Devils in the Details

"Congress looks at the Bush Administration's proposed $700 billion Wall Street bail out. "

It's like letting the murderer judge himself.

james danley:
re: ""provide the general welfare." .... it wouldn't be long before millions of individuals will not be just losing their homes but also their jobs. That could mean tens of millions of children starving--and dying. We just cannot allow that to happen. "
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"provide the general welfare."
an overlooked and forgotten legacy of the 'founding fathers'

it is indeed unfortunate that it takes a national crisis for the rest of America to begin to have concern for "millions of individuals " who are not making big dollars a year in salary.
If the government ever took the time to really invest in America and it's people, instead of all the fraud B.S. that goes on, America might actually be the envy of the world.

"What I'd like to know is how much of this "toxic" bad debt is mortgages used by greedy speculators to buy 2nd homes, investment properties to "flip" ... "
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Yeah, "2nd" and "3rd" and so on.

The Congress should be getting RID of Paulson -- and swiftly impeaching Bush/Cheney, if that's what it takes to get rid of Paulson -- but that'd take too much guts, and the craven horses need to get home to deal with their portfolios and campaign.

Meanwhile, with or withOUT the coup at the top -- which will allow the very rich to maintain the piggish circumstances to which they're accustomed -- the dollar's going nowhere but down-down-down for those who have few dollars, no jobs, no mortgages, no retirement, etc.

These phonies ought to be DOING something. Kissing Paulson's heinie for endless hours isn't it.

Deregulation was not the problem. The main problem was too much government interference and greed.

There is an interesting article from Investor's Business Daily, posted Sept 15, 2008 ("The Real Culprits In This Meltdown") that lays much of the blame on the Clinton Administration. Another interesting article is by Kevin Hassett of Bloomgerg.com posted yesterday, Sept 22, 2008 ("How the Democrats Created the Financial Crisis: Kevin Hassett"). Google these and read for yourself.

Capitalism and the free market work best when government interference is held to a minimum (i.e. enforcing federal anti-discrimination laws and safety regulations). The IBD article states: "Tough new regulations forced lenders into high-risk areas where they had no choice but to lower lending standards to make the loans that sound business practices had previously guarded against making. It was either that or face stiff government penalties."

The lowering of the lending standards, and the pushing of the flexible interest rates onto the consumers are what made a cyclical inconvenience (the housing market downturn) into a crisis. Once prices of homes got too high, people stopped buying. It's simple Economics 101 folks. Under normal circumstances eventually the prices reach a point where buyers would jump in and begin purchasing again.

But this was not a normal circumstance. That's because so many mortgages had flexible interest rates. As the value of the property dropped below the amount of the mortgage the banks raised the interest rates on the mortgages. Eventually the property values became half and in some cases one third the value of the balance on the mortgage. The original collateral no longer covered the mortgage. So as the interest rates increased, the mortgage payments increased greatly. In some cases doubling and even tripling. The speculators who borrowed to purchase multiple homes stopped making their payments and just walked away. Those living in their homes could no longer make their payments and were forced to default on the loans.

Now these banks and the investment firms (who purchased many of these mortgages) are stuck with the defaulted mortgages with no buyers.

As a conservative, I really hate it when government bails out, or worse yet takes over, private companies. Under normal circumstances I prefer that the free market is left alone and allowed to correct itself . But as I said before, this is not a normal circumstance. One of the main obligations of the federal government is to "provide the general welfare." If the federal government just sat back in this situation and allowed the free market to correct itself, it wouldn't be long before millions of individuals will not be just losing their homes but also their jobs. That could mean tens of millions of children starving--and dying. We just cannot allow that to happen.

Whether this proposed solution is the "correct" solution, I don't know. But I do know that waiting too long for a "correct" solution will make the recovery even more challenging.

As I understand it, the plan would essentially allow the banks to set the lowest price on the worst assets. So, they would be dumping the assets with the lowest value ( a lot of them would be $0 ), at an inflated price. I don't think these "assets" are assets like in the S&L crises - land, houses, boats, expensive paintings etc. These "assets" are mortgages that people have stopped paying on - so we are basically expected to buy a bunch of broken promises, yes?

It also seems to me that the Bush administration featuring Henry Paulson (who used to be the head of Goldman Sachs, and as such was a HUGE part of the problem) is once again trying to railroad through an ill-conceived and hastily drawn fix, on which it insists there be no oversight nor protection for us, the taxpayers. This, my friends, is "I'd hate for the smoking gun to be in the form of a mushroom cloud" all over again.
The "plan" that Paulson expects us to back is on 3 pages. Unless those pages are really big, or the fonts are really small and there are no salutations or signatures, that doesn't seem like a whole lot of planning. Instead, it seems like the 22 page plan that the administration had for the post-combat phase in Iraq. How'd that one work out?
Are we going to fall for this yet again?

