Let it burn? Or not?

[joe]

Addison said:

The only question is how much.

Ok. I could make an investment of $10k, but if I only get back $5k, hey, I only lost $5k. Sounds like a rock'n deal to me.

And if the economy goes bust, a lot of people will not be able to make that commitment

I addressed that here, "However, I believe in the American way and people who desire to work, will do what it takes to make things right. If the gov't wants to continue to put in place or add small business related programs that encourage us, I can support that. No matter how it is worded, "bail out bill", "rescue bill", "save us bill", etc, for being stupid, those businesses need to deal with it."

Steve Forbes has been saying we do need to do this.

I didn't realize that, but it doesn't mean I agree with him on all he says. Since he is not going to lose any meals over this, I am interested in what he is to gain from this. The main reason I mentioned Forbes and Perot is how they distinguish the different between good business plans and political business plans.

[schaabdl]

This may just be the cure to the easy credit. It is amazing how differently people act when they have a real equity stake in their possession. I don't trust the institution (Congress) most responsible for the problems (and anyone who points fingers at the President - regardless of party - is simply ignorant). We can find legislation everywhere that led to this mess and regulations that expanded the easy credit. We find stupid legislation like Sarbanes that again brought issues by unintended consequences. The basic economic laws still work - get out of the way - failure is an option. Banks / creditors can make deals to save something - yes pennys on a dollar - but as long as we are willing to bailout failures, then why not be more speculative and take on risk (aka Fannie and Freddie)? Stop it now and we learn. Bail out now and we are doomed to the same issue down the road.

[ArrogantBastage]

Who has the most to lose? Rich fat cats that include many of those in Congress. Why do you guys think soooo many of these guys are for the bill?

Now, I'm doing well and will take a hit as well but you know what? I'll still survive it very well as will most Americans.

Paulson former CEO of Goldman Sachs.... who had $20Billion in AIG.... and Paulson doing most of the pushing. Whose interest you really thinks he has?

C'mon people, they can say this is all about Main Street if they want... it's not that true.

[joe]

I can't wait to see the updated real estate infomercials. "We know there is an economic crisis in the financial industry. However, there has never been a better time, than now, to begin living your dreams and invest in real estate. Be your own boss. Buy that dream home and car. You can finally have time for your family. Take exotic vacations. For three payments of $29.99 each, less than $100, you too can live the American dream so many others before you have discovered. Just listen to these testimonials."

Wait, they are already saying that.

[Addison]

Originally Posted by joe

Addison said:


Ok. I could make an investment of $10k, but if I only get back $5k, hey, I only lost $5k. Sounds like a rock'n deal to me.

Ever buy clothes or a car?

I addressed that here, "However, I believe in the American way and people who desire to work, will do what it takes to make things right. If the gov't wants to continue to put in place or add small business related programs that encourage us, I can support that. No matter how it is worded, "bail out bill", "rescue bill", "save us bill", etc, for being stupid, those businesses need to deal with it."

I just don't see how that will keep some people I know from losing their houses in the forseeable future.... or the snowball effect it will have.

Worse, I don't see how that helps retirees and other workers who lose the savings they have so responsibly set aside.

And I guess, I've lost a lot of faith in some Americans' ability and others' willingness to rebuild into the kind of industrious, conservative model we long for.

And those small business programs will be the same kind of socialism we're trying to fight, aren't they? At least if we get stuck with Obama, his cures will prolly look a lot like these loans that were made to people who couldn't pay.

I didn't realize that, but it doesn't mean I agree with him on all he says. Since he is not going to lose any meals over this, I am interested in what he is to gain from this. The main reason I mentioned Forbes and Perot is how they distinguish the different between good business plans and political business plans.

He thinks the cost of letting it burn will ultimately be much higher than the cost of the bill.

[joe]

Aiddison said:

Ever buy clothes or a car?

Unless I can use those as business related expenses, those are not assets. It's an expense. I don't expect to profit off used consumable goods.

I

just don't see how that will keep some people I know from losing their houses in the forseeable future.... or the snowball effect it will have.

It probably won't, but there is a good chance it would have happened anyways.

Worse, I don't see how that helps retirees and other workers who lose the savings they have so responsibly set aside.

Again, it probably won't. As I said, putting your faith in that kind of security is not much security at all.

And I guess, I've lost a lot of faith in some Americans' ability and others' willingness to rebuild into the kind of industrious, conservative model we long for.

Those that don't will struggle no matter what decision is made.

He thinks the cost of letting it burn will ultimately be much higher than the cost of the bill.

I won't argue with him. Nor will I argue with fear.....sometimes.

[joe]

During my drive home, one of my favorite talk show hosts is Al Kresta. He had a called who was driving home the idea I did about depending on money. This was a farmer and he said they faced a similiar crisis in the mid 90s. However, the American farmers were told to sell and there would be people to buy and take their place. He wasn't going to be given any federal money to help his business survive. He was frustrated and discussed it with his priest. His priest told him not to waste his suffering. At first, it made him mad to hear that, but he realized, this was an opportunity for him to be drawn closer to Jesus. Don't waste his suffering. He had to work harder than he ever had before, but he survived.

