Bailout Nation: Freddie, Fannie, and more

[TJones]

Here's something you guys may not have thought of. You keep saying Obama won't raise taxes, but taxes will raise just as soon as the Bush tax cuts expire. Obama will not sign another order to keep them going, so Obama will, in fact, be raising taxes if elected. I am not so sure that McCain would NOT do the same thing though, as I now see that raising taxes is the only way to quickly get money back into the treasury.

[Mark F. Barnes]

No matter who is in there TJ, taxes are going to be raised, they have to be after all this hot check writing that's been going on in the last two weeks. It's inevitable.

[RedScare]

Here's something you guys may not have thought of. You keep saying Obama won't raise taxes, but taxes will raise just as soon as the Bush tax cuts expire. Obama will not sign another order to keep them going, so Obama will, in fact, be raising taxes if elected. I am not so sure that McCain would NOT do the same thing though, as I now see that raising taxes is the only way to quickly get money back into the treasury.

I have never said Obama won't raise taxes. In fact, I recommend it. I am not a free ride Republican. I believe that the US does not collect enough revenue to pay its bills. That is not good government. And, if McCain would continue the bad government of George Bush, as he apparently would, he belongs nowhere near the White House.

[westguy]

That's too far back. Subprime mortgages were just a blip a few years ago (2 percent in 2000). I'm sure ACORN's people were waiting in the wings for 30 years to take advantage of this.

[editor]

I'm glad people are starting to explore the ACORN connection here. I think it's a lot dirtier than we know.

Hmm, interest rates are already ridiculously low, and there's only one direction they can go if the fed wants to increase the money supply. When it reaches zero, will they have to tell everyone there's nothing else they can do?

Japan has had zero percent interest rates for years; since about 97, I think. Every time I'm there I see giant ads everywhere for 0% loans from the banks. It was done for the same reason as us -- to stimulate the economy. But it didn't really work. It kept Japan relatively healthy compared to other Asian economies, but left the nation's decision makers with little else to do, so the economy largely stagnated for the last ten years.

[Subdude]

I think the marketplace will sort all that out. Yes, we'll have a few megabanks in the short term, but eventually the well-managed mid-size banks and some upstarts will fill in the gaps formerly held by the other names.

There are still thousands of local banks across the country in various states of health. When this all shakes out probably some of them will eat each other and form medium-sized banks that will eventually begin to challenge the megabanks. Not to mention credit unions. Even though they can only grow so far, they still provide a viable alternative for many people.

It's all cyclical. So far it's Citi and Chase that have managed to grab a couple of chairs before the music stopped. But a new game will start eventually, and a whole new round of players will be in.

Letting the marketplace sort things out is one of the things that got us into this mess. A lesson here, just like from the Great Depression, is that banks are different from other businesses. What is the mechanism by which mid-size banks could supplant Citi or Bank of America? If the feds can't say with certainty that they would be ready, willing and able to bail out Citi, BoA, and JPM Chase then they should discourage financial institutions of this size. If the risks of combining the former investment banks with these retail banks is too high, then the investment banking units should be spun off as soon as possible. I simply fail to see the benefits of having so few megabanks. In the long run it could be excessively risky for the government and economy, and also I usually prefer a more competitive landscape.

No kidding. With the people at the helm of AIG showing their true colors, I wouldn't cry if AIG was nationalized and the pieces sold off to the highest bidders.

Which is exactly what is happening.

[TheNiche]

Hmm, interest rates are already ridiculously low, and there's only one direction they can go if the fed wants to increase the money supply. When it reaches zero, will they have to tell everyone there's nothing else they can do?

- <---It's a minus sign.

And both the U.S. Treasury and the Bank of England have already been there, done that.

That's right, some investors would be content to lend money to the U.S. government on the condition that the government gets to pocket the interest! In effect, it is paying the government a fee so as to act as a safe short-term depository for cash. It is a perfectly legitimate exchange and is an indication of a very bad/uncertain economy but is not in and of itself a bad deal.

As with most everything I've heard on a day-to-day basis over the last several months, this scares the living ____ out of me. But perversely, it only makes me want to go buy the kind of car that I already know that I shouldn't be able to afford. On the one hand, I can probably get a pretty good shake in this environment and then maybe stumble into some means to keep it (probably from aggressively inflation-oriented monetary policy), and on the other, if we find ourselves falling into a deflationary spiral, I figure that I'm going to go down in flames anyways on account of that so many of my personal assets are fixed assets (real estate), so it may as well be a quick and thrilling descent so that I can get the forthcoming seven years of bad credit over with sooner rather than later in my life. There really isn't much middle ground envisioned in my economic forecast.

[RedScare]

- <---It's a minus sign.

And both the U.S. Treasury and the Bank of England have already been there, done that.

