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Monday, September 25

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m / September 24, 2008 11:39 AM

i think its ridiculous that the people who caused it are going to essentially get off scot free on my dollar. and i think those lending companies are insanly irresponsible to have let it happen. i know you can't foresee the future, but giving out loans to people who cant even afford a down payment is insane. in addition, would the government ever bail out kohl's, or any company in another sector, if it were going through similar tribulations? probably not. i know in the end, no matter whether the gov. stepped in with this plan, i would probably end up paying for it. but this better result in a big ol' fatty rebate going forward.

Jill / September 24, 2008 12:14 PM

M's right on the money. I love the fact that financial institutions clammored for deregulation, but now that the shit has hit the fan, they're crying to the govt. to help them out. Take your million (plus) dollar bonuses and shove them where the sun doesn't shine, you morons. Aren't these people some of those mythological creatures called fiscally conservative Republicans? I keep reading about them, but in the last 8 years of the Bush administration, I haven't seen any.

Brian / September 24, 2008 12:33 PM

It's just business as usual with the GOP — stuffing their pockets with cash, and the pockets of their friends, on their way out the door. What, you don't think this 'crisis' was manufactured for just that purpose?

Pete / September 24, 2008 1:37 PM

Great deal for Wall Street, but as usual taxpayers and homeowners would get screwed. Thank goodness Congress is taking a deliberative approach and demanding taxpayer/homeowner safeguards, despite the "pass this immediately, the sky is falling!" hysteria of Paulson and Bernanke.

Handing a $700 million checkbook, with no strings attached, to Paulson, the former head of Goldman Sachs (one of the firms that's directly responsible for this mess) strains the very limits of credulity. You might as well hand over the EPA to the CEO of Exxon.

m / September 24, 2008 1:55 PM

p.s. i also thought this was an interesting way to look at this astronomical amount:

http://www.slate.com/id/2200718/?y=1

Jill / September 24, 2008 2:06 PM

Wanda Sykes sums it up nicely on Jay Leno: http://jezebel.com/5054144/wanda-sykes-campaigns-for-cabinet-position-on-last-nights-leno?autoplay=true

Andrew / September 24, 2008 2:20 PM

Woah, McCain just announced he's going to suspend his campaign Thursday (presumably for a couple days) to head back to Washington and help out dealing with the financial crisis.

It'll be interesting to see if Obama follows suit. I hope he does.

David / September 24, 2008 2:32 PM

Privatized profits, socialized losses. Wall Street sure seems like a nice place to work...

This crisis is helping to crack my brain wide open. On the one hand is the need to keep all the plates spinning, so financial markets don't grind to a halt.

But on the other hand is the very real and very American tradition of revenge. That's why we're one of the only Western nations where the death penalty is still largely supported by the public.

And revenge, in this case, is a far deeper motivation than people want to acknowledge. There are a lot of homeowners who are drowning in their mortgages, and the Federal government essentially gave them the finger. But when Wall Street was drowning, the Fed jumped.

I think a lot of citizens (not just homeowners) want to see Wall Street get the finger, just once.

David / September 24, 2008 2:40 PM

"Woah, McCain just announced he's going to suspend his campaign Thursday (presumably for a couple days) to head back to Washington and help out dealing with the financial crisis."

Sure sounds like somebody don't want to debate.

printdude / September 24, 2008 2:45 PM

We're Fucked.
Socialism, here we go.

Andrew / September 24, 2008 2:45 PM

@David: Maybe so. I'm hoping they both go back to DC and have the debate.

spence / September 24, 2008 3:37 PM

I hope Obama doesn't take the bait on delaying the debate. The day that McCain gets trounced in the polls, the day his advisor gets outed by the NYTimes as receiving $15,000 a month for the last 2 years, McCain suspends his campaign. Didn't he just say that the fundementals of our economy are strong? This is just a political manuever to pull attention away from these things. Regarding the bail-out, something needs to be done. I think taxpayers should get a stake in these companies we're going to bail-out and a proportionate amount of profits generated.

spencew / September 24, 2008 3:38 PM

sorry, $15,000 for the last 2 years from Freddie Mac...

jen / September 24, 2008 4:09 PM

don't worry y'all, obama didn't take the bait:

http://www.msnbc.msn.com/id/26872907

Cheryl / September 24, 2008 5:27 PM

Imagine that--a candidate who can do two things at once. Incredible.

fluffy / September 24, 2008 9:07 PM

Only in America

Luke / September 25, 2008 10:31 AM

maybe I don't fully understand exactly what the bailout entails, but I'm sure I'm not the only one. As I understand it, the money pays off $700B in mortgages that can't be paid, so essentially they are taking everyone off the hook, not just the banks. I'm sorry, but I have a hard time with the notion that all of those people who took these "fabulous" deals being offered by the banks, without reading the fine print, as victims. The greed went both ways.

