The Bailout

[Hangtime]

Hang, you assume to know anything about me.  

  I'm well versed in the use of many firearms.  I don't need to flaunt this on a blog, unlike most of you feel is needed.  I learned from an individual who didn't talk a whole lot about the places his government sent him, if you know what I'm saying.  I don't need a rack of guns in my home to feel protected.... just three. One for concealed permit (9mm), one for home defense(12-gauge) and one for "if the sht really ever did hit the fan" (7.62 mm NATO ).

Also, I won't need to stand in line and pay retail for ammo, so, don't worry about me.  Thanks for your concern though.  

Jezzus Freakin grapefruit, Turtle Doc, it's joke. Cheer the hell up, yah thin skinned liberal weenie.

[Gaidin]

I just love how everybody sets and talks about its the Dems fault, NO its the Repubs Fault.  Who cares!!  Cant change the past.  Can only change what you do now.  Nothing we say here will affect what they do in washington about this POS they are trying to pass.  Nothing anybody on this board thinks matters to those who will decide.  This is a problem brought on by all of washington.  Not just one party.  My uncle told me once, be careful how hard you party tonight, you still have to work in the morning.  Well, We had the party, now we gotta deal with the hangover and still go to work.

[bustr]

Hang,

We still love you.

I use a Forrester Co-Ax press here. Bedded my M1A1 in a McMillan heavy stock with a third generation scope mount. It places 5 rounds rapid fire after heating up the barrel with rapid fire in a 4 inch group at 200yds. With a cool barrel slow fire it will do one inch at 200yds shot by some one younger and steadier than I. The local rifle range only has 200yd for long distance.

Hang in there Mr. HangTime......

[rpm]

It's not the Repubs fault or the Dems fault. It's the greedy bankers fault for making those big, fat, juicy subprime loans.

Just because you really, really want to live in a McMansion doesn't mean you can afford it, even if your banker says go for it.

[SD67]

You're right Lazs, I do not live there.
We had a similar thing back in the '80s and '90s when banks were handing out loans to people who really couldn't afford it. I worked in Real Estate for a short term while my ex and I were travelling, I got to see how the mortgage brokers thought at the time. A lot of those people lost those homes as the banks foreclosed. Heck even now some who could afford 5 years ago them lost their houses recently due to the interest rate rises.
It's uncanny to think that back when this all started in the early '80s interest rates were huge, something like 14% BUT housing prices were much more affordable since only about 10% of a families net income was required to pay an average home loan off.
Now interest rates are at around 8% but it takes around 50% of the net income to cover those repayments.
I saw something like this coming a long time ago, I started to prepare for it back in 1994, unfortunately fate stepped in and now I'm starting from scratch with a whole new life.
If Sarah and I succumbed to the temptation a few years ago and gone onto debt to but a house we might have been able to afford back then, we'd be in deep trouble now. We instead chose to keep ourselves debt free, and now we are thankful for it. Things are getting considerably tighter, but at least we do not have to worry about paying off the mortgage or any credit cards. If we did we would be screwed.

[Kaw1000]

It's not the Repubs fault or the Dems fault. It's the greedy bankers fault for making those big, fat, juicy subprime loans.

Just because you really, really want to live in a McMansion doesn't mean you can afford it, even if your banker says go for it.

The goverment pressured the banks to do those loans....its the goverments fault  all of them!!

[Bodhi]

Bodhi, you do realise that the banks will get the mortgages paid off AND keep the property. The homeowners will still lose their houses. It's a win/win for the banks. Restructuring would be a much more acceptable solution to me. I'm no fan of welfare, especially corporate welfare. The rich get richer off my taxes with this bill.

I am not saying that.  I said don't allow the judge to restructure that.  Judges are there to ensure the law is followed to the letter, not restructure mortgages.  There needs to be an independent panel that looks at the possibility of Joe Blow keeping his house.  From what I am seeing though, there are far too many Joe Blows that bought homes they can not afford.  Why should we structure it even lower so that Joe Blow benefits by being a financial idiot to begin with.

If it were up to me, I'd take all the bad debt in the name of the US government through the proposed buy out, place majority share of interest and ownership (be it company, mortgages, or widgets) in the name of the people and until all that money is paid back.  If they do not pay it back, we keep it and sell it ourselves.

Hell, I just do not understand why that is such a hard concept for people to realize.  If ya take out a loan with collateral and don't pay it back, you don't get to keep the collateral.

[crockett]

I am not saying that.  I said don't allow the judge to restructure that.  Judges are there to ensure the law is followed to the letter, not restructure mortgages.  There needs to be an independent panel that looks at the possibility of Joe Blow keeping his house.  From what I am seeing though, there are far too many Joe Blows that bought homes they can not afford.  Why should we structure it even lower so that Joe Blow benefits by being a financial idiot to begin with.

