payments. What we are talking about is the majority of the adjustable rate mortgages and reverse arms, etc are about through the system. After 2009 there should be very few of them left on the books. A great number of these home foreclosures are not mom and pop or you and I that can't make our payments anymore. They are investors who have decided to walk from their investment and not make the payment any longer. Some are people who treated their homes as an ATM. Home value goes up, I want a new car, home value goes up, I want a $60K boat, home goes up in value, I want a three week trip to ski in Europe.

Almost anyone I know that has been in their home for five years or longer and didn't go and refinance or use it as collateral for other investments is still paying their mortgage, still living in the same house in the same neighborhood and looking at the greed around them buy the buyers who were going to make a million and thought I was stupid because I didn't jump on the bandwagon and missed the boat since I wouldn't leverage all I had to buy houses because they were only going up.

Ben Raines

[JohnBirchSociety]

Can the banks renegotiate with the buyers?

I'm no economics major but if the banks decided to cut the interest rates, peoples payments would lower and the would have less foreclosure in there pocket.Less foreclosures on the market would bring the home values back up via supply and demand?

Is this feasible or is it too late?

A cut in interest rates increases money supply, which in-turn decreases (to a greater proportion than the increase in the supply) the purchasing power of the "Dollar". This means it takes more "Dollars" to do the same thing. Yet wages never compensate for this problem (except for a few who control their wage to a great extent, like upper-level corporate exec's). Therefore, the exact opposite effect happens then what you anticipate.

People would be less likely to afford their mortgages.

By the way, if interest rates are given differently to different people based not on their credit worthiness but lack thereof (now that is bizarre economics), that would set up a good case for discriminatory practices in lending and some good lawsuits.

Over time the free market always rewards good decisions. In the short-term there are exceptions to this, but over time there is equillibrium. The Socialist proposals we have before us now as a people are the opposite of this. Socialism rewards theft, because it IS theft.

[BenRaines]

I agree that it is a wrong idea to cut loan balances or reduce interest rate because a person has poor financial skills or has been irresponsible with credit. If you bought too much house, more than you can afford, then move to a more affordable neighborhood and get a smaller house.

My grandparents had a two bedroom 1,100 sq ft house. My parents with five children had a 1,400 sq ft house. Our first house purchase was 1,448 with four kids.

We had no tile floors, granite counter tops. We had linoleum floors and tile counter tops.

I am not for reducing mortgage balances or preferential interest rates for poor credit borrowers. All this will do is prolong the inevitable. They will still lose their homes.

Ben Raines

[WANDERER]

Thanks A-Train for posting the pork barrel list....

On the other side of the ocean: Rudd looks to China for economic bolstering; public facility building projects fast tracked... to provide jobs for the newly jobless no doubt; interest rate cuts for banks only; savings accounts looking dodgy if banks fail; no real subprime mortgage problem (in Oz all of your assets are seized if you default on loans..so you either sell...or crash badly); money floated on international lending market by the reserve bank..to Asia; bailout plan won't rescue U.S companies in Oz; 10% of superannuation funds lost in a few days etc. The reality: no market to sell raw materials to = problems. NZ already in recession.

Rudd says U.S will rebound and continue to be a player in the global economy.

Edited October 4, 2008 by WANDERER

[hordak]

I agree that it is a wrong idea to cut loan balances or reduce interest rate because a person has poor financial skills or has been irresponsible with credit. If you bought too much house, more than you can afford, then move to a more affordable neighborhood and get a smaller house.

My grandparents had a two bedroom 1,100 sq ft house. My parents with five children had a 1,400 sq ft house. Our first house purchase was 1,448 with four kids.

We had no tile floors, granite counter tops. We had linoleum floors and tile counter tops.

I am not for reducing mortgage balances or preferential interest rates for poor credit borrowers. All this will do is prolong the inevitable. They will still lose their homes.

Ben Raines

I'm a huge fan of personal responsibility. A few months after i bought my house with a 30 year fixed my bro bought one with the floating arm interest rate(not exactly sure which one) and i don't have much sympathy for him.(Sibling rivalry will never die)However his bank realized that trying to sell his repoed house in a neighborhood full foreclosure they would lose more so the fixed his interest rate lower for a longer time so he could stay in it.Seemed like a smart move on the bank end.

I wonder how many of the foreclosures are people who bought too much house, and how many are second homes or investment property? I remember a few years ago seeing all the "get rich in real estate/ fix and flip" programs and thought it seemed like a bad idea.

[BenRaines]

Fixing his rate is not a bad thing. He probably had a year or two of making payments on time and should have gotten a better rate. Bank doesn't lose giving a better rate. Bank loses when they have to accept less for the loan than agreed.