So, if the govt doesn't bail out the economy, banks will foreclose on homes that they can't sell, and both the homeowners and the banks will be bankrupt...the economy collapses. I don't like it, but I don't see any other option. It would take far too long for the govt to pay off bad mortgages one-by-one by helping homeowners, so they have to do it through the banks. Sure, it gives the impression that they are sticking it to us, but I don't think that's the case. And no, I'm not a republican. I think the GOP is to blame for this, but that does nothing to change the situation we are in.

eee / September 25, 2008 10:43 AM

I like the idea of taking that money they'd give Wall Street, and giving it back to the taxpayers. Give US the bailout money, let us pay off our mortgages, debts, etc. Hell, we're the ones suffering, let us try to recoup our losses.

Rich / September 25, 2008 10:49 AM

Luke...good points up until the GOP zing.

While the President has advisors that should have spoken up, the House and Senate have committee's that could have stopped this as well.

I think that this was allowed to happen because it is the campaign season. McCain wanted to see the economy boom hoping the fall out would happen after November. Obama was there wanting to see the economy fall so he can use this issue in commercials.

In both camps, "doing nothing" is what the Legislative and Executive branch did during the boom. Both parties are to blame.

Would Obama be talking about the economy if the election were held a year ago when the Dow was at 14,000? I...think...not.

annie / September 25, 2008 11:13 AM

I'm with Luke (not just b/c he's my man) but the thing that really sucks about this greed is that people like me and luke are totally fucked when it comes to purchasing a home, in the near future. We were told that we need close to $40K for a downpayment now. Um, it's going to be hard to sock that away when we have high rent, student loans and well, life!
So, while people get to keep their homes, ones they couldn't afford in the first place, two hard workers w/ no plans to live beyond our means are out of luck, at least for some time.

Spence / September 25, 2008 11:18 AM

The scary part is that we're in uncharted territory here. There is no guarantee that this bail-out will stave-off an impending recession. We're trusting an administration that has consistently used these scare tactics to force through their agenda. Why should the American public suddenly trust them? I think we saw this all before with the "Weapons of Mass Destruction" in Iraq. I think time needs to be taken in any bail-out plan of this magnitude. Let's not give the keys over to the metaphorical drunk driver.

vise77 / September 25, 2008 11:35 AM

This is a problem that has been building for at least a generation, helped along by various administrations, not the least of which was Clinton's, which pushed for deregulating investment banks and generally did the bidding of Wall Street. Bush 2, of course, gets massive blame.

I am angry as hell that we have to bail out greedy, reckless and/or dumb companies--you know, privatize profit, socialize risk. The next time I hear one of these free-market-is-God type complain that mass transit funding is socialism, I will simply have to laugh. The bailout is sickening, but, I fear, is it sorely needed right now.

I think this is one of many, major financial shocks this country will face over the next 10-30 years. This bailout, if enacted, and if the feds don't sell these crappy securities for a profit, will add to an already dangerous level of federal debt. The higher the debt is, the more the interest payments are-- which means less money for other budget items--and the more future borrowing will cost. The dollar also goes down. Debt has helped sink empires greater and longer-lasting than ours. Look what happened to the Brits after they helped win WWII. Or, look up the role debt and bad financing played in the downfall of the Spanish Empire.

Then there are the entitlement programs--Social Security, Medicare, Medicaid. Like them or hate them--and polls and politics show that most Americans still love these programs--the reality is grim: Unless we act soon with drastic action, we will not be able to fund these programs at current levels without massive tax hikes or massive cuts in other areas. Leaving Iraq, or ending the space program, or doing whatever some people want to do is only a drop in the bucket in terms of solving the debt and entitlement programs. Our financial problems are far more fundamental then relatively minor programs or single (if long-lasting) historical events.