If it were up to me, I'd take all the bad debt in the name of the US government through the proposed buy out, place majority share of interest and ownership (be it company, mortgages, or widgets) in the name of the people and until all that money is paid back.  If they do not pay it back, we keep it and sell it ourselves.

Hell, I just do not understand why that is such a hard concept for people to realize.  If ya take out a loan with collateral and don't pay it back, you don't get to keep the collateral.

The problem is, if they do what Paulson is trying to push, the banks will actually make a profit on their bad loans at tax players expense. He doesn't want us to just pay the needed amount to cover the loan, he wants us to pay a premium mature price on the bad loans. So that means the average joe gets no help out of this deal, but the banks get a profit paid for by the same average joe that just lost his house.

Why should the tax payer have to flip the bill for big business and the 7 figure a year CEO's that ran their businesses into the ground? Why should we get stuck holding the bad loans? The tax payer should own the stocks not the bad investments, and should have a time frame on selling the stocks to recoup the money "loaned" to the banking industry. Not own the stock for a indefinite timeline keeping it from becoming a nationalisation of the banking banking system.

[MORAY37]

Jezzus Freakin grapefruit, Turtle Doc, it's joke. Cheer the hell up, yah thin skinned liberal weenie.

LOL. 

[Hangtime]

There yah go.   

[bj229r]

Man you are so full of it your Avatar is brown...

No one was "brow-beaten into loaning money to people who never had a prayer of paying it back".. The mortgage companies wanted to lend the money to these people because it's where their biggest profits are. The lending companies wrote the damn bill that you are complaining about, they wanted less govt regulation, just so they could lend to low income people.

Why do you think credit card companies sign up college students in droves that have no jobs? Why because they know they will end up making huge profits  off them in late fees and high interest. The mortgage companies did the same thing, it just wasn't college students with no jobs, but rather low income people who could barely afford the payments.

Hell it wasn't even low income, most of the defaults are from middle class working people who took on more than they could handle. So claiming it was low income people's fault is very far from the truth.

Ok...mebbe it ISN'T the Daily Kos, mebbe you get all your news from Ariana Huffington...no matter

The Clinton Administration felt that the Community Reinvestment Act, an well-intentioned idea in 1977, wasn't doing enough, so they stuck some enforcement rules in it   http://www.usdoj.gov/olc/cra.htm

(pardon wall of text)

AUTHORITY OF THE FEDERAL FINANCIAL SUPERVISORY
AGENCIES UNDER THE COMMUNITY REINVESTMENT ACT

        The federal financial supervisory agencies lack authority under the Community Reinvestment Act of 1977 to provide by regulation that financial institutions that do not meet the credit needs of their communities may be subject to administrative enforcement actions under 12 U.S.C. § 1818.

December 15, 1994

MEMORANDUM FOR EUGENE A. LUDWIG
COMPTROLLER OF THE CURRENCY

        This memorandum responds to your request for our opinion concerning whether the federal financial supervisory agencies ("the agencies")(1) have authority under the Community Reinvestment Act of 1977 ("CRA"), 12 U.S.C. § 2901 et seq., to provide by regulation that financial institutions that do not meet the credit needs of their communities may be subject to administrative enforcement actions under 12 U.S.C. § 1818. We conclude that the agencies lack such authority.(2)

I.

        The purpose of the CRA is "to require each appropriate Federal financial supervisory agency to use its authority when examining financial institutions, to encourage such institutions to help meet the credit needs of the local communities in which they are chartered consistent with the safe and sound operation of such institutions." 12 U.S.C. § 2901(b). To further this end, the CRA requires the agencies to assess an "institution's record of meeting the credit needs of its entire community," 12 U.S.C. § 2903(1), and to "take such record into account in its evaluation of an application for a deposit facility by such institution." 12 U.S.C. § 2903(2). "Application for a deposit facility" is defined to include applications for approval to open a branch, to relocate a main or branch office, or to merge with or acquire another institution. 12 U.S.C. § 2902(3). The agencies must prepare a written evaluation of each institution's performance under the CRA, assign a rating to that performance, and disclose that rating to the public. 12 U.S.C. § 2906. The CRA also authorizes the agencies to promulgate regulations to carry out the purposes of the Act. 12 U.S.C. § 2905.

What the bold means, is if the stats say a bank isn't creating enough mortgages for people who can't afford them, the govt's shoves a football bat up their arse and prevents them from expanding their business,(research the term "Redlining")   so they came up with cute ideas like basing the qualifications of the borrower on 3% rate, then even 2% part of the ARM, then progressively dropping stuff like debt-to-income ratio, down payment....having a JOB...NOT having to verify income history....sure they knew these loans would have a high degree of failure, but they were given license to make TONS of money with no repercussions

http://investors.com/editorial/editorialcontent.asp?secid=1501&status=article&id=306544845091102

[Toad]

Remember, they are talking about buying "mortgage related securities" not actual mortgages themselves. Big difference. This bailout is focused on saving the Wall Street axeholes, not homebuyers. The mortgages underlying these securities are not getting any help and will likely continue to fail. The kewl part is that this time it'll be the good ole taxpayer losing even more money while the Wall Street crowd will still be sipping Manhattans on the stern of their 250' yatchs.

