I'm down about the economy, any words of hope?

[BentMetal]

Here is something that I watched tonight on the internet. The more I hear about this financial crisis, the more discouraged I get. It takes about 25 minutes to listen to this interview, so feel free to do so if you have the time. You can read the transcript below the actual video (a piece of which is listed below), which might take you less time. But none of this sounds good.

http://www.pbs.org/moyers/journal/09192008/watch2.html


BILL MOYERS: I've known you a long time. Are you reaching the point where you're leaving yourself and us despairing?
KEVIN PHILLIPS: Well, I'm not despairing because one of the things, as you know, when you get to be more or less our age, you've got grandchildren you can feel young with. But I'm sick of Washington. It really deserves the fact that 81 percent or 85 percent of the people think we're on the wrong track. I mean, we are on the wrong track. I wish I could say that there's a blueprint that would get us back on the right track. But my sense of histories previous goes to the one or two percent leading world economic power is you don't get back on the right track.
BILL MOYERS: So what happens? KEVIN PHILLIPS: You go through a painful adjustment process. The British were absolutely top dog in the world in 1914. Two world wars and 35 years later, they were having, after World War II, they were having food rationing, the pound sterling crashed, dukes were giving guided tours of their castles because they couldn't afford to maintain them otherwise. Doesn't take long. And I'm afraid the United States is coming right into that period which marks a couple of decades coming up that are going to be very difficult for America.
-----------------------------------------------------------
Any words of hope out there? The economics blogs and Op-ed pages at the Washington Post and New York Times makes this seem like a depression is staring us right in the face. Nobody comes out and predicts a depression, they say that it is almost impossible, but you read between the lines and it seems like we have too much stuff hitting all at once.

[StickFish]

Yep hang on and buy cheap

[Dave G]

For the most part, we did this to ourselves. We need to take a couple of steps back and regroup. Housing, what were we even doing giving loans to people that can't afford them. Oil, Big Oil taking billions in profits for the last several yeas and we have a stupid congressional investigation. And there are other items. Work on that and we will be back on track. Everyone is doom and gloom and this time it was pretty close but I hope with a new administration that we can back on track.

[baltz526]

how is this really effecting your money? the cost of fuel has more effect on most peoples yearly budget than anything the big, badly managed morgage money market has. this morgage crisis is goverment driven, our goverment printed the dollars that bought all these sub-prime morgages. the money lenders took the handout of these freshly printed dollars (that belong to all of us) and they gave them to (others among us) that where bad risks to repay them. all it took was a very little inflation in the price of consumer goods (like fuel) to remove the ability of these sub-prime morgage holders to to start the cascade you see in this area of our economy. do you know how easy it was to get this money? i know a remodeler, that was buying houses to remodel. you know how much yearly income this person had? ZERO except for the money from the flipping of the remodeled houses. that is how bad these sub-prime loans are. give loans to people with NO real income, on propertys that are in bad condition in areas with depressed property values. NOW I WONDER WHY THE MORGAGE MARKET IS CRASHING?

[Beefcake]

Originally Posted by baltz526

how is this really effecting your money? the cost of fuel has more effect on most peoples yearly budget than anything the big, badly managed morgage money market has.

No question why this happened, but it definitely does hurt some of us. I have been a real estate broker for 16 years and a small-time developer for 7 years. My business is in the toilet, and I don't know that I have the reserves to wait it out this time. Anyone know of a good truck driving school?

[duckboy]

It is kind of like being the generation that gets to be there for the ending of the world.

I hope we (the USA) are like the Phoenix.
Reborn from the ashes and wreckage
as something more powerful
and beautiful
and wise.

[Eagleclaw]

Go start a bank and make really risky loans... i hear the government will give you all the cash you need no questions asked. You can't beat that... you make tons of money when times are good and when you get over your head the government comes with wheel barrows full of money to help you through the tough times....must be nice

[Just_learning]

Originally Posted by duckboy

It is kind of like being the generation that gets to be there for the ending of the world.

I hope we (the USA) are like the Phoenix.
Reborn from the ashes and wreckage
as something more powerful
and beautiful
and wise.

I hope the same as well. However, bailing people and the economy out every time something happens with borrowed(TAX PAYER) money doesnt teach the public, and certainly not the corporations anything. It only gives them confirmation there is always a hand to catch them.

I think the US could learn something from post WW2 Japan and Germany. They didnt have anyone to bail them out and had to learn to be self sufficient by focusing internally. CUrrently we sit around 20th in education, manufacturing is suffering and the general person is struggling as it is to make ends meet and all we can do to solve everyones problems is raise taxes. I do think a little struggle is in order to teach the common man that they are fortunate and dont have any sort of entitlement to an easy life.