That's right, some investors would be content to lend money to the U.S. government on the condition that the government gets to pocket the interest! In effect, it is paying the government a fee so as to act as a safe short-term depository for cash. It is a perfectly legitimate exchange and is an indication of a very bad/uncertain economy but is not in and of itself a bad deal.

As with most everything I've heard on a day-to-day basis over the last several months, this scares the living ____ out of me. But perversely, it only makes me want to go buy the kind of car that I already know that I shouldn't be able to afford. On the one hand, I can probably get a pretty good shake in this environment and then maybe stumble into some means to keep it (probably from aggressively inflation-oriented monetary policy), and on the other, if we find ourselves falling into a deflationary spiral, I figure that I'm going to go down in flames anyways on account of that so many of my personal assets are fixed assets (real estate), so it may as well be a quick and thrilling descent so that I can get the forthcoming seven years of bad credit over with sooner rather than later in my life. There really isn't much middle ground envisioned in my economic forecast.

Good analysis. And bankruptcy isn't so bad. Many wealthy people have used it as a means to rid themselves of unwanted debt. The personal responsibility mantra is used by business to shame consumers into paying their debts. Business would never adhere to such a restrictive rule, and neither would their officers. Besides, I've known several people who kept rather lofty FICO scores even after bankruptcy. If you've paid all your bills before and after the bankruptcy, your FICO score stays relatively intact. And, once the crisis is over, banks will start the whole cycle over again.

Like they say, it's not the end of the world...unless it is.

[MetroMogul]

I am beginning to believe the fetus of today's financial meltdown lies in part, in the Community Reinvestment Act of 1977. This fine piece of work was a law passed in 1977 and signed in to law by a Naive President Jimmy Carter. The sole purpose of the CRA was meant to encourage banks to make loans to high-risk borrowers, often minorities living in unstable neighborhoods, and help try and get them into a better residential situation.

The Community Reinvestment Act (or CRA, Pub.L. 95-128, title VIII, 91 Stat. 1147, 12 U.S.C.

[Mark F. Barnes]

[Mark F. Barnes]

DOW is flirting with the 9000 mark, man I think I am going get on my Hog and go for a ride.......

[BryanS]

DOW is flirting with the 9000 mark, man I think I am going get on my Hog and go for a ride.......

Pretty soon... We'll see dow 8000 or lower... Russia's stock market has lost 87% of its value. Japan... they still haven't recovered. If we have a correction down to 7000-ish... that would be 50% from the all time high... I would call it a bottom then. Right now, its still over valued...

[crunchtastic]

On a local, or I guess I should say personal, bailout level: there is a noticeably increased security presence in and around my office building. People are getting angrier and angrier--have heard a number of stories where folks in my office have been picking their kids up from daycare, going to football practice, etc, and getting reamed by their neighbors over the AIG thing. I wouldn't be surprised to see some executive heart attacks on the job. It's such a weird vibe.

[RedScare]

On a local, or I guess I should say personal, bailout level: there is a noticeably increased security presence in and around my office building. People are getting angrier and angrier--have heard a number of stories where folks in my office have been picking their kids up from daycare, going to football practice, etc, and getting reamed by their neighbors over the AIG thing. I wouldn't be surprised to see some executive heart attacks on the job. It's such a weird vibe.

No one here is angry at you, crunch...so far as you know.

[Subdude]

On a local, or I guess I should say personal, bailout level: there is a noticeably increased security presence in and around my office building. People are getting angrier and angrier--have heard a number of stories where folks in my office have been picking their kids up from daycare, going to football practice, etc, and getting reamed by their neighbors over the AIG thing. I wouldn't be surprised to see some executive heart attacks on the job. It's such a weird vibe.

Gee, now why do you think they would be angry?

[OkieEric]

Gee, now why do you think they would be angry?

I'm just angry at the world in general - nothing specific

Another beautiful day on the markets! DOW down 5.88%... And to think, I was naive enough to believe we might actually have a green day today

[RedScare]

I'm just angry at the world in general - nothing specific

Another beautiful day on the markets! DOW down 5.88%... And to think, I was naive enough to believe we might actually have a green day today

Holy cow! Try 7%! You look away for a few minutes and the losses accelerate! Even Exxon finally succumbed to the pressure.

[Mark F. Barnes]

Getting my ass handed to me again today, and it's only Thursday. The ride felt good, but it ain't helping this.

[RedScare]

From top to bottom, 14,280 at its high and 8,595 at its low, the DOW dropped 39.8%.

[TJones]

Getting my ass handed to me again today, and it's only Thursday. The ride felt good, but it ain't helping this.

Good thing your office is only a one story Mark.

[OkieEric]

From top to bottom, 14,280 at its high and 8,595 at its low, the DOW dropped 39.8%.

The DOW first reached these levels back in early 1998. A spectacular 10 years

[RedScare]

GM dropped 31% TODAY. It is down 56% in a month. Talk is that it won't survive 2009. It's market cap is below its 1929 level.