Mortgage-Backed Securities - MBS

 A type of asset-backed security that is secured by a mortgage or collection of mortgages. These securities must also be grouped in one of the top two ratings as determined by a accredited credit rating agency, and usually pay periodic payments that are similar to coupon payments. Furthermore, the mortgage must have originated from a regulated and authorized financial institution.

Also known as a "mortgage-related security" or a "mortgage pass through".  
 
 When you invest in a mortgage-backed security you are essentially lending money to a home buyer or business. An MBS is a way for a smaller regional bank to lend mortgages to its customers without having to worry about whether the customers have the assets to cover the loan. Instead, the bank acts as a middleman between the home buyer and the investment markets.

This type of security is also commonly used to redirect the interest and principal payments from the pool of mortgages to shareholders. These payments can be further broken down into different classes of securities, depending on the riskiness of different mortgages as they are classified under the MBS.  

This guy has a much better idea:

http://firedoglake.com/2008/09/19/how-to-bail-out-ordinary-mortgage-holders-and-not-just-banks/

The government is talking about setting up a Trust to buy distressed debt then sell it again. The problem is that the Trust company will simply bail out banks at taxpayer expense without helping mortgage holders much. The mortgages it sells will still be underwater, or too expensive for many people to service, especially as their houses lose value.

The other proposal, just giving money to people to pay for their mortgages, is bad also. Housing prices are actually dropping, most mortgages issues were bad mortgages with horrible penalty clauses, based on assumptions about housing values which are just wrong. House prices are going to keep dropping.

What the government should do instead is set up a Trust to buy mortgages at a discount, then reset them to 20, 30 or 50 year fixed mortgages with a reduced face amount. If the house is later sold, half of the increase goes to the government, so that taxpayers make a profit. The mortgage cannot be paid off before the end of its term so that financial scavengers cannot come around and, as they did over the last ten years, say "get rid of that mortgage, and take ours. It's better. Honest!", because we know that when they say better, they don't mean better for the mortgage holder. The mortgage is attached to the property and is transfered to any new buyer. And the mortgage cannot be removed from the property, and any new mortgages attached to the property are junior to the government mortgage.

End results:

a) a floor is set for mortgage prices. (Whatever discount the government is buying at. Probably 60% to 70%, but it should be based on what the long run price was in the area before the housing bubble.) This ends the confidence crisis in these securities, because there is now a market price—what the Trust will pay.

b) It helps homeowners stay in their homes.

c) It gets rid of overly complex mortgages and puts in their place a dead simple mortgage that anyone can understand.

d) It punishes lenders, which they deserve, for making loans they should never have made.

e) While it does keep homeowners in their homes, it doesn't let them off scot-free either. In exchange for a good mortgage they can service, they give up some of the future profits on sales in their houses.

f) The government will almost certainly make a long term profit on this. This is important, because it's not fair for people who aren't underwater on mortgages to spend hundreds of billions or trillions bailing out those who are without some expectation that in the end it won't be more than just a transfer of wealth to them and to investors and banks...


...If they do give the administration what it wants, then Wall Street and the Banks just got bailed out, no help goes to ordinary people and you get stuck with a trillion dollar bill. Taxpayers get all the toxic assets, but Wall Street, who paid themselves more in bonuses in 2007 then 80 million Americans got in raises, keeps the profits.

Thoughts?

[Widewing]

My thoughts are simple.... Let the CEOs and corporate numbnuts responsible for running their companies into the ground suck eggs. No golden parachutes... Let them draw the same pension percentage as the rank and file.

As for those peawits who bought more house than they realistically can afford.... I'm not getting any assistance for my modest home. I had the good sense to live within my means.

Tell ya what, let the feds fork over to let you keep your house... However, I expect your fat backside at my house every Friday to mow, edge and trim my lawn. That's how you can pay me back my portion of wasted tax dollars. %$#&*%$@


My regards,

Widewing

[bustr]

Don't suppose we could get 100,000 citizens to detain, try and string up these wall street scumbags? When banks failed for uncommon reasons or communities were defrauded in the 1800's the citizens some times would have necktie parties.

After all "We the People" have been defrauded and we are ultimatly the law.

[bj229r]

I'm given to understand 5-8% of ALL subprime mortgages are in default (prolly more to come, as ARMs reach max in 5th year?) and there is a trickle-down effect through all of financial sector, which is going to make getting credit next to impossible for years (unless your credit score is WAY high)--that will stop our country in its tracks...might be interesting to watch. Fortunately, aside from kid going to college, I don't need to borrow any money...hopefully, that won't change