What I'd like to know is how much of this "toxic" bad debt is mortgages used by greedy speculators to buy 2nd homes, investment properties to "flip", or risky term 80/20 interest only refi's of a primary residence where they pulled out ALL their overinflated "equity" to remodel kitchens with new stainless appliances and granite counters, put a pool in the yard, and a Hummer in the driveway! The people who made these decisions and the lender's and secondary market players that were willing to make the loans to these irresponsible people and purchase these loans should be stuck with them. This bailout is going to REWARD the greedy and penalize the thrifty, financially responsible folks who have not leveraged their homes to the hilt, or who held off and rented while they were saving for a home to buy under traditional, conventional guidelines. This is like having the neighbor who stayed home and took care of the family X's dog, being asked to hand over their hard earned dollars to family X when they got home from a bad trip to Vegas!

Better for Wall Street to crash, if that was to happen,which I doubt.Then for the the dollar to be worthless and have the price of gas and food go through the roof. Don't forget these are the same people that brought you the Iraq war, how'd that go for you. 700 billion with no ties, and Lil Bush getting ready to step out the door ? come on. Don't be a sucker, wise up. Put pressure on Congress to stop this deal. I can smell this rip off all the way down here in Florida.

if you make 30 thousand a year,you cannot afford a 300 thousand dollar home.
let the market settle its own problems--and get back to realistic lending---might be a good lesson for all

four years ago i saw this coming-----people were buying homes they could not afford---by use of baloon loans---payments were lower than the interest---now we are to bail out the goons giving the loans--and pay for homes people could not afford----i lay this right on the repub administration-----and deregulation is and was a part of mccains thinking.

colorado,

You are a thoughtful person and I know that we are basically on opposite sides of the ideological fence.

What has me going is the idea that this will be turned into a political football and used as a campaign item. The scenario for this has already been set by some on the right.

I agree with you completely about the need for cooler heads to prevail and I can only hope that a non-partisan approach to this can yield positive results for all Americans. At the same time I think the possibility of political leverage here has to be considered by my less-than-brilliant party leaders in both houses.

If in fact, it ends up being allowed to determine the election I will regret that that the entire economic system wasn't put in jeopardy to prevent it.

But that's just me.

According to what I have heard from some, the S&L bailout in the 80's actually made some money but something seems "fishy" with the fast speed of their efforts this time. Could it be they are all helping to cover each others blatant dereliction of their responsibilities in allowing this to happen - it seems everyone had their fingers in a big juicy money pie?

Let McCains Advisors, buy your lives at a cheap price, if you want. But I say no to Corporate-Country Take-Overs. Their Oil Prices are dependant upon, all out of touch businesses. Those people at McCains side, is controling the 'VALUE' of the dollar. So 'NO', to McCains advisors.
ASK THEM TO GIVE OUR LIVES BACK!!!

Vote 'NO', to McCain.

I actually believe this is a very interesting proposal. The federal government will buy ALL of the risky mortgages from every bank and investment company in the US. This will immediately free up the banks to actually begin giving out loans again (and, hopefully, returning to the more sensible practice of only giving mortgages to individuals who are able to prove that they can repay the mortgages). And then as the housing slump rebounds, there will be hundreds of thousands of these mortgages that can be resold for a fair profit. It's actually possible that the initial estimated cost of $700 billion could turn into a net profit of a few hundred billion dollars.

Having said that, it is also possible that, like so many other federal government programs, the bureaucrats might be pressured into rushing to get these mortgages off the books and will have to sell them for a fraction of their cost, resulting in a huge loss. But of course that will also mean fantastic deals for home buyers.

One thing, the federal government should not sell these mortgages to speculators. They should make sure that the buyers occupy the homes for at least 5 years.

Leonard Peltier problem is that if they let the house fall as you suggest-as usual it would be the little people, the elderly, the poor who will suffer the most. you can bet that social program cuts are coming and none of obamas promised change will come to fruition either, sorry folks the house is broke they will tell us.
like you my first inclination was 'let it crash' but the effects globally especially on the poor will be horrific if we do not feed the beast. at least for now leonard appease the beast we must while we gather strength and stop fighting each other. we can never defeat the beast as long as we are divided.
undecided purple person

700-billion dollars of Tax Money..can be considered a bail-out or just another piece of higher costs for living..its definitly part of a G. W. Bush push for a Global Community to look at America and find its purpose/the Globe of an earth is looking rather large if you consider the PLAYERS--as a ratio of maybe 7:100+/but will numbers be an answer--??..or are the stories a ambient resonance that all is a loss.

McCains Oil Tycoon Advisors, are playing scare tactics with oil prices, and the Americans dollars. Vote Independant

I don't like the politics of underhanded tactics. That's why I hope Palin is able to put Obama in his place.

I'm sure Sarah and Todd Palin has the answers to all our problems. Psych.

We, the American people were stupid enough to put George Bush in the White House, twice. What makes you think we are any smarter now? Just look who we Democrats offered up as an alternative to the Republican candidate. For those that are reality-based Obama is really no suitable alternative. I shrug my shoulders several times a day these days.

Underdog,

This is a game the Republicans are considering. They can distance themselves from THEIR White House and the Democratically controlled congress by opposing the bailout and assuming that the Democrats will do the responsible thing, then take the fall for giving away a trillion dollars of tax money.

I say call their bluff and let the economy fail rather than another 4 years of liars and incompetents.