[crunchtastic]

Gee, now why do you think they would be angry?

The same reason I am, trust me. But it is a little disconcerting.

There is a rumor going around that yesterday, 2 angry citizens came into the main tower, mad as hell, wanting to talk to someone about 'getting their money back'. We were told today to stop wearing shirts with the corporate logo.

[RedScare]

There is a rumor going around that yesterday, 2 angry citizens came into the main tower, mad as hell, wanting to talk to someone about 'getting their money back'. We were told today to stop wearing shirts with the corporate logo.

What money back? Bush hasn't made anyone pay any money! That's what some of us have been bitching about for 7 years! Bush doesn't make anyone pay for anything.

I understand the irritation at AIG execs who haven't figured out what $122.5 Billion in government money means yet. But, taxpayers demanding "their money back" haven't exactly been paying attention, either.

[KinkaidAlum]

I think you are missing the whole point Mac. It's not the BUYERS fault at all. other than the default on their promissory notes. But it is the LENDERS fault for loaning people who are in over their head. POOR LENDING PRACTICES. Not requiring a person to be liquid enough to put down 20% is a poor lending practice IMHO. Get my point?

I wish I'd followed this thread from the get-go. I couldn't agree with you more.

I may be as liberal as they come, but some of the conservative notions I was brought up with regarding finances have stuck with me. I would never buy something I couldn't afford. I would never buy a house if I couldn't put 20% down. I try to avoid credit at all costs but pay in full when I do. Credit is a scam.

[MetroMogul]

My measley government job is looking pretty good right now, and unless Texas falls into a California style budget deficit a nice teaching job awaits my girlfriend. Though I make in a year what Mark may gain or lose within a few hours time, I've never lived better; all my bills are paid, I can eat, and I can fund my video game habit with money left over by the time the next federal deposit hits the bank account. I'm finally coming out of a 12 year DEPRESSION when the sky is falling around me. It is odd how the world works.

[RedScare]

I wish I'd followed this thread from the get-go. I couldn't agree with you more.

I may be as liberal as they come, but some of the conservative notions I was brought up with regarding finances have stuck with me. I would never buy something I couldn't afford. I would never buy a house if I couldn't put 20% down. I try to avoid credit at all costs but pay in full when I do. Credit is a scam.

Certainly variable rate credit is a scam. But, I would disagree only slightly with Mark's premise that it is not the buyers' fault at all. When it comes to government bailouts of homeowners' mortgages it IS the buyers' fault. Like Mark, and like Kinkaid, I only borrowed what I could afford, NOT what the mortgage broker said I could afford. Though my first mortgage was only 10% down, I only borrowed $105,000...HALF what my friends were borrowing.

Now, when it comes to the LENDERS, blaming the customer is dodging responsibility. If I buy a car cheap, and the dealer goes under because he lost money, is that MY fault? Of course not! Lenders post the rates they will lend at. They create the down payment requirements. THEY control the documenting process! If they are uncomfortable with the documents, NO LAW IN THE UNITED STATES requires them to lend to that applicant! Anyone telling you otherwise is lying. Lenders under the gun for making ridiculously risky loans with NO documentation, and selling those loans to investors as low risk investments are looking for scapegoats. And, lo and behold, the poor and the minorities get to take their lumps once again. Hogwash!

This crisis is still brand new. Cadillac is still running their "it is good to be rich" commercials, incongruous as they seem today. It will take some time for all of us to come to grips with the fact that our excessive greed and consumerism guaranteed this outcome. Until we reach that point where we can accept our share of the blame for our own demise, some of us will continue to listen to the blame shifting by those who can afford a publicist onto those who cannot. No one forced Wall Street to invent CDOs. No one forced JPMorganChase to invent Credit Default Swaps. And, NO ONE forced wealthy investors and hedge funds to buy them!

Lay off the poor people. The greedy rich dug this grave.

[Mark F. Barnes]

Well folks if you have the liquid to get in long, this time next week will be the time to do it. Couple of my guys are predicting bottom in the low 7's, then we'll have some stagnant time, before it starts easing back up next year. I'm sure these full blown short players are loving this volatility, but it's tough on the weak hearted. I just suck it up and keep my eye on that total gain column, but it will make you want to take a drink. Folks we are just going to have to tighten up the belts and dig in, we'll come out of this, I guess the weeks without power were just a boot camp for this fiasco. Just remember those days with nothing, no power, a/c, no access to your money in the bank, it can be worse.

If you have a variable interest loan that you can lock down at anytime, take advantage of it, it's going to be down. Pay down some debt if you can. Just don't go out and add to it, no matter how temping it may be. Hang in there, no bread lines forming yet.

[RedScare]

Hang in there, no bread lines forming yet.

Since this is the 21st Century, will we have drive-thru bread lines and GPS locaters for the soup kitchens?

[houstonmacbro]

Talk is that it won't survive 2009.

Explain...? What won't survive?