Al doesn't support the "bail out", but even he admits he must think about this from a Catholic perspective. When it comes to the economy, a lot of people always refer to the thinking of Adam Smith, but as he reminded the audience, he was a moral philosoper first and foremost. He always considered the moral implications in his arguments. Yes, you can look at the numbers all you want, but our decisions must go deeper than that.

Al would support the Federal "bail out" if this was the only option we had. He has talked to several economists who believe there is more than $700 billion in the private sector who will purchase these loans. Both large and small banks will participate. Some of these companies who the Feds are planning to bail out will lose money, but that is the nature of business sometimes. Others will take over and our country will move forward.

http://www.avemariaradio.net/christi...php/Al-Kresta/

[rachel]

Hey JT!!! Welcome back!!!

No bailout. Any time politicos push something this hard, this fast, I am highly suspicious.

I am not convinced that there are 750 billion dollars worth of mortgages that are going under unless we hand over the cash tomorrow. There have to be other ways to deal with this, and people are starting to come up with ideas.

In this wealthy country, for example, you can't tell me that there aren't people/corporations who have the money to buy up some of the mortgages that do fail. Perhaps after a shuffle, we'll end up with smaller lending institutions making loans etc. Where are the libbies who are death on any "big corporations" now? They'd rather prop up the biggies?

I am not an economics expert, nor yet an expert in mortgage lending. But other methods of dealing with this should be explored rather than handing the keys to the henhouse to the foxes that got us into this in the first place.

Hey, hows about the government offer help to the homeowner and lending institution both by negotiating lower payments/interest for the hard up buyers with the lenders in exchange for liquidity assistance loans?

There are any number of economists I'm sure, who could shoot that suggestion full of holes. However, something stinks about this rush deal, and I want more suggestions and ideas to be explored, gleaned from those to whom economics and the mortgage industry are their forte.

[Addison]

Rachel and Joe, regarding other companies buying the loans, I would agree, but see post 18. I've been told that is the reason they're failing to begin with. It's part of the Mark to Market rule that was set after the Enron fiasco.

I still don't understand why we have that rule at all. Seems crazy to me.

Why can't we just get rid of it and up the FDIC cap?

[FastEddy]

" Home Truths ... Largely absent in all of this discussion, but on the minds of many, is fixing the balance sheet of the households who are at the heart of the mortgage crisis. This should really be priority No. 1. ... Foreclosure is incredibly inefficient. Estimates are that the average cost of foreclosure is on the order of $78,000. This, on a median home price of roughly $220,000, represents a huge dead-weight loss to society. ... Suppose the homeowner bought a house for $200,000 with a down payment of 10%. The outstanding mortgage is $180,000. Suppose now that the value of the house falls by 25%, leaving the homeowner upside down by $30,000. The household facing negative equity has an incentive to default. ... suppose that in the case just described the lender were to replace the existing loan with a new contract that consists of a plain vanilla mortgage (ARM or fixed rate) of $140,000 plus a shared appreciation claim. The shared appreciation feature gives the lender the right to the first, say, 40% of the appreciation of the collateral above the value of the debt over some specified future time period (say five or 10 years). ... " - SOURCE - Thomas Cooley's editorial today @ Forbes.com

Now that's a "bailout" I could live with. Bailing out the big wazzos downtown will never trickle down to the average "buried" homeowner ... but this will.

====

" ... Why can't we just get rid of it and up the FDIC cap? ..."

Watch out ... they are saying they will include this as a teaser perk in the senate version = It should be done as a separate bill, but they will try to package this chocolate donut with the big brown bailout banana ... BOHICA

[kestrel]

I would be in favor of some sort of cram down policy.

[aammondd]

Originally Posted by FastEddy

" Home Truths ... Largely absent in all of this discussion, but on the minds of many, is fixing the balance sheet of the households who are at the heart of the mortgage crisis. This should really be priority No. 1. ... Foreclosure is incredibly inefficient. Estimates are that the average cost of foreclosure is on the order of $78,000. This, on a median home price of roughly $220,000, represents a huge dead-weight loss to society. ... Suppose the homeowner bought a house for $200,000 with a down payment of 10%. The outstanding mortgage is $180,000. Suppose now that the value of the house falls by 25%, leaving the homeowner upside down by $30,000. The household facing negative equity has an incentive to default. ... suppose that in the case just described the lender were to replace the existing loan with a new contract that consists of a plain vanilla mortgage (ARM or fixed rate) of $140,000 plus a shared appreciation claim. The shared appreciation feature gives the lender the right to the first, say, 40% of the appreciation of the collateral above the value of the debt over some specified future time period (say five or 10 years). ... " - SOURCE - Thomas Cooley's editorial today @ Forbes.com

Now that's a "bailout" I could live with. Bailing out the big wazzos downtown will never trickle down to the average "buried" homeowner ... but this will.

