How do you feel about the bailout?

[PrincessFiona]

Re: How do you feel about the bailout?

Sooo....what if instead of bailing out wall street, we renegotiate all of the high interest mortgages and credit cards to reasonable interest and funnel the funds to keep more homes from going into foreclosure by...gulp...paying a little towards the mortgages of some of those who can't afford to keep things going (with the understanding that this is a loan to them that they would get at zero or excruciatingly low interest with paybacks starting in a couple of years and extending over 15 years or something.

We bail out wall street simply by making good on as many home mortgages etc as we can instead of handing money to companies and having people still lose their homes.

Win/win?

With this current bailout, is there a plan to payback the taxpayers or their children at some point? Are we willing to completely cut back now on as many projects as possible to pay for this? What social, economic and other programs are we willing to cut to pay for this...because the money will have to be paid back...it will come in the form of higher taxes for you and me...not for the people who are currently defaulting on their loans. It will also come at a high cost to our children, who will also be saddled with exorbitant college costs.

We can't afford not to think about these issues. Health care, education, bailout...we have to think about it all....

Kris

[SuzySunshine]

Re: How do you feel about the bailout?

I haven't had time to understand all of this bailout but one thing I have read in several places is that we're not just giving these companies this money. We're buying a part of them so yes, the taxpayers will be paid back because when they start turning a profit again some of that will come back to the government just like any other partial owner.

As for bailing individuals out - I still don't like bailing out people who WAY overspent for their own mortgage - don't give me this "we didn't know" crap. If you're bringing home $3,000 or less a month you CAN'T afford a mortgage payment that is half that. Now there are people out there who were scammed, that's different.

[PrincessFiona]

Re: How do you feel about the bailout?

As for bailing individuals out - I still don't like bailing out people who WAY overspent for their own mortgage - don't give me this "we didn't know" crap. If you're bringing home $3,000 or less a month you CAN'T afford a mortgage payment that is half that. Now there are people out there who were scammed, that's different.

I agree...but these credit institutions looked at the numbers and they also knew the people couldn't pay it back. I feel as opposed to propping up irresponsible homeowners as I do the lenders. :badday: This whole mess just stinks!

Re: How do you feel about the bailout?

I think that some money will come back in through the reverse auctions and that will hopefully keep it under the $700 billion. Still, the scope of it is alarming. What started with AIG and sounded more reasonable has mushroomed.

I don't think loans should be made to help people with their mortgage. It is the fault of both the lender and the borrower unless the lender misrepresented the loan. I get stuff in my mailbox all the time trying to sell me things on bad terms, things I can't afford, etc. At some point, there is only so much you can do to save people from themselves. :huh: I think it would be ok to have some way to re-negotiate the terms of the loans, maybe some way to get around refinancing costs, to get the loan to a lower interest rate for people who could make it if the interest rate dropped (like change the ARM loans that adjusted to a traditional mortgage).

I have to try to catch up on more of this tonight. In the case of some of the companies, I'm specifically thinking AIG, there are implications that go WAY BEYOND the company executives or the holders of their products. In some cases, I think they were insuring money market funds (you know, those safer alternatives) and the investments in the MM accounts were going to fail possibly making the funds "break the buck" and making the value of a dollar fall to 97 or 98 cents on the dollar. That would have major ramifications for the stability of financial markets and be worse than what is going on now, IMO.

[PrincessFiona]

Re: How do you feel about the bailout?

I know you're right, Nellie.... I guess I just want to pout over this for awhile.

[Sheherezade]

Re: How do you feel about the bailout?

FWIW, I heard a financial pundit on a talk show today say that one of the reasons they ruled out bailing out the homeowners directly is that it wouldbe hard to *find* the homeowners associated with these loans quickly. The "bad" mortgages have been bundled together and then "sliced" in to risk groups and then sold on the bond market as a mortgage backed security. So, if bond A is failing for Lehman.....it has little bits of Joe's loan, little bits of Mike's loan, etc. It isn't one person= one bank. All the mortgages have been mixed up and divided and then been passed from owner to owner upstream. So....how do you know who to bail out to save this company or that? You need to save the companies because they what's interconnected to other "blameless" investors ---and you need to act on all that "bad debt" that the USA has sold off to our trade partners (China and India). I'm sure they aren't thrilled with the losses.....and they could do us damage in the economy if they chose to dump T-bills.

