The Official Bail Out Thread
Paul in Cannon Beach
4,703 Posts
Alright, would one of you beancounters please explain this to the rest of us? I am not sure if I should be supportive or outraged.
Now Mccain has threatened to not attend the first debate if no bailout agreement is reached by Friday. That may be the weakest threat of all time since the time Frank threatened to leave the forum if we didn't agree to refer to him as a "progressive".
I'm listening to Barney Frank on the Lou Dobb's show and I cant figure out if he supports the bail out or not. I also can't figure out how he got elected.
Now Mccain has threatened to not attend the first debate if no bailout agreement is reached by Friday. That may be the weakest threat of all time since the time Frank threatened to leave the forum if we didn't agree to refer to him as a "progressive".
I'm listening to Barney Frank on the Lou Dobb's show and I cant figure out if he supports the bail out or not. I also can't figure out how he got elected.
Comments
Are we sure this is not just some huge reality show being foisted on us by network television?
Then, I hear someone like Newt Gingrich and others strongly opposing the bailout and I start to wonder.
Personally, I think at this point, its better to go ahead and proceed with the buyout of these mortage backed securities just so people calm down. But I may be wrong.
This bailout could potentially be beneficial to us, as we could get dividends from these investments down the road, should the value increase.
It all depends on the price the government pays for the securities and who sets the price. The securities could (and should) appreciate in value. Paulson has the experience and knows what he is doing. If Warren Buffett says he would do it, then it is a good idea – here we like to say “In Buffett We Trustâ€. Again, it depends on the valuation of the securities; the mortgages were so inflated and there was complicity between appraisers and banks so the real value is going to be difficult to determine.
If I have a stapler that is worth $1 and you pay me .50 for it - that is good for you; if you pay me $7 for it - not so good.
Clear as mud, right?
We curenlty have close to 1,000 mortgages on our books. Not one is even in delinquency, and we haven't had a foreclosure in over a decade - even though the majority are ARMs. We use sound lending practices, we spend a lot of time and effort educating our borrowers, and we stay on top of things throughout the life of the loan.
Yet, institutions that used predatory practices to prey on the greed of their customers, stockholders and executives are now getting a free pass on their transgressions, paid for by my tax dollars.
HR professionals frequently complain about the lack of personal accountability and responsibility in the workforce. Well, this bailout institutionalizes that lack of accountability to the Nth degree.
We have the Community Reinvestment Act which has strong armed financial institutions to loan money to those that are poor risks for fear of being accused of redlining.
We have upwardly mobile people who keep trading up to a larger and more expensive house and driving up housing costs.
We have banks willing to loan money to these upwardly mobile buyers giving them a false sense of security.
And on and on.....
While I believe that the underlying cause of all this is GREED, and that accountability should come into play - who will ultimately pay the price for all this? Not the people who made these loans and overvalued the properties, it is the American people who will have to pay.
CRA requires us to loan to people in our zone, which fortunately does not include many lower class areas. Through every examine we have had, and believe me the FDIC goes over EVERY loan here with a fine toothed comb, no one has ever said we are not complying with CRA. CRA also requires us to invest other things, like time, in our communities.
The real thing they look at to determine discriminatory lending patterns is HMDA.
The bailout happens in some form. The government buys the trouble paper, probably at a significant discount. The worst of the debt is written off - again, at taxpayer expense. The surviving paper will be sold to cronies for pennies on the dollar, where they will reap billions in profits, subsidized by us.
I hope there will be full disclosure as to who repurchases these loans and at what cost - when the time comes. This is in actuality OUR money they are using and we have a right to know who profits and how.
I know that full disclosure and government usually don't go together...
The problem always comes from mismanagement and greed. However, if we continue to let things go as they have, we will all be in much bigger trouble than a big tax debt. Buffet is not the only one in the know who says this is a good thing. Suzie Orman and lots of others who understand the crisis are not only saying yes, they are asking what took so long.
