Some details on the bail out bill

[Tom R.]

See, that's the part I just don't get.

Sure, a bunch of banks are losing a lot of money, because they made loans they shouldn't have (Actually, because they bought debt they shouldn't have)

But no money-man is so stupid that he can't tell the difference between some yahoo that bought twice as much house as he could afford, and a legitimate business that uses credit as part of its day-to-day operations.

I should hope that the banker would think twice about lending to the yahoo again, but to refuse a loan to the legit business would only shut down the bank's own business.

I can see the banks getting pickier about making loans (and god knows they need to be!) but it would be self-defeating for them to stop all transactions cold.

I think the whole thing is a rotten attempt to over-hype the situation, to avoid the consequences of their bad decisions.

But what do I know...

Robert

I agree. Although it was reported that Pres. Clinton and some leading Democrats pressured the lending houses to lessen their standards so that anyone could get a home loan (subprime loans), the CEOs reaped millions of dollars on the deal. So I think it was done cooporatively.

Regardless, people are still spending money, getting loans, etc. Banks already follow standards when making loans to people & businesses. That's why responsible clients can still get loans easily. Without the scare-mongering, the most damage will be a temporary hiccup on affected investments and, depending on location, a drop in home values. The market needed to correct itself anyway.

As for Wallstreet, those who will benefit from the bailout aren't moving because they hope the fed money will provide more pennies on the dollar than what creditors will pay.

Whether the bailout is socialism or not, that money will be made up in higher taxes that most of us will end up paying one way or another. Not for me.

By the way, here's Dave Ramsey's plan, which he suggests everyone send to the their Senators and Representatives:

Years of bad decisions and stupid mistakes have created an economic nightmare in this country, but $700 billion in new debt is not the answer. As a tax-paying American citizen, I will not support any congressperson who votes to implement such a policy. Instead, I submit the following three steps:

Common Sense Plan.

I. INSURANCE

A. Insure the subprime bonds/mortgages with an underlying FHA-type insurance. Government-insured and backed loans would have an instant market all over the world, creating immediate and needed liquidity.

B. In order for a company to accept the government-backed insurance, they must do two things:

1. Rewrite any mortgage that is more than three months delinquent to a 6% fixed-rate mortgage.
a. Roll all back payments with no late fees or legal costs into the balance. This brings homeowners current and allows them a chance to keep their homes.
b. Cancel all prepayment penalties to encourage refinancing or the sale of the property to pay off the bad loan. In the event of foreclosure or short sale, the borrower will not be held liable for any deficit balance. FHA does this now, and that encourages mortgage companies to go the extra mile while
working with the borrower—again limiting foreclosures and ruined lives.

2. Cancel ALL golden parachutes of EXISTING and FUTURE CEOs and executive team members as long as the company holds these government-insured bonds/mortgages. This keeps underperforming executives from being paid when they don’t do their jobs.

C. This backstop will cost less than $50 billion—a small fraction of the current proposal.


II. MARK TO MARKET

A. Remove mark to market accounting rules for two years on only subprime Tier III bonds/mortgages. This keeps companies from being forced to artificially mark down bonds/mortgages below the value of the underlying mortgages and real estate.

B. This move creates patience in the market and has an immediate stabilizing effect on failing and ailing banks—and it costs the taxpayer nothing.


III. CAPITAL GAINS TAX

A. Remove the capital gains tax completely. Investors will flood the real estate and stock market in search of tax-free profits, creating tremendous—and immediate—liquidity in the markets. Again, this costs the taxpayer nothing.

B. This move will be seen as a lightning rod politically because many will say it is helping the rich. The truth is the rich will benefit, but it will be their money that stimulates the economy. This will enable all Americans to have more stable jobs and retirement investments that go up instead of down. This is not a time for envy, and it’s not a time for politics. It’s time for all of us, as Americans, to
stand up, speak out, and fix this mess.

 

[Ecomike]

Whether the bailout is socialism or not, that money will be made up in higher taxes that most of us will end up paying one way or another. Not for me.

I disagree that it will increase taxes. Warren Buffet on PBS interview with Charlie Rose last night said the US Gov. will make money off the deal in the long run. All they need to do is raise the national debt, borrow the money and buy and pull those assets off the market long enough for housing prices to start going back up instead of down. Then they can slowly sell those assets back to the market at a profit.

 

[JNickel101]

...and start the process all over again.....I still fail to see how bailing out Wall Street will all the sudden make these ARMs affordable to the idiots who can't pay their mortgages now.

Dave Ramsey's solution would cut losses, convert them to FRMs, making them affordable to the people who took them out in the beginning.

I'm only about 2 hours from DC right now, I have half a mind to go down there and sit outside, badgering congressional members as they walk by, asking them why the hell none of them proposed the Common Sense approach...

Assholes....

 

[Ecomike]

...and start the process all over again.....I still fail to see how bailing out Wall Street will all the sudden make these ARMs affordable to the idiots who can't pay their mortgages now.

Dave Ramsey's solution would cut losses, convert them to FRMs, making them affordable to the people who took them out in the beginning.

I'm only about 2 hours from DC right now, I have half a mind to go down there and sit outside, badgering congressional members as they walk by, asking them why the hell none of them proposed the Common Sense approach...

Assholes....

There may be a problem with that approach, in that bank standards for loans are getting tighter now, so their internal policies probably don't allow them to make those loan changes to some whose credit has already been devastated with a a foreclosure notice already, and late payments.
In reality, the Fed and Treasury are the only ones left with enough credit power to intervene.

I have no problem with the Fed/treasury helping individuals rebuy or hold on to those houses (converting ARMs to FRMs, which does also need to be done for the next million set to convert soon), but right now we need an overnight plan that can stabilize the market literally overnight, not a plan that takes 12 to 24 months to implement.

TIME is the enemy right now. The plan (if I understand it correctly?) you propose should have been done 18 months ago when there was time for it to work.

 

[FarmerMatt]

Time is the only thing we need right now. I'm beyond frustrated to the point of anger. The pork in this bill is absolutely outrageous. Tax breaks for wooden arrow mfg's?? You've got to be fckin kidding. I'm voting Barr & if my congressman votes for this one like he voted for the last one than I'm voting for who ever is running against him no matter what party their with...

 

[Bent]

Time is the only thing we need right now. I'm beyond frustrated to the point of anger. The pork in this bill is absolutely outrageous. Tax breaks for wooden arrow mfg's?? You've got to be fckin kidding. ... if my congressman votes for this one like he voted for the last one than I'm voting for who ever is running against him no matter what party their with...

Hear hear!




Edit: My Congressman and Senators called and informed.

 

[Bent]

Bill details and Senate vote details from last nights action.

http://www.senate.gov/legislative/L...ote_cfm.cfm?congress=110&session=2&vote=00213

 

[RichP]

Bill details and Senate vote details from last nights action.

http://www.senate.gov/legislative/L...ote_cfm.cfm?congress=110&session=2&vote=00213

Yea, our two, casey and specter will vote for whatever they can line their pockets with. Specter has never met a bill he didn't like no matter what his voters wanted.

 

[Deadman 94 xj]

I'm impressed with your answer! Hell of a Good answer. Just what is your major?

You might consider running for office someday, we could use such clear thinking in Washington, IMHO, it would be a novelty.

Ha, thanks. It only happens once in a blue moon. Major is Supply Chain Management doubled up with info systems management.

It'll be interesting to see if the bill gets passed by the house on Friday. There's a lot of pressure with the re-elections.