[baltz526]

you all do understand that this was a pyramid scam and it was always known by our goverment that it was a pyramid scam. our goverment printed the money for it. now they are printing more money to cover the collapse. and yes we will now have less valuable money to buy fruitloops with. and the fruitloop boxs will be lighter in the cart at checkout. and guess what, it was a bipartisan collaboration no polititician can honestly point their fingers at anyone but them selves

[Freakwater]

Should a company that is "Too Big To Fail" be allowed to exist? A company so huge that the corruption and mismanagement of a few people can bring down the whole economy? This is a national security issue.

Freakwater

[backlash442]

Originally Posted by Just_learning

I hope the same as well. However, bailing people and the economy out every time something happens with borrowed(TAX PAYER) money doesnt teach the public, and certainly not the corporations anything. It only gives them confirmation there is always a hand to catch them.

I think the US could learn something from post WW2 Japan and Germany. They didnt have anyone to bail them out and had to learn to be self sufficient by focusing internally. CUrrently we sit around 20th in education, manufacturing is suffering and the general person is struggling as it is to make ends meet and all we can do to solve everyones problems is raise taxes. I do think a little struggle is in order to teach the common man that they are fortunate and dont have any sort of entitlement to an easy life.

Ever hear of the Marshal Plan??? I'm sure the Germans remember.

Do you know why the Japanese economy got going? Little thing called the Korean War. US needed munitions and it got the Japanes economy up and going by having them supply what the US needed. Ramped up manufacturing then the Japanese turned that into cheap transitor radios.
A bit simplistic but it was the K.W. that jump started their economy.

[matttheduck]

post WW2 Japan and Germany. They didnt have anyone to bail them out

I'm not one to call somebody out, but this is a ridiculous statement. U.S. taxpayers spent billions rebuilding these two societies after spending billions defeating them. What in the world are they teaching in schools these days?

[mpmax]

The Japanese economy is still in recession from their last bubble in the early 90's.

[jimh]

First trick is don't watch Bill Moyers if you want to be positive.

[Just_learning]

well...if its any indication of our governments capabilities the market is down over 100 points 45 minutes after opening. Looks like this "master plan" is working great.

I sure hope this works...

[backlash442]

Originally Posted by mpmax

The Japanese economy is still in recession from their last bubble in the early 90's.

No that's not true at all. However, it did take them years to recover and don't think the perception of being in a recession left some people.


Market jumps about 800 points in 2 days you should expect a pull back. Interesting to see that MS and GS have applied for banking status.

[uhmw]

Once the scale of public opinion begins to asume the worst or best I know that the real situation has changed due to over reaction. Internet bubble -it came back. Our country is always chasing some sort of gold rush and get rich quick senerios once the ball stars rolling everyone jumps on the band wagon. Maybe we should look into more reliable jobs or start businesses that people need. There are some jobs and businesses that provide a comfortable life nothing fancy just comfortable. Armed forces, School Teacher, public servant, food production worker, auto mec. Small business owner, maintance mecanic, bus driver, machinest and the list goes on. While these jobs might pay less in the begining they do offer a chance for advancement. My experiance is that it takes a ton of work over a long period to make decent money. If your living the high life and really not trying to hard or its comming easy your situation is probably temporary. Yes it will be hard for the band wagon folks but I figure the next wagon is comming round the corner any time now, maybe it will have somthing to do with alturnative energy.

[retaliate]

I'm afraid I'll get worse before it gets better, bandaids will not fix the gaping wounds of our wrecked economy, you simply can't borrow your way out of debt many wondered how it held together for as long as it did, Hope is about all we have at this point eventually it will bottom out, & things will get better, hang in there.

[jfa686]

Originally Posted by uhmw

Once the scale of public opinion begins to asume the worst or best I know that the real situation has changed due to over reaction. Internet bubble -it came back. Our country is always chasing some sort of gold rush and get rich quick senerios once the ball stars rolling everyone jumps on the band wagon. Maybe we should look into more reliable jobs or start businesses that people need. There are some jobs and businesses that provide a comfortable life nothing fancy just comfortable. Armed forces, School Teacher, public servant, food production worker, auto mec. Small business owner, maintance mecanic, bus driver, machinest and the list goes on. While these jobs might pay less in the begining they do offer a chance for advancement. My experiance is that it takes a ton of work over a long period to make decent money. If your living the high life and really not trying to hard or its comming easy your situation is probably temporary. Yes it will be hard for the band wagon folks but I figure the next wagon is comming round the corner any time now, maybe it will have somthing to do with alturnative energy.

i agree...no offense to the mortgage industry as a whole but I witnessed some of my most lazy, unmotivated, dirtbag buddies jump on that wave. I admitt I was jealous. they were rollin some nice cars and parking them in some nice houses, working (if you call it that) 4 hours a day, spendin money like it was growin on trees, jumpin from job to job with no real commitment or loyalty to one outfit...and here I was puttin in 6 days a week sometimes more to a company that I'd been at for over 10 years and not even coming close to that kinda lifestyle or $$$. but I had hunch the bubble would burst..it's just too bad we (taxpayers) have to bail'em out or run the risk of total collapse.

