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- BLOG GONE TO TRASH!
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9 comments:
Forgive me as I failed to mention the following usual contributors: Mat, Dave, Julietbast, JULS, Cindy, Becki and the ROD'man.
Would like all of your (and others not mentioned) opinions about the speech!
...and Paul!
Sorry to say I missed it. The "highlights" that I've seen on the news hardly seem like words that will instill confidence in a teetering financial system. You know, stuff like "panic" and "depression". To say nothing of a jaded general public that longs for competent & calming leadership.
I started to watch it, but fell asleep (can you blame me?).
The basic issue is...
Some years ago, our all too wise leaders decided it would be nice if more Americans (and, er, non-americans) owned their own homes. They pressured lending institutions into offering mortgages to people with less than stellar credit. The mechanisms used to facilitate this included:
No income verification.
No immigration papers.
No money down.
Interest only loans
Adjustable rate mortgages
etc. etc. etc.
The bottom line is that many people got to buy homes who really could not affort to actually PAY for these homes. Many were overly optimmistic that their incomes would go up, that the value of the home would go up, that the interest would never go up. Well, many were mistaken.
Although you hear this referred to most often as "predatory lending", the "blame" must! also be extended to people making poor decisions and buying more than they can afford. Really no different than running up credit card debts.
Anyway, it is also common practice to buy a home through a mortgage broker. This is really just a salesman who hooks the buyer (borrower) up with a bank (lender) according. Certainly, the brokers are not interested in the long term payoff of the mortgage, but rather that they sell mortgages to make commissions. On top of that, most mortgages are actually sold one or more times and become part of an investment - mortgage backed security.
The situation now is that there are many billions of investments in these mortgage backed securities, but the value has gone down because people aren't paying the mortgages. Some institutions have invested too heavily in these securities and the loss of value has crippled them (AIG, Fannie Mae, etc.).
What our great leaders are now telling us is that they have to do something to fix this. Nameley, to spend (at least) 700 BILLION dollars to buy up these mortgages and then do... well, they haven't really said what they will do with them yet.
In the good old days, we had a way to deal with people who couldn't pay their mortgages - it was called foreclosure. I really haven't any idea what congress is cooking up now, but it seems to me that we might end up with a hug tax burden, on mortgages that for properties that are valued less than the owed amount, and 'home owners' who are somehow protected and allowed to stay in the homes they can't pay for.
What a mess!
This is all we need - more government involvement.
What I truely think? If the goverment bails out this situaltion, we one just more step closer to Socialism. Not good!
Historical fact. No Communist or Socialist State has ever reached Utopia.
Sean,
in my opinion what you have written pretty well sums it up. Although I might add that there are at least a few real victims of predatory lending. How did they become victims? Primarily due to their own carelessness. Anyone that ever bemoans the cost of education need only look at a fiasco like this as to how it compares to the cost of ignorance.
I thought about all that was said.I believe in looking one's opponent eye to eye. McCain didn't look at Obama once while I was watching.It showed to me that his ear piece might be for other reasons then going deaf until Obama walked towards him to shake hands at the end.Doug@Sean,you're smart people:)
If anyone is interested here is a perspective on the bailout plan and how we got in the trouble in the first place.
http://www.spiegel.de/international/germany/0,1518,579707,00.html
Juliet,You're so smart as usual.:)
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