Lets not use a house. How about a coin. Everyone isbying a coin that is in limited supply. Since it is in limited supply the price keeps going up. Everyone can't afford the coin but they lie, make up income, buy more coins than the can afford and use credit to do it. The makers of the coin start making more and more. All of a sudden there are more coins than people need and the price starts dropping. It keeps dropping. Those who borrowed to buy the coins go to the bank and ask "Let me pay you less than promised because the coin is worth less and I can't sell it and make a ton of money" Bank says "Your mistake".

Because we value home ownership it makes it a national tragedy. If it were coins we would say "Stupid people".

Ben Raines

[hordak]

Fixing his rate is not a bad thing. He probably had a year or two of making payments on time and should have gotten a better rate. Bank doesn't lose giving a better rate. Bank loses when they have to accept less for the loan than agreed.

Lets not use a house. How about a coin. Everyone isbying a coin that is in limited supply. Since it is in limited supply the price keeps going up. Everyone can't afford the coin but they lie, make up income, buy more coins than the can afford and use credit to do it. The makers of the coin start making more and more. All of a sudden there are more coins than people need and the price starts dropping. It keeps dropping. Those who borrowed to buy the coins go to the bank and ask "Let me pay you less than promised because the coin is worth less and I can't sell it and make a ton of money" Bank says "Your mistake".

Because we value home ownership it makes it a national tragedy. If it were coins we would say "Stupid people".

Ben Raines

Makes since but it seems like the banks would be better off taking 3% interest then having the house foreclose at 6% and sit empty. Off course that would probably affect the investments like CD returns etc.Plus they can just ask the taxpayers to bail them out.

[BenRaines]

Very few houses that are at 6% are being foreclosed. These are Adjustable Rate Loans. Now they are at 8 or 9% and the people bought with a very low rate so they could afford the payment and figured that the house value would go up and they could refinance at a lower rate when there was equity. Now there is no equity and they can't refinance and their gamble, an adjustable rate loan is just that a gamble that either rates go down further, that you will be making more money or that the house value will go up and you can get a better loan. Bad gamble and they lose.

Ben Raines

[BusyMom]

It's really easy to talk about all these borrowers who are overextended. I was one of those borrowers. Between a variety of financial problems (extended unemployment being one) and an increasing mortgage, we got to the point where we couldn't keep up. We decided to sell to a private investor to make sure we could sell the house and avoid foreclosure. Well to make a long story short, he borrowed $60,000 against my house and made it impossible to get the house back w/o taking on that loan...yeah right! I asked for help from the state and got none. To file the necessary paperwork, a lawyer wanted $15,000 up front...umm, nope don't have it! I found out this dude had been prosecuted on fraud charges previously and contacted his parole officer...yep, he sent me on to the Dept. of Finance who investigated but did nothing. The DA will look at it but recommends a private attorney because it's a civil matter. In the meantime, the investor failed to complete the purchase and the house went into foreclosure. Yep, it stinks! I sure wish I had a "bail out" plan to fall back on. I tried to do the right thing and get out of the house prior to foreclosure. I did finally get a judgement from the court but well, I have the task of collecting on it.

There are real people involved in this crisis and some are doing their best to do the right things. I know moving in, I never expected a 9 month streak of un/under employment for my husband and it certainly made things very difficult. Oh, and this investor is still "buying" houses and probably taking out loans against them so he can do it all wrong and shady but no one gives a darn because the buyer made a mistake.

[skalenfehl]

When I built my own house back in '99, I closed on a 5.125% interest with 40k in (sweat) equity and I took no chances in selecting the fixed rate. Unfortunately I've had to tap into my equity and that is what is now killing me right now with a second loan. I'm eeking by but take full responsibility for doing it. I just hate taking responsibility for Washington's plan.

[BenRaines]

BusyMom, this was not meant as a point against someone who had a period of unemployment or who on top of that sold to a crook who stole from them. This is about greed. The same type demonstrated by the guy who bought the house from you.

Ben Raines

[skalenfehl]

Indeed. This is about shady people who took advantage of the rest of us. I wish I had read the fine print in my second before the ink dried. Remember next time that even if you sign, you should still have a grace period of time to back out. It's called a right of rescission. I succeeded once in doing this because the way a loan was structured. Unfortunately I wasn't smart enough to catch the last one. It's tough, especially when you don't have a qualified adviser or an attorney to help with the details.

[JcDean78]

Big time NO! In fact I would say that all those that voted in favor of this legislation should be impeached for failure to uphold the Constitution. I really wish I were rich or even well off so that I could challenge it in court to hopefully put a stop to this madness. Honestly they should all be impeached, every single last one of them. They are a disgrace to our Republic and the offices of which they hold.