[backlash442]

What's scary is the 25 dollar jump in oil futures. That has absolutely nothing to do with supply and demand. It's a safe haven play if you can believe that.

Just how ugly is all this going to get before it's all said and done?

[Bertram42]

This is what worries me... Those with cash whether it be an individual or country are the ones who will benefit from this. We have spent about $250B on bailouts so far and looking at a total of over a $1 trillion if the new plan goes thru. The government can't just come and raid you checking account to get this new cash and they have spent most of what they expected to collect this year so far. This will force them to sell T-bills and bonds to cover the deficet. Whoever buys these financial instruments will most likely get premium rates and with the dollar down and falling, expect forign countries to buy most of these since they have greater buying power with thier currency.

So while the rest of us struggle to climb out of this self inflicted wound those with money will be getting even more.

Hopefully this will teach a lot of people a valuable lesson to not spend more than they can reasonable afford. All it comes down to is, the piper is here and he is going to get paid.

[Joe C]

there's a lot of people with money getting hit by this too. It's bad now and it's gonna get worse.. but we'll be ok. Our government will just add some debt for our kids to pay off someday.

[cooky]

Originally Posted by backlash442

What's scary is the 25 dollar jump in oil futures. That has absolutely nothing to do with supply and demand. It's a safe haven play if you can believe that.

Just how ugly is all this going to get before it's all said and done?

How 'bout that oil market- Talk about a squeeze!!!! I'm wondering how bad things will get myself. Is this the beginning of the end or the end of the beginning... I have a sneaking suspicion that its JUST the beginning- plain and simple.

[Thumper]

Originally Posted by Bertram42

We have spent about $250B on bailouts so far and looking at a total of over a $1 trillion if the new plan goes thru. The government can't just come and raid you checking account to get this new cash and they have spent most of what they expected to collect this year so far.

Folks here are talking like the government is giving away 250 billion or a trillion dollars. Nothing could be farther from the truth. The government is stepping into the role of residential investment banker and standing behind these marginal loans. As time goes on, prices in real estate will bounce back as they have for the last 100 years and the feds will be quick to sell these obligations back into the private sector.

This is a blip in the curve. The government has never lost money on a bailout yet.

[maniacmikey]

When ever I am feeling bad about things I take my daughter out for a little cotton candy. Nothing will lift your spirits like watching a kid eat a little candy. We should all find that kind of joy.

[negoc8]

Originally Posted by maniacmikey

When ever I am feeling bad about things I take my daughter out for a little cotton candy. Nothing will lift your spirits like watching a kid eat a little candy. We should all find that kind of joy.

I'll stop on the way home. Great idea!

[Point-of-Sale Clerk]

Originally Posted by Thumper

The government has never lost money on a bailout yet.

I believe that to be incorrect... AMTRAK

[Silver Hilton]

Originally Posted by Thumper

The government has never lost money on a bailout yet.

That's because the government's money isn't on the line, Jack. It's our money. If the government is doing so damn good, why does it have 3 Trillion dollars in debt?

When the government makes expenditures, it comes out of tax revenues, and the US givernment (did I say give-rnment?) gives us a 'stimulus payment' or a bailout, or prescription drug benefit plan, that has to ultimately be made out of tax revenues, which come from us. Or we borrow it, and then pay interest on the borrowings.

According to this week's Newsweek, which has an article on the topic, the government's record on bailouts is spotty. Bailing out Chrysler let automakers have a false sense of security which prevented them from adapting. Now they look like they will all fail. Bailing out the S&L's may have led into the current lending debacle, and certainly was a net loss for the taxpayer. Bailing out Lockheed didn't ultimately do anything for the company or the industry.

The american voter needs to learn that there is no free lunch. We are on a path to ruin and hyperinflation. Ever government that has ever existed that got into un-affordable debt turned to hyper inflation to get out of it. They have to pay off the debt with current tax revenues, and one way to do that is yield to inflation, and pay off expensive debt with cheaper, newer currency. This happened in pre-WWII Germany, Argentina, Mexico, Brazil, Zimbabwe, and Pre revolutionary France.

Please, tell your legislators, of either party, we want you to live within our means.

[Big TULE]

Tell me again why we have bipartisan politics?
Regular middle class, hard working Americans that believe in the basic principles that this nation was founded upon.

You believe that people shouldn't be lied to by politicians. You believe that we have an obligation to help those that really can't help themselves but you don't want to create a nanny state.

You believe that this country is open for all to come, just abide by the rules. You believe that we need to do something to provide health care for all but we don't want to create some gigantic European style socialist health care system and turn 1/7th of the economy over to the government to run. You've seen an example of that - it's called the Veterans Administration Health Care system and it's pretty bad.