It is a risk though. The government could make money on this over time, but it could also lose big money over time. In that case we will all have to pay thousands of dollars to pay it all back. Even so, thousands is much better than 25% unemployment and even good banks struggling.
Just my 2 cents.
Nae
The bailout removes the natural consequences - because billionaires will be reduced to millionaires, and millionaires will be reduced to common-folk, and that wouldn't be good for the campaign warchests or the post-term consulting gigs of our people in D.C. The Treasury Dept. and Congress agree they will replace those natural consequences with regulation, and it will only cost the taxpayers $700b or so. If you want to find the hidden costs of this bailout, don't forget the cost to all the businesses that will have to endure the added regulation even though they didn't "participate" in the trough-gorging that took place prior.
If you're in a publicly-held company, ask your CF0 what Sarbanes-Oxley is costing you. And that monstrous piece of over-regulation was because Washington didn't want to turn off the contribution spigot that was Enron.
Sorry, folks, but we keep making it too easy for them to escape responsibility.
That's not really fair. I don't believe anyone in Washington knew what Enron was up to. Enron's CFO had intentionally created a facade of success and profits and Arthur Andersen signed off on the deceit in order to keep their consulting fees. Once the house of cards began to crumble, the feds got involved in fairly short order. Until then, there was really no way that anyone could have known what was going on at Enron. Even Enron's CEO was woefully out of touch with the reality of his organizations financial problems.
I dont disagree with you about natural consequences. HOWEVER, if you believe what many are saying about the real causes of this crisis, you might reasonable conclude that the MOST natural consequence should be that Obama doesn't get elected.
John McCain was raising concerns about the growing financial crisis back in 2003. Meanwhile, Obama was the NUMBER ONE recipient of campaign contributions from Fannie Mae.
The comparison with Enron is correct in one sense. The criminals at Enron gambled that their stock would continue to climb and when it didn't, their house of cards collapsed. The housing crisis appears to have been caused by a belief that home prices would continue to climb and when that didn't happen, the reality of the situation became evident.
This crisis has been building for years. The government helped to create the mess.
I have changed my mind and do not wish to get into this. It is too partisan. x0:)
We often offer up claims and plans to fix the greedy. Unfortunately, they seldom work. Try to go after a guy who isn't paying his fair share of taxes, and he moves his money to another country. Look at OJ Simpson. He has lots of money, but it is tied up in foreign accounts that make it impossible for the Goldman's to collect.
And just look at income taxes. We actually passed an amendment to the constitution to be able to collect income taxes. Look at how difficult it is to pass an amendment. You have to get a large majority on board to do so. Do you think the average guy who voted for the income tax amendment believed he was going to be taxed? The 'plan' was to tax the rich. The middle and lower income population was to be exempt. You see how that turned out.
The greedy and the cheaters will find a way to work the system or go around it no matter what laws you pass. We try to make it more difficult, and they come up with new ways. In the meantime, it is the little guy who suffers. This bail out is for the little guy. Some of the ones we don't want to benefit will, but the main thing is that we will protect the innocent (and perhaps the stupid).
Nae
Thanks in advance!
Think back to 1982 and Penn Square. Poor lending practices, bordering on fraudulant, banks failed, new regulations. Along comes Enron, fraudulant again, innocent people lost money, new regulations. Now here we are again at poor lending practices.
>didn't have 20% down, you were required to buy mortgage insurance and keep it
>until you had at least 20% equity?
Those days still exist - or at least they did in 2005 when I got my mortgage and had to buy PMI.
I read this morning that recently Congress approved a $25 billion bailout to the auto industry recently. How many were aware of that? Hey a few billion here, a few billion there... it's just money.
Where does it end? Who's next, a billion dollar bailout for truck drivers? How about for child day care centers?
Frank, if I decide to jump, I'll put the title in the mail, you'll have to fly out to take delivery. I was going to give it to Q, but she incessantly tells me how much more she likes the Pontiac Solstice and she wanted to put pink racing stripes on it.
The DOW was at 10,617.37 up 251.92 just a bit ago.