I thought it was interesting to hear this comment made because it suggested that the option of bailing out the consumers was investigated and rejected on more than moral grounds. I agree that the lenders that went out looking for bad debt to sell upstream are culpable as well as the people that took the offer. Some of these people really aren't that smart. :huh: My dad has been helping advise his cleaning lady about her crappy mortgage. Apparently, some bank lent her money to buy a house for 150% more than its appraised value and set the mortgage payment at higher than her monthly income. What was she thinking? Yes. But.....what were they thinking? (I know what they were thinking, actually. They were thinking "I'm going to sell this baby upstream and then she's not my problem any longer. Let her figure out how to pay it!" )

There is no morality in business anymore.

Re: How do you feel about the bailout?

What happened to ethics? Would that loan officer have made that loan to his mother? It is so disappointing.

[DCJenn]

Re: How do you feel about the bailout?

There is an excellent analysis and explanation of exactly what is going on- past, present and future with some very interesting questions on Fresh Air w/ Terri Gross. You can probably listen to it on the NPR.org website.

It's the first explanation that I have heard that is done in normal speak, not financial speak.

Jenn

Re: How do you feel about the bailout?

I posted a link to that....somewhere...I think the person she is interviewing is Michael Greenberger (assuming we are thinking of the same thing).

[DCJenn]

Re: How do you feel about the bailout?

No- this is from today with a female reporter from the NY Times.

J.

Re: How do you feel about the bailout?

Here it is:

http://www.npr.org/templates/story/stor ... d=94928783

I think I've heard Gretchen Morgansen interviewed on the show before. Thanks for the heads up -- the show isn't on for another few hours here.

[Rapunzel]

Re: How do you feel about the bailout?

Gretchen Morgenson definitely has her critics.

http://busmovie.typepad.com/ideoblog/gr ... morgenson/

Of course, she is from the NYT - and that paper is very quickly becoming one with dubious credentials. :huh: I know that when I hear NYTimes now I think "highly biased".

[DCJenn]

Re: How do you feel about the bailout?

Why do you DO that?

Did you listen to the show or just immediately google search the person being interviewed?

J.

Re: How do you feel about the bailout?

I'm listening to it right now. I would say it is part opinion but also part easier to understand summary of what happened. Pretty easy to sort out, IMO.

[ladymoreta]

Re: How do you feel about the bailout?

I also don't have a lot of financial background, but these bailouts seem like a really terrible idea to me. The idea is that we (the government) will loan the money to the companies at a high interest rate, but when the companies get back on their feet, they'll pay us (taxpayers) back, and we'll reap the benefits of the profits made from the interest. Is it just me, or does this sound scarily like what happened with the subprime mortgages??? The lenders gave loans with outrageous interest rates that didn't have to be paid immediately. Then, they sold the loans with the promise of making a huge profit once the loan reset to the higher rate.

Fast forward a few years, and all those loans didn't pan out because the borrowers (surprise!) couldn't afford the house. A few years from now, will we be seeing (surprise!) these companies still can't afford the loans? When that happens, we'll have dumped billions of dollars into companies that still go bankrupt, just like the subprime borrowers who are still struggling to make payments that are over twice their salaries. Shouldn't there be a point where you just walk away?

The problem with just walking away is that this is an election year. If Bush can just prop up everything for a couple more months, he'll walk away without the economy blemishing his already poorly-regarded legacy. (Most people don't remember that the economy was heading south at the end of Clinton's presidency, too.) Unfortunately, whatever he does to sustain the economy a little longer will have to be dealt with by the next administration.

But, to contradict myself, letting these institutions fail means the loss of thousands of jobs. Those CEOs making millions of dollars a year in bonuses alone won't be hurt much. That's what financial planners are for. The mailroom clerks, secretaries, accoutants, helpdesk workers, middle managers, etc. are the ones who will have their lives turned upside down. I believe many of these companies are in New York, so it may see its job market flooded with unemployed applicants, and people may move away, causing housing prices there to drop even more. Letting these things happen will make a much stronger economy in the long run, but no one likes to make decisions that will hurt so much in the present for a promised reward in the future.