You believe that the free makret is the best solution for solving our economic problems but you get real angry when unscrupulous company leaders take advantaged of the middle class investor who are counting on their 401K plans for retirement.

You believe that our national defense is critical and that we need to come to the aid of countries we have treaties with and prevent horrible dictators from murdering their own people and their neighbors. But, you don't believe we should be involved in every skirmish around the world - only when our national interests are at stake. Otherwise, stay out of other peoples affairs.

You believe that a smaller Federal government is better than a large one. That our tax dollars are best spent when they stay right here.Giant bureaucracies waste our tax dollars and don't accomplish what they were intended to do.

You probably believe that education is important and that teachers probably aren't paid enough. You want these teachers to have more say in the education of our children and that as parents we need to have good working relationships with those teachers. Once again, keep the money at the local level - local is better. Trying to run the education system from DC isn't the best way to get good education.

My guess is that you believe strongly in preserving clean environment to pass along to our children but people are important too. We need to get ourselves off the Arab oil spiggot and we need to do it now. We need to drill for more oil and use clean burning coal, natural gas, and even safe nuclear power plants to generate most of our electrical power. We also, in parallel need a plan to move this nation to safe, clean, low carbon footprint energy sources like wind, geothermal, solar, and hydrogen. You know we can't move to those energy sources overnight so we need a realistic plan to use the energy we have right here in the US and gradually move to the safer cleaner fuels, without totally destroying our economy. We want clean water and clean air but we don't want to see millions on the unemployment lines.

This stuff seems so common sense, why is it so hard for many politicians to understand this stuff? Why is it so hard for them to realize that most of the people in America want these commons sense political ideas to dominate our political landscape and to quit all the fighting and arguing - just make it happen. Is that so much to ask?

[BARCHASER]

Really, "the government has never lost money on a bailout yet". 1980's S&L crisis, cost was 160 billion and that was in in 1990 dollars, more like 300 billion in todays dollars. "Prices will bounce back like they did for last 100 years". I cant prove it but I have read that it wasnt until the 1950's that real estate prices returned to pre depression levels. High RE prices were provided by cheap, easy and dumb borrowed money that is now gone.

http://en.wikipedia.org/wiki/Savings_and_Loan_crisis

quote=Thumper;2185692]Folks here are talking like the government is giving away 250 billion or a trillion dollars. Nothing could be farther from the truth. The government is stepping into the role of residential investment banker and standing behind these marginal loans. As time goes on, prices in real estate will bounce back as they have for the last 100 years and the feds will be quick to sell these obligations back into the private sector.

This is a blip in the curve. The government has never lost money on a bailout yet.[/quote]

[Jar Head]

For those of us who are still employed, I offer some simple (perhaps even oversimplified) questions to determine if you should worry:

Are you in the real estate or lending industry? Do you despise your boss & he/she despises you? Is your company running in the red? Does your role at your company come under a “cost center”? Is your position at your company easily “outsourced”.

If you answered “no” to most or all of these questions, then I would ratchet the worrying down a notch. If you answered "yes", well then worrying is the first step to improving your situation – just as long as you move to action, because everyone knows that worrying in and of itself never helped anyone.

I think this is interesting. Google – the internet company – has a “worry”. What do you think it is? What is one thing that could wipe them off the map? ……Electricity! Yes, electricity. The lack of sufficient electricity is a major threat to Google’s future. Also, how is it that Google’s stock is still trading near its historic highs and so many of us are worrying that we are slipping into another Great Depression?

[lingslayer]

Originally Posted by Big TULE

This stuff seems so common sense, why is it so hard for many politicians to understand this stuff? Why is it so hard for them to realize that most of the people in America want these commons sense political ideas to dominate our political landscape and to quit all the fighting and arguing - just make it happen. Is that so much to ask?

Thanks Tule, but this begs the question: Why is it so hard for so many voters to understand this stuff?

The next time a politician offers benefits that sound all warm and fuzzy, remember to ask him for the specifics of how (s)he intends to pay for those warm fuzzys.

Smaller is better. Not "less is more." There is a difference.

[Just_learning]

TOday should be another interesting day. I sure hope they get the bill up and out, but it looks like it is taking a turn for political gaming with the failure of the divestment bill late last week.

Stay tuned.

[backlash442]

"I think this is interesting. Google – the internet company – has a “worry”. What do you think it is? What is one thing that could wipe them off the map? ……Electricity! Yes, electricity. The lack of sufficient electricity is a major threat to Google’s future. Also, how is it that Google’s stock is still trading near its historic highs and so many of us are worrying that we are slipping into another Great Depression?"

Give it some time. Print a trillion dollars and see what it starts to do to inflation. Things could get really ugly down the road.

This bail out is a lose lose proposition. Going to be pain felt by all of us. However, the higher oil goes up the more I stand to benefit. At least potentially anyways.

[Silver Hilton]

According to the paper this morning, the bailout will cost $2300 per man, woman, and child. I'm curious as to what my family did to deserve a $9200 bill.