Combine the above with our country's need to invest billions upon billions on our infrastructure, and we face extremely serious financial and budget problems. I am not sure we as a country right now have the will or smarts to solve such a huge problem in a timely manner.

Rich / September 25, 2008 12:46 PM

@ Annie..."We were told that we need close to $40K for a downpayment now."

You have always needed a down payment for a mortgage.

Only a real estate bubble will allow you to get a mortgage with no down payment.

People did get mortgages with no down payment in the bubble...sounds like you are more pissed that you missed the boat.

Imagine...the NERVE of a bank to ask for a down payment on a mortgage.

Luke / September 25, 2008 12:51 PM

@ Rich: Annie didn't say that it sucks that we need a down payment, only that the percentage of the loan amount required as a down payment is extremely high now because banks' risk tolerance is so low. We didn't miss any boats...we just didn't jump on that Titanic of a bandwagon.

annie / September 25, 2008 1:54 PM

Thanks, Luke. I did own a condo and then a house 6 years ago and I didn't go through a mortgage lender, went through a bank, didn't get a deal on either and my down payment was $10K. Now, 6 years later to make a $30K jump, seems steep.

Rich / September 25, 2008 2:48 PM

@ Luke and Annie, I guess. :-)

"only that the percentage of the loan amount required as a down payment is extremely high now because banks' risk tolerance is so low."

Not to split hairs, but the down payment amount is higher right now b/c banks do not have the liquidity to support the lower down payment.

The bailout is contructed to give banks more liquidity, and that should result in the down payment amount to lower.

Luke / September 25, 2008 2:52 PM

ok Rich, thanks. Yer smart.

Spook / September 25, 2008 3:55 PM


If I saw this coming for the last two years!
Yet all of our Demorat or Republicreature
leaders ignored because they all were getting greazed

And all those that elected them can go F*ck themselves.

Excuse Moi. I'm just so tired of our sports, nascar gun loving, Red Eye, Eat Love Pray, Bible reading, flag waving, uncritical O'Bama, Daley loving, “traditional values” honoring sleep walking country who NOW have the nerve to be surprised by this cold water!

Yea, its gonna be a cold a$S winter. And like we have the President WE deserve, WE know have the economy WE deserve!

p.s I love what President Hugo Chavez said while holding up a Noam Chomsky book on imperialism

....I nationalize greedy golbal companies in my country and
Bush screams Socialism is evil and capitalism is great!
But when Bush bails out his rich greedy friends, it's OK!

Even with a third of that money, we could have reduced or even finished off poverty in Africa, in Asia and in Latin America,"

Smile America!
You're on Roman Empire TV America

Jill / September 25, 2008 4:11 PM

I'm with Luke and Annie. I missed the housing boom because the prices were getting so high, so quickly, and even though I'm sure somebody would've given me a loan, I knew I couldn't afford to buy.

Even if the percentage on down payment goes lower, it still doesn't make sense to me to buy because of all of the extras you have to pay (e.g.--PMI) if you're not able to put down 20%. And it's not easy to come up with that 20% anymore.

royce76 / September 25, 2008 10:32 PM

yeah 20% down on our house would've been $63,000. i do remember chase taking a LONG ass time with this loan though, maybe they were more prudent than say, wash mu or whoever was buying those bait and switch mortgages from broker houses. lets scarlet letter those houses where people now pay a lower fixed because of this bailout when all they had the credit rating for three yrs. ago was a 5% 3year bait and switch. I honestly don't care if i live near a bunch of bank owned empty houses. more parking less dog barking. responsibility for your decisions people! btw I'm also very pissed at the MN Twins 3rd ump and centerfielder

Spence / September 26, 2008 11:04 AM

It looks like McCain blinked first:

http://thecaucus.blogs.nytimes.com/2008/09/26/debate-is-on/

The McCain campaign is back on, not that it was really off in the first place

Pedro / September 26, 2008 2:06 PM

It is clear that most people don't understand the variables involved in this crisis and look to boil it down to one demoninator and place blame.

i.e. blame it on Bush, deregulation, mortgage lenders, etc...

Everybody involved has some degree of culpability in this, and sorry to say, but this goes to both political parties.

