Clinton is pushing it to, only even in a more socialist and insane way.

December 05, 2007 02:46PM
Its nuts.

Part of the reason why this problem began is because there was a problem (recession) that was exacerbated by Sept. 11th and the Federal Reserve threw a bandage over it. That bandage was incredibly low interest rates. The markets in general are complicated and intricate. Look at what goes into supporting our economic system :

1) You have Sally Mae, Fannie Mae and Freddie Mac acting as final buyers of educational and housing loans. They're managed (in a general sort of way) by the government as a way to increase "liquidity" or basically make it financially intelligent for banks to lend to people they otherwise wouldn't lend to under such terms. So the bank goes and sets up the loan then sells it off to more or less a government entity that then backs that loan.

2) The loans are also repackaged into bonds, put through a food processor, diced and spliced together and then resold off. Who is the major market for these loans? States, cities, the federal government, etc. They are the number one purchaser of these loans and they use them to meet pension obligations. So when you're complaining about how post office employees have a better retirement plan than you do, bear in mind part of the reason they have that plan is so that we can keep our housing market going. So we can artificially force our economy to grow and grow and grow.

3) Bankruptcy revision laws make it substantially harder to go bankrupt on debt. There's a lot of issues with this. In ways it helps lenders but in a lot more ways it hurts the economy as a whole by plugging the "release valve" we have in place.

4) That's not even getting into other credit instruments and consumer spending.

So basically, we put a bandage on a problem and that bandage spiraled out of control into a worse problem. Then we go and we have the federal reserve reduce its lending rate to banks and allow them to collateralize those loans with CDO's that are drastically devalued. On top of that, we're going to prevent resets on these mortgages and allow term alterations.

Who does this help anyway? Well, lets see who it doesn't help:

1) If you aren't a homeowner on the verge of default - this doesn't help you. If you're honest you probably won't be elligable.
2) If you're a shareholder of a bank, this doesn't help you. This plan will cause the bonds to differentiate from LIBOR and several of the sales agreements for these credit derivatives (including the SIV's Citigroup underwrote, for instance) include provisions that obligate the seller to repurchase the asset at original cost if there are issues with it. That means that these banks have to repurchase these assets and then, because they don't move with LIBOR any more, accept yield erosion due to the fact that they aren't moving with the interest rates anymore.
3) This does nothing to improve lending environment or home sales.
4) This will ultimately increase cost of living in the form of hidden taxes on land, goods, etc at the local level and federal level.
5) If you're on the verge of default over this, this plan probably will only delay the inevitable anyway. It'll spread out the defaults but it won't stop them.

So who benefits? A couple politicians, mostly. We're going to throw another bandage on the problem. It doesn't really help anyone involved or the people as a whole. Five or ten years from now when it causes more issues we'll look back and say, "Wow, Paulson was a dumbass for that."
Subject Author Posted

Why Handholding is Bad

Death_Claw December 04, 2007 11:42AM


Death_Claw December 05, 2007 10:45AM

No Empathy Eh?

happyorb December 04, 2007 08:07PM

This is a pretty discrete fix. Are you a subprime mortgagee?

Balrahd(VIP) December 05, 2007 01:25PM

Clinton is pushing it to, only even in a more socialist and insane way.

Death_Claw December 05, 2007 02:46PM

I hear you.

bajula December 05, 2007 08:02AM

A little addition...

bajula December 05, 2007 08:25AM

Re: A little addition...

Death_Claw December 05, 2007 08:38AM

Re: A little addition...

happyorb December 05, 2007 08:59AM

aww orb used to be happy

Stevers April 27, 2010 05:03PM

I'm sorry but you're off base arguing with DC here

Lokain December 05, 2007 12:55PM

Re: I'm sorry but you're off base arguing with DC here

happyorb December 05, 2007 03:30PM

I have to object to one point.

Death_Claw December 05, 2007 05:07PM

If you can't be bothered to read the contract don't sign it. n/t

Death_Claw December 05, 2007 09:18AM

That's what I hired my moron Lawyer to do. He failed, and I was screwed. ~

happyorb December 05, 2007 03:31PM

I would be shocked if 5% homebuyers read the final Kts.

Balrahd(VIP) December 05, 2007 01:33PM

I'm not disagreeing with that, its hardly an excuse however.

Death_Claw December 05, 2007 02:23PM

More importantly, if you're mortgaging 3-4x your income, pay a lawyer to read it for you nt

Rade December 05, 2007 09:46AM

RIF, I hired a Lawyer to read it, he sucked. ~

happyorb December 05, 2007 04:00PM

Re: No Empathy Eh?

Death_Claw December 04, 2007 08:44PM

All theory no practical experience...

happyorb December 05, 2007 08:48AM

I would rather rent.

cointreau December 05, 2007 11:27AM

Re: All theory no practical experience...

Death_Claw December 05, 2007 09:18AM

Re: All theory no practical experience...

happyorb December 05, 2007 03:59PM

Re: All theory no practical experience...

Death_Claw December 05, 2007 04:58PM

Weren't you the one who previously argued that homeownership is the end all/ beat all of human happiness? n/t

jegec December 05, 2007 02:36PM

I argued its not affordable for your typical person (and it should be).

Death_Claw December 05, 2007 02:47PM

Here's what I was thinking of

jegec December 05, 2007 03:24PM

What's your point?

Death_Claw December 05, 2007 04:50PM

Maybe I misread

jegec December 05, 2007 05:03PM

There are qualitative benefits to owning a home.

Death_Claw December 05, 2007 05:15PM

I was going to make an elaborate post about opportunity cost but i see you beat me to it

Rade December 05, 2007 09:51AM

Buy vs. Rent has a ton of variables.

ExPaladin(VIP) December 05, 2007 09:05AM

Some good points, for me it was a much better deal to buy. ~

happyorb December 05, 2007 03:33PM

Condo's also have hidden risks

ExPaladin(VIP) December 05, 2007 09:09AM

A lot of this also goes into the differences between...

Death_Claw December 04, 2007 08:59PM

*clap* *clap* Hurray for financial responsibility! nt

infi December 05, 2007 01:26AM

Ron paul plug. nt

The Forsaken(VIP) December 04, 2007 12:52PM

The US Mortgage crisis.

DurNominator(VIP) December 04, 2007 11:51AM

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