[Just_learning]

Originally Posted by Silver Hilton

According to the paper this morning, the bailout will cost $2300 per man, woman, and child. I'm curious as to what my family did to deserve a $9200 bill.

I wonder the same thing. How about we start by cutting foreign aid, stopping tax breaks for corporations(tax those higher who ship jobs overseas) and reinvesting that money in education and the people. I know it sounds harsh, but maybe people need to learn how to work again.

Charity starts in my house - why should we help others with some ideal that we havent perfected here. Take care of americans at home and let those who have the dream of living like americans work for it themselves. See where that gets us.

[baltz526]

the legislature is delaying implimentation of the bailout. pigs lined up at the trough of the lobbiest money train. with delay, it allows the politicions to reap the lobbiest dollars. pass it fast and it cuts this dirty money tap off. do not expect a quick resolution. the blood money must be collected first

[Thumper]

Originally Posted by Silver Hilton

According to the paper this morning, the bailout will cost $2300 per man, woman, and child. I'm curious as to what my family did to deserve a $9200 bill.

That is silly SH. This bailout will cost exactly zero (except for the time value of money), assuming that real property resumes its 100-year history of climbing in value. As the value of residential real estate climbs, the government will sell off its paper (to banks and other investors) since the increased value will restore the equity of the instrument.

Very similar to the Chrysler bailout, which was quite profitable for the U.S. taxpayer.

Much adieu about nothing.

[Silver Hilton]

Originally Posted by Thumper

That is silly SH. This bailout will cost exactly zero (except for the time value of money), assuming that real property resumes its 100-year history of climbing in value. As the value of residential real estate climbs, the government will sell off its paper (to banks and other investors) since the increased value will restore the equity of the instrument.

Very similar to the Chrysler bailout, which was quite profitable for the U.S. taxpayer.

Much adieu about nothing.

That's 'ado'. Adieu is what we should say to our monet. ;-)

I haven't seen any real analysis I trust yet, so you may be right. However, Congress is voting on a spending bill. Maybe they get the money back from somewhere, but I have seen nothing that explains where that will be yet. In the meantime, Congress is voting on a spending bill. Past history indicates that that will come out of someone's pocket.

I am hestiant to believe that real estate is going to return in value to what we recently saw. The reason I am hesitant is that the valuations were too high for the people living in the houses to afford. A family making $80,000 a year cannot afford to pay for a $600,000 house. That suggests to me that in the long run, a price level for housing such as we have recently seen is untenable.

In the long run, trends revert to the mean. The trend in real estate in the last 5 years has been away from the mean, and I think it's more likely than not that we will see depressed housing prices for some time. In that scenario, the holders of these mortgages are looking at a 20-50% loss on the real estate. Maybe that means that the tax payer is only out 125-350 billion dollars. That's still more than I want to pay, because, dammit, I saved my ass off and paid off my mortgage. Now I get dinged because I don't have interest to deduct, and I get dinged because irresponsible and dishonest people are getting away for their sins.

Yeah, I'm a little annoyed about this.

[HeavyMetal BankFisherman]

Regardless of what they do regarding the bailout, these investment vehicles need to be tossed in the trash.


Mortgage-backed security: Banks lend money to homeowners through home mortgages; these loans are then bought from the banks and sliced up and repackaged into securities that investors buy and sell just like stocks. Those investors make money off the homeowners’ monthly interest payments. The nation’s housing crisis has forced many Americans to skip payments, or worse, foreclose on their homes, so investors don’t get the interest payments. That’s why the securities become toxic assets to have on a company’s balance sheet: nobody wants to buy them, and there’s no market for them. Thus, all those institutions that hold these mortgage-backed securities — and they’ve got a lot of them! — are in big trouble.

Derivatives:A mortgage-backed security is a derivative security by definititon, because it derives its value from another financial security — in this case, home loans. But, there are some really complex derivatives out there using mathematical formulas that not even some financial wizards on Wall Street can comprehend — and a lot of those derivative securities get their values from the real-estate market, again wreaking havoc on Wall Street because financial firms hold too many of them.


Credit Default Swap:This is a type of credit derivative which you can think of like an insurance policy: a seller agrees to make payments to buyer in the event of a predetermined credit event, usually a default on loans. The buyer pays fixed payments in exchange for this insurance. Thus, the seller of the CDS is making a bet that something won’t happen- that the loan won’t default. Leading up to the credit crisis, CDSs were widely used to bet that certain companies would fail. AIG’s participation in the CDS market largely contributed to their huge losses.

[codyor448]

I don't understand how this "Corporate Welfare for the Wealthy", isn't going to cost the taxpayers. Our county has laid off a few people, and closed it's doors on fridays.. Next will be the police and fire protection i suspect. In lost property tax revenue, we have lost millions... SO yes, it is costing Joe Taxpayer now, but more in the future with the loss of additional state and local revenue, that won't be available.