Rich / September 26, 2008 2:11 PM

Pedro...well put.

Spook / September 26, 2008 2:34 PM

Hey Pedro,

why don't you explain the macro "variablesinvolved"
instead of sounding like bland NPR with out the college education


and news flash this was bigger than a bunch of saps being fooled by greedy pigs at Country Wide

Rich / September 26, 2008 3:39 PM

I can explain the variables involved, Spook!

There are countries that were 3rd world nations 20-30 years ago and are now industrialized nations.

The IMF nearly doubled in the 2000's compared to the 1990's, which is a good measure on how much money countries have around the world.

Those governments now have capital (cash) to invest, so they went to the U.S. Government looking for investments.

Greenspan did not raise interest rates on Government Bonds, which led those countries to look elsewhere for investing.

Going to the broad shoulders of the U.S. Real Estate market was the idea.

There was a sharp increase in demand for Real Estate Bonds. So it was easier to get a mortgage. Banks had liquidity so it could issue mortgages with zero down or little down. That led to brokers issuing "No Income No Asset" sub prime loans to fulfill that increase demand for Real Estate bonds.

Then what was happening was the tools used for giving "risk" on a bond did not have a factor for a "NINA" loan (No Income No Asset).

Bonds get rated based on past rick/return ratios. Since the past data was apples (No NINA loans taken into consideration) and the bonds being issued were oranges (they had NINA loans included), the return in reality did not fit the risk.

Further, Standard and Poor's were rating AAA Mortgage Bonds (low risk) that had about 2% low risk mortgages in the bond! The rest of the bond was filled with sub prime NINA mortgages (extremely high risk). Side note: Standard and Poors is currently being investigated for this practice...FYI.

Eventually people in masses were defaulting on these mortgages, the Bonds were not getting paid, the demand decreased for these bonds, and there was no where to put the "left over" NINA mortgages.

As one mortgage broker put it, "I knew the end was coming when I only made $20,000 in commissions that month".

Now these banking institutions have a bunch of Bonds that are not worth much on their books. those institutions have no liquidity because the bonds that normally are paid each month are not getting paid.

The "bailout" will buy those bonds and mortgages, giving those institutions liquidity to do business.

Something like that.

:-)

reenie / September 26, 2008 6:46 PM

Today's New York Times had an interesting story about how Sweden handled its real estate bubble burst back in 1993.

The difference between their strategy and ours (so far)? Sweden held banks accountable: they had to write down losses and hand over equity to the government.

Story is here: http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html

Spook / September 27, 2008 9:55 AM

Well, Richie old boy old, old chum, old man of the realm. clearly you aren't on the Blue line reading The Red Eye. But my intellectual beef with your comment is that its a good outline but not a truth telling road map of how we got here and the the motives behind. Feel me? I mean how could you leave out the massive amounts of bundeled( sold to all major fin. Institutions with no oversite) fraudulently made to poor folks by inflating their income or decreaing their income so they could be forced into higher interest rates to pay more? What about the change in banking regulations so banks can fly under the consumer protection radar? What about the Bankruptcy bill supported by both candadites that allowed credit cards to squeez out every drope of a poor and working class person's blood by changing interest rates on even thoughs who pay one time and charging extra fees when you pay on time? What about the political influence on both parties and the growing disparity between rich and poor, the fact that we can create the political will on both sides of the asile to clean up the mess of greedy corp. thives who put profit over morality, but can't make the will to end rising child poverty in America or provide universal healthcare for the poor? As they said in The Wire, qoute " all the pieces matter" of course some more than others.

The fact is, this perfect storm has been brewing for the last tweenty years and behind it is American greed and the fact that we value and place a premuim on the dollar far more than we do on our own collective humanity.

Pedro / September 27, 2008 10:26 AM

Rich gets it.

Where this comes into play for "main street" is that the groupings of mortgage backed securities (called tranches) were sold to pension funds, and other investors, that were increasingly under pressure to provide larger returns that reflected the current market conditions (i.e. if the alternative investment vehicle is returning 15% and you are only returning 6%, you don't look very adept at managing money).

