Bush drops opposition; endorses housing bailout

coyote

In a way it's a relief. I was preparing myself to be in agreement with Bush about something. Now things are back to normal.
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"If a path to the better there be, it begins with a full look at the worst." — Thomas Hardy

CarlosFerreira

Homesteader

gollum

I, as a person who bought a house on a fixed 30 year that I could afford, can understand the outrage many feel as I also do. But in the big picture I think it is best to bail these people out. I really dont see how anyone benefits in putting 10-50 million famalies out in the street. Banks wont benefit, famalies wont benefit and the government wont benefit. With the hard times that are coming a ntion wide repudiation of debt may be the only thing the country can do at some point.
As the saying goes, owe the bank 100k and you should be worried, owe them a million they should be worried. Those who dont have money to pay wont, no two ways about it.

idiom

It's only illegal if you get caught.

Bush will be out of office soon and off scot free.
Congress can't get caught. They're fricking congress.
The corporations are essentially now uncaught. Thanks to Uncle "JailBreak" Sam.
And the consumers? Well F&F are there to make sure they don't get caught either.

So as many people have suggested, go get a credi card or mortgage for as much as you can and buy gold or something, bury it and default.

(where did all the pre-approved credit cards go?)

emersonbiggins

Twilight · Expert Joined: Mar 02, 2007 Posts: 2971 Location: UK

Agreed, "families in the streets" is a propaganda meme.

In an economy allowed to function properly, property owners who default would have their houses quickly resold at some loss to the bank, to people who are better able to afford a safer, stricter loan. The defaulters would then rent, in some cases from the new owner of a similarly defaulted property.

- The defaulters win because they have lower monthly expenses and are not a debt slave for much of the rest of their working life.
- The second buyers win because they bought a house at a fair valuation with a loan they can afford.
- The taxpayers win because they do not have to pay the difference on unaffordable mortgages (they get torn up on default).
- The government wins because investors do not demand an extra percent or five to continue to lend it money.
- Some banks lose because where they wrote stupid crap above the signature line, they do not make the money they hoped to make by lying.

The economy loses to some extent because banks become reluctant to lend money after suffering losses, but that is temporary and in either case inevitable.

The crucial difference is, this is cheaper for the economy as a whole. Because debt is being serviced by people who are able to service it, the risk of default is lower and so is the cost of service if it is priced in a competitive market. By keeping non-credit-worthy or mis-sold people in their houses with their mortgage agreements intact and allowing other taxpayers to pick up the difference, the country accepts a higher overall cost of debt service. Money which could have been used productively by those who earned it, is used in the act of default prevention instead, giving house builders, appraisers and lenders an incentive to inflate prices and post-reset interest rates higher and continue to mis-sell until the taxpayer is no longer good for the money and cannot make up the difference. That kind of spiral is s***. You end up in exactly the same place - mass defaults, economic damage - but from a much greater height. To mix terminology, during the time bought, potential energy is stored and at some point it could kill the economy on release. The longer the delay, the higher the fall.

And what is of particular relevance to the topic of this site, money which the middle class could have used to buy and install a rooftop passive solar water heater and storage tank, or trade down to a smaller more fuel efficient car, will have been used to keep up payments on someone else's unaffordable mortgage and will be sitting in some bond trader's offshore account. So much for preparing for the hard times coming, huh?

Put plainly, keeping someone invested in a flawed financial product will cost you energy security. Ditch the goddamn product.

Incidentally, there is a massive surplus of housing stock in bubble economies all over the world. States such as California have one or two years of unsold inventory, many others likewise. Those that do not, were probably not touched by bubble valuations in the first place, otherwise builders will have generated a surplus. Spain has a well-documented vacant plan city and properties all over the country that are not selling. Even in the UK, with its "crowded island" and "chronic housing shortage" sales pitch myths, there are dark towers and complexes in many cities. There will be no shortage of places to rent once the losses are recognised, and their new owners will need the rental income. There is that much overcapacity that contrary to popular belief, rents could actually fall in many places. Good breathing room to get one's affairs in order.
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"The American people are watching the numbers climb higher and higher at the pump and they're waiting to see what the Congress will do." - George W Bush

DantesPeak

I just tried to find out as many details of the new housing bailout bill as possible. Let me clarify a few points.

The $300 billion is for the FHA, which generally deals with low income households. My understanding is that low income persons who can not pay their mortgage can apply to the FHA and replace their mortgage from a bank, for example, with a FHA mortgage. So this basically bails out mortgage lenders and to a lesser extent homeowners.

The credit line for F & F is to be unlimited. As in no limit. This means that the US may assume not only the $5 trillion in F & F debt, but trillions $ more in potential derivative liabilities.

I don't think that Congress ever gave out a blank check like this before, even with Social Security, and I'm not sure that a law like this would even stand up to a court challenge.

Effectively, the US has guaranteed F & F debt and gotten nothing in return.
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It's already over, now it's just a matter of adjusting.

Concerned1 · Coal Joined: Jun 06, 2008 Posts: 7

Well, I certainly know that a lot of those people who are embroiled in this housing mess were fooled into those variable rate loans by a herd of unscrupulous real estate agents. I truly hope they will be helped out of their current troubles with this new infusion of money! No one wants people out on the streets while perfectly good housing is just sitting there essentially abandoned. What's the sense of that? And I believe very much in the concept of forgiveness, something usually visiously denounced by the popular media. I just hope those helped will be good people who were led astray or who unknowingly made unwise decisions they later came to regret. Not people who are simply bilking the system for their own profit. That's just rewarding the fox at taxpayer expense.

heroineworshipper

No-one owns houses here. They're executive dreams for the top 0.5%. They could lose everything & no-one would care, yet we fall over & toil endlessly to keep their worthless property in Stockton valued over $1 million.
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People first, then things, then dollars.
There will be enslavement & cannibalism.

Eli

Give me an F'n break concerned.

This is not a bail out for the common man this is a bail out for the banks. People who find themselves in a house that is hopelessly overvalued or with a payment that they cannot afford have an option to correct themselves of this problem.

WALK AWAY.

They are not going to become homeless but they will become renters, which is probably what they were before all this got started.

This current plan just means that every time one of those people walk or goes bust the US taxpayer will get screwed instead of the bank.

Get ready because interest rates are about to go to 80s levels and then we will see how much bad debt it takes to destroy the US Gov.

This is a very very bad idea and will in the end only make things much worse. Wait until no one wants to buy US Treasuries and then we will see how bad things can truly get.

Twilight · Expert Joined: Mar 02, 2007 Posts: 2971 Location: UK

Iaato

Iaato

DantesPeak