Like others, we have paid off our mortgage, and could afford a bigger house, better boat etc. etc. but chose to save instead. I am furious that i have to pay for this welfare to the rich, the same people who hated regulation, and in fact orchestrated this by de-regulation of rules put in place after the depression to head off this very thing, are now expecting the "Unwashed masses" to pay their bills. I say Suffer! No one's going to bail out my business if i overextend (nor do i expect them to), so who do these people think they are. I hope they go Belly up.

[Silver Hilton]

What I heard on the news driving home is that the proposed bailout is a purchase of troubled loan inventory. If that is true, then someone has to lose some money. These loans wouldn't be for sale if they weren't in trouble. That means that, over the portfolio, there is going to be some percentage of loss. These are highly leveraged loans, and most of them are upside down, that is, the underlying property is no longer sufficient to secure the mortgage.

The holders of these mortgages are going to lose some money. If the government becomes the holder of the worst of these mortgages, my estimate is that we will post losses of 30-50% of the face value of the mortgages, plus the costs of running this program.

The best answer is that the government buys these at some substantial discount to face value, but I doubt they will be that hardnosed. The banks should lose their behinds in this.

Thumper glossed over the time value of money. Even if the government collects every dime of the original loan, we will have borrowed the money to buy these loans, and these loans are non-performing currently. The borrowers aren't paying. We aren't earning interest on these dollars, and we are paying interest on the money that we borrow to buy these. Assuming that we borrow the whole 700 billion dollars, which is a safe assumption because the givernment is running a deficit these days, it will cost us something like $35 billion dollars a year, just for the interest.

Jack, it's kind of interesting how our roles are reversed in this discussion, no? You ****** liberal big spender, you. ;-) What, I can't call Jack a commernist anymore?

[Old Coot]

With all due respect, I've successfully bought and sold paper for a living. There's no whole recovery from this compost, even with a deep discount.

The value of the paper on a defaulted loan isn't much when the value of the property that secures it has dropped. If you buy paper on a defaulted loan your avenues of recourse are to recover your money from the borrower - who likely wouldn't have defaulted in the first place if they had any money, or to take the property through legal action and sell it.

Hundreds of thousands of these defaulted loans are stated-income loans where no proof of ability to repay was required. That animal is now extinct, so when the borrowers go to refi out of their mess, now they have to prove ability to repay, and they can't do it - because the initial representations were false. No ability to pay, no refi. No refi, no payoff of the defaulted loan.

If the value of the property has dropped, and if there isn't anyone to buy the place because the real costs of living have escalated significantly while income has not, there's no sale. No sale, no recovery.

This bailout is touted by politicians as the way to keep millions of americans in their homes. That's disingenuous, it won't do a thing to forestall foreclosures.

The purpose of the bailout is to transfer losses from tons of intentionally crappy investments by the wealthy to the working public; and to avoid the criminal prosecutions that should - but will not - take place. It will save precious few homes. It's an enormous swindle.

I've also been a mortgage fraud investigator and people have gone to prison due to my work. Contrary to opinions expressed in a different thread, there is an incredible quantity of fraud tied to this mortgage crisis. Probably more than half of the stated-income and stated-asset loans involve borrower fraud and a high percentage also involve originator fraud. (Fraud: An intentional misstatement or misrepresentation of fact with a goal of inducing a lender to fund a loan.)

Time to close my mouth.

john

[Silver Hilton]

John, while I agree that there has been fraud, I think a lot of it is people being foolish and ignorant about what they can really afford. I have a friend who makes about 40 grand a year, who is in a house that was worth about 800 grand (probably 650 grand now). He has successively taken out loan after loan on his equity, using the money to pay off credit cards, despite not having the income to pay the loans back. Fraud? I don't think he did anything fraudulent, but someone else may have. He was just foolish. But he is going to be one of the statistics, just because he believed the ads. And whoever is holding his loan is not going to come out whole, because the property has dropped well below the value of the loans.

I think that is a pretty common story in America today. We have been told by the advertisers that we can have it all, and it's just not true. Now our government is telling us the same thing. We shouldn't believe them, either. I wrote my congress critters today, asking them to be reluctant to bail out the greedy. I hope you will, too.

[happybrew]

Originally Posted by Silver Hilton

According to the paper this morning, the bailout will cost $2300 per man, woman, and child. I'm curious as to what my family did to deserve a $9200 bill.

Wow! My family's share is $23,000!!!

I'm betting on inflation. Not hyperinflation, but an extended period of high inflation. There are winners and losers with inflation. My single largest expense is my mortgage. I have a 30 year fixed rate. I'm not planning on moving anywhere. I took out a second on the house when the value went up and got rid of my credit card debt. It is on a 20 year fixed rate. I will be paying off those mortgages with cheaper dollars. Salaries tend to rise with inflation, but when debt is being monetarized they will lag behind the rate of inflation. I will likely come out of it with a mortgage that is a smaller portion of my income than would otherwise be the case. Food and energy inflation, however, will likely cause me some pain before that day comes.