As Rich points out, the ratings agencies, Standard and Poors and Moody's are the main ones, did not have the ability to rate the risk appropriately. When the market turned, all of the holders of these assets suddenly had no idea how much risk was in their portfolios, which seized up the normal functioning of the market. (becuase how can you buy or sell something that you do not know how to price correctly.)

This has led to a lack of liquidity in the marketplace and the real danger is that the market gets so dislocated that the institutional investors, like the pension funds, are forced into realizing significant losses. It is this type of situation that the proposed solution is trying to avoid.

You can rail on and on about "fat cats" on wall street, and no doubt there are people there to blame, but you must remember that the vast majority of financial activity in the capital markets is to facilitate legitimate commerce.

I could go on, but the point I'm trying to make is that this isn't about trying to pin blame on one party, person, or institution. This solution should be about providing the necessary framework so that any damage can be minimized, because in the end, the damage has been spread over more of your head than you may have realized.

...and Spook, I am quite educated and mature enough to think objectively. Thank you.

Spook / September 27, 2008 11:24 AM

So Pedro, you reguritate every thing Rich said which is exactly what is at hand to any one who reads the journal, NY Times, the Bond Buyer, the Economist, etc, etc. and you reguritate it why? Because you are looking for the Gapers Block Gold Star? Because you want to sound "intelligent"? You speak about the "vast majority of fin. activity being legit. activity" but of course cannot think outside the box about the question of morality, humanity and what does it mean to be a good citizen.


And of course you speak of a "necessary framework" as if this was just a market based phenomena as oppossed to dealing with the fact that we have broken the proverbial "rubber band". And of course you DONT want rail on "fat cats" because as Americans we are trained never to rail on "fat cats" we are trained to admire the roberbarons and corporate thives. Of course let Shequita- who stay down the block- slip up and then my friends, we ar ready to point the finger. Where is Bill Cosby on this? How come O'Bama isn't all heated on this as he was with how Jamal aint raising his kids? Because they aint go money to fund his "life style"

Yes Pedro, I get
it and I get you. Not that it takes much in the way of intellectual capital. You are
in the words of that
deeply Socratic Professort in Colorado Ward Churchill one of the numerous "little Eichmanns" that allow this total backwards stupid country to countinue as oppossed to growing up

Pedro / September 27, 2008 11:29 AM

I hope you get the help you need.

Rich / September 27, 2008 4:56 PM

Spook:

"I mean how could you leave out the massive amounts of bundeled( sold to all major fin. Institutions with no oversite) fraudulently made to poor folks by inflating their income or decreaing their income so they could be forced into higher interest rates to pay more?"

Actually, I touched base on them. NINA stands for "No Income, No Asset" loans. That is where the "predatory lending" practice was happening.

"What about the change in banking regulations so banks can fly under the consumer protection radar?"

Fair enough...I noticed you did not feel the need to tell us where it fits, so allow me. The banks deregulation is what allowed banks to buy NINA mortgages from the brokers, thereby putting them in Real Estate Bonds and sold on the market. If this market was more regulated, those mortgages would not be allowed to be given, and thereby would not be put in bonds.

I purposely left out the Bankruptcy item you mentioned, but yes!...that plays a huge role after the mortgages are defaulted. Great point.

"What about the political influence on both parties and the growing disparity between rich and poor, the fact that we can create the political will on both sides of the asile to clean up the mess of greedy corp. thives who put profit over morality, but can't make the will to end rising child poverty in America or provide universal healthcare for the poor?"

I see your point here, but you are not going to like my answer. The role of government is different for each economic class. Let's not pretend the Government is there for the lower class in the same capacity as the upper class.

To borrow from Howard Zinn...the governments role to the lower class is to make sure no civil wars break out. No military coups, no "General" heading our nation after they took over the White House.

The governments role to the upper class is to keep American business's profitable and keeping the wealthy, well, wealthy.

I'll agree with you last paragraph as well. A little dramatic with the whole "collective humanity" ending, but I'm in agreement none the less.

Spook / September 27, 2008 9:00 PM

Rich,

Yea I;m wit you.
That's all I asked, was that you broaden the scope of your telling of this tragic tale from a sterile policy wonk clinical
outline to a more broad historical perspective including what it means to "America"

And honestly, what is more dramatic, my "collective humanity" or that this was allowed to happend in the first place? And thanks for the Zinn, yea I need t reread him

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