Yep thats the best thing Ive heard so far.
And something in line with what Ive been saying all along.

[Addison]

I don't think any of these ideas are going to have a chance, as the Senate is about to push through this bill they have now.

I have to say, I think it's criminal that they are taking all this time off. I want them to take their time, but they should be taking it with their noses to the grindstone analyzing options.

[aammondd]

We have to flood the house republicans saying we want a better deal.

A mix of fasts and the common sense plan would go down well with everyone.

[FoundingFather]

Originally Posted by aammondd

We have to flood the house republicans saying we want a better deal.

A mix of fasts and the common sense plan would go down well with everyone.

This might be a start:

Boehner

-and-

http://www.gop.gov/web/guest/contact_us

[jtdc]

Originally Posted by Addison

Rachel and Joe, regarding other companies buying the loans, I would agree, but see post 18. I've been told that is the reason they're failing to begin with. It's part of the Mark to Market rule that was set after the Enron fiasco.

And of course that is part of the bait to get approval on this new bill. And the latest bill is 450 pages long, more than 4 times the size of the rejected bill. But part of that is politics as usual. John Thune said much of it is a previous Senate Bill which was approved in the Senate, but not taken up in the House. So it has been married to the current bill to force the house to vote for it as well.

[Addison]

Yup. It really is amazing, and sad, how they have to complicate everything by adding a little here, add a little there, add a little more to balance it out, and on and on... just to please everyone's agendas.

(It occurs to me that they over-make legislation like I over-make gravy. )

[Orin]

Better to let it burn. Freedom to succeed, freedom to fail. Neither we, nor Wall Street will learn anything unless it happens and we'll get another something like it in the future and expect the Nanny to come to the rescue.

[jtdc]

Originally Posted by rachel

Hey JT!!! Welcome back!!!

Thanks!

Originally Posted by rachel

No bailout. Any time politicos push something this hard, this fast, I am highly suspicious.

It was reported today that a communication to Wall Street investors from the Treasury said that they should not worry. The add on restrictions were so flawed they were un-enforceable.

Originally Posted by rachel

I am not convinced that there are 750 billion dollars worth of mortgages that are going under unless we hand over the cash tomorrow.

I saw where a large auto dealership, I think it was Herd Chevrolet, went bankrupt yesterday. Do you think maybe they were already gone as this financial fiasco hasn't been going on long enough for them to become insolvent.

Originally Posted by rachel

In this wealthy country, for example, you can't tell me that there aren't people/corporations who have the money to buy up some of the mortgages that do fail. Perhaps after a shuffle, we'll end up with smaller lending institutions making loans etc.

I saw the other day that something like 95% of the financial institutions are still loaning money. They, of course are only loaning to credit worthy customers. Gee, if the insolvent companies had followed that philosophy, we wouldn't be in this mess and those companies would also still be in business.

I used to have my own local trucking company. Back in the early 80's I had three rigs. There were months when the trucks only worked 3 days per month. But my trucks were old and paid for. One day as we waited for possible work, three rigs were repossessed from the yard where we parked. As my drivers, who had urged me to buy new rigs, watched those truck go out the gate, they were grateful that they still had jobs.

Other than when I purchased my third truck did I ever have a loan. If I had a breakdown or a slowdown in work, I reached into my savings. When I hear of companies borrowing money for each payday, I wonder where I went wrong! This country has become addicted to living, and working, in the hole. And when you are already insolvent, one little problem is more than you can handle.

Warren Buffet seems to have as much ability to bail out these companies as this country does. But his money will not cause our government to print more money which would devalue what he has anyway. So the private sector is the way to go.

[David]

Originally Posted by jtdc

Thanks!

It was reported today that a communication to Wall Street investors from the Treasury said that they should not worry. The add on restrictions were so flawed they were un-enforceable.

I saw where a large auto dealership, I think it was Herd Chevrolet, went bankrupt yesterday. Do you think maybe they were already gone as this financial fiasco hasn't been going on long enough for them to become insolvent.

I saw the other day that something like 95% of the financial institutions are still loaning money. They, of course are only loaning to credit worthy customers. Gee, if the insolvent companies had followed that philosophy, we wouldn't be in this mess and those companies would also still be in business.

I used to have my own local trucking company. Back in the early 80's I had three rigs. There were months when the trucks only worked 3 days per month. But my trucks were old and paid for. One day as we waited for possible work, three rigs were repossessed from the yard where we parked. As my drivers, who had urged me to buy new rigs, watched those truck go out the gate, they were grateful that they still had jobs.

Other than when I purchased my third truck did I ever have a loan. If I had a breakdown or a slowdown in work, I reached into my savings. When I hear of companies borrowing money for each payday, I wonder where I went wrong! This country has become addicted to living, and working, in the hole. And when you are already insolvent, one little problem is more than you can handle.

Warren Buffet seems to have as much ability to bail out these companies as this country does. But his money will not cause our government to print more money which would devalue what he has anyway. So the private sector is the way to go.

HEY. How about you! WELCOME BACK JTCD!!!