There are winners and losers in any economy. Risk takers win when the economy is good, and lose when the economy is bad. Slow and steady loses opportunities during a strong economy, but is safer in a bad economy.

[happybrew]

Originally Posted by Old Coot

The purpose of the bailout is to transfer losses from tons of intentionally crappy investments by the wealthy to the working public; and to avoid the criminal prosecutions that should - but will not - take place. It will save precious few homes. It's an enormous swindle.

You hit the nail on the head. The public did not take on the risk of those investments. It is absolutely wrong to make the public take the hit for it. The companies that did not do good business should experience the natural and logical result of not doing good business. Unfortunately, however, there is nothing you or I can do to stop this from taking place. It will happen. Right now the politicians are jockeying for position to get their cut.

[Silver Hilton]

Originally Posted by happybrew

Wow! My family's share is $23,000!!!

I'm betting on inflation. Not hyperinflation, but an extended period of high inflation.

Happy, I think that's a good bet. The only way that the government can get the national debt down to something that can be paid off out of the tax flow is by allowing significant inflation. My bet is for 50% cumulative inflation over the next 10 years, which would be about 3-4% per year.

This will favor those who hold physical assets, own businesses, and stocks, and be bad for those who hold dollar denominated assets, such as annuities, bonds, and bank accounts. Asian stocks may do well. Real estate in non-inflated areas, which lets out Seattle and Portland, will probably be solid, too.

[Thumper]

Originally Posted by Silver Hilton

Jack, it's kind of interesting how our roles are reversed in this discussion, no? You ****** liberal big spender, you. ;-) What, I can't call Jack a commernist anymore?

Hey! At least I pointed out the time value of money as a factor.

Other than the T.V.O.M., the government will only lose if real estate fails to rebound in value. I've only been on this earth for 67 years, but its been going up for virtually all of that time. Otherwise I want that $21,600 house back that I bought in 1964.

It sold a few months ago for $320,000.

Imagine that --- me a communist.

[BARCHASER]

Everybody is bashing banks. Most, and I have seen the numbers, subprime mortgages were originated by mortgage companies/brokers and S&Ls. Real banks, commercial banks insured by the FDIC, with both state and federal charters, originated very few subprimes. WAMU is not a bank, neither was Indymac, they are S&Ls, totally different animal. I was an OCC Examiner for 36 years, although I retired 5 years ago. None of the banks I examined did subprime mortgages and I worked in many of the biggies at one time or another, including Wells, BofA, US Bank, Chase, Citibank etc.

That's what makes me suspicious. At the hearing they keep talking about banks with subprime MBS exposure. To my knowledge, no major commercial banks has a subprime problem, with one exception Wachovia, I dont know what happened to them.

I'd like to see a list of just who these institutions are with all this junk.

I have a sneaking hunch it is hedge funds, yes the rich guy investment funds, that has all the junk. Bailing out rich guy hedge fund investments may be what this is all about.

[GraphiteZen]

Nope, no words of hope. We will all be speaking Chinese in a year and a half.

I transfered my IRA funds to a money market as I lost 20% of my portfolio in 2 days....

[cubsfan]

Originally Posted by matttheduck

I'm not one to call somebody out, but this is a ridiculous statement. U.S. taxpayers spent billions rebuilding these two societies after spending billions defeating them. What in the world are they teaching in schools these days?

C'mon now, leave schools out of this. It has nothing to do with it. Nothing!

[Lead Bouncer]

Originally Posted by backlash442

What's scary is the 25 dollar jump in oil futures. That has absolutely nothing to do with supply and demand. It's a safe haven play if you can believe that.

Just how ugly is all this going to get before it's all said and done?

oh yes it does. The folks who shall remain unnamed are going home without legislation pass that will produce one more quart of crude. The offshore limit is 50 miles, no state money sharing etc etc. Unless there is a massive change in players, nothing else will bring the oil back down. 5.00 dollar gas by XMAS

The dollar headed down again as well since wallstreet knows, the printer will be making more money. Oil is priced in dollars. Its going to volitile trading as well. gold is head back up as well. I also heard that a lot of shorts positions were being covered on oil.

[backlash442]

Originally Posted by Lead Bouncer

oh yes it does. The folks who shall remain unnamed are going home without legislation pass that will produce one more quart of crude. The offshore limit is 50 miles, no state money sharing etc etc. Unless there is a massive change in players, nothing else will bring the oil back down. 5.00 dollar gas by XMAS

The dollar headed down again as well since wallstreet knows, the printer will be making more money. Oil is priced in dollars. Its going to volitile trading as well. gold is head back up as well. I also heard that a lot of shorts positions were being covered on oil.

No it doesn't/nor didn't. It was never about supply and demand and if you believe that well you probably believe in little men in green suits and hats. Gas at 5 bucks by Xmas? I don't think so. Oil would have to go above 150/barrel and I don't think that is going to happen. If it does it absolutely will have nothing to do with supply and demand.

Higher inflation could/should lead to a raising of rates by the Fed which at least fundatmentally would strenghten the dollar. But the way things have gone this past year you can toss out fundatmentals.

[lingslayer]

Originally Posted by backlash442

No it doesn't/nor didn't. It was never about supply and demand and if you believe that well you probably believe in little men in green suits and hats. Gas at 5 bucks by Xmas? I don't think so. Oil would have to go above 150/barrel and I don't think that is going to happen. If it does it absolutely will have nothing to do with supply and demand.
But the way things have gone this past year you can toss out fundatmentals.

It sounds like you threw out fundamentals long ago.

[baltz526]

ok here is how i see it. the fed is asking the tax payers for a $700,000,000,000.00 loan. with this loan from US the tax payer (causing an equal $ amount of inflation) the fed is going to, on the TAX payer behalf, but bundles of home morgages. these home morgages are being sold at less than $0.30 on the $1.00. these morgages may be worth $0.70 on the $1.00 in real estate value. with a steady income from intrest coming in from the loans. a percentage of these loans are in default or will become in default. then with these defaulted loans the federal goverment will auction these propertys to recoup the funds. so in time the goverment will re-aquire our tax dollars and could turn a profit!

[BeaverBoy]

Originally Posted by Silver Hilton

According to the paper this morning, the bailout will cost $2300 per man, woman, and child. I'm curious as to what my family did to deserve a $9200 bill.

I was just going to post those numbers. Do you think the government would be better off giving everyone that money rather then big companies. How about we give the money to people who filed taxes last year? How much would it be then. Everyone could pay off bills or it might be enough for people to refiance there homes so it would get rid of alot of bad mortages. No matter how you look at it, it is alot of money. Sometimes I feel that we need to just take it in the shorts, let times get tough and just maybe people will learn there lesson.

[Lead Bouncer]

That would be quite the stimulus package. The money is, as described would allow banks to loan money for a car, home or business buyer. If you cant get a loan to buy a new sled, the boat companies will go out of business. As proposed, the money is not a loan. Its a purchase of all the bad and suspect mortgages, that the banks cant afford to keep, cant sell etc. The govt can wait indefinitely for the home market to come up. My biggest concern is dumping the homes like a foreclosure sales instead. Too many politicians wont want to cut spending to help balance the books. It gets added to the national debt. We pay interest on that debt.

If you look up cnbc on the web, you might be able to find a fairly blunt summary of the players. It was on Fast Money, of Wednesday 9/23 and consumed the first half of the show.

I dont know how they figured the loss amount. One figure I heard was 700,000,000,000 for 300,000,000 people. Lots of people messed up, but if more financial instituions go under it will roll down hill.

[Lead Bouncer]

Originally Posted by backlash442

No it doesn't/nor didn't. It was never about supply and demand and if you believe that well you probably believe in little men in green suits and hats. Gas at 5 bucks by Xmas? I don't think so. Oil would have to go above 150/barrel and I don't think that is going to happen. If it does it absolutely will have nothing to do with supply and demand.

Higher inflation could/should lead to a raising of rates by the Fed which at least fundatmentally would strenghten the dollar. But the way things have gone this past year you can toss out fundatmentals.

I shouldnt bother to write this. Oil went back up right after Hurricans in New Orleans and Texas. A lot of rigs are still shut down. Oil began to drop when the executive order was rescinded on offshore drilling. Ive already explained the rest. After Nov 4th one way or the other, oil investors will know what the drilling policy will be in the US. They will buy or sell accordingly. We have an oil shortage and its not debatable.

[backlash442]

Originally Posted by Lead Bouncer

I shouldnt bother to write this. Oil went back up right after Hurricans in New Orleans and Texas. A lot of rigs are still shut down. Oil began to drop when the executive order was rescinded on offshore drilling. Ive already explained the rest. After Nov 4th one way or the other, oil investors will know what the drilling policy will be in the US. They will buy or sell accordingly. We have an oil shortage and its not debatable.

I guess I shouldn't write this either. Do you know anyone in the oil drilling business? I do. There is no shortage unless you want to count drilling rigs. Oil companies can't sink drills fast enough. Only thing holding them back is the actual rigs themselves.

So you think oil spiked 25 dollars intra day due to the hurricanes? Now that is what I call naive at best. Oil as a commodity is preceived as a safe haven these days disregarding any fundamentals of true supply and demand.

I guess we'll see who is correct come Xmas. Barring some sort of new crisis I think oil will trade in the 90-110 range. It won't be up at 150.

[Jimfisher]

We may not see the bottom, but it might be near. It will be interesting to look back 10 years from now.