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Old 09-30-2008, 01:15 PM
 
Location: Santa Monica
4,708 posts, read 7,701,403 times
Reputation: 1029

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Quote:
Originally Posted by TnHilltopper View Post
I found this to be rather interesting would be curious to hear the thoughts of the more economic minded types lurking around here.

Commentary: Bankruptcy, not bailout, is the right answer - CNN.com

Wouldn't that already be the US government?

I read that article, by a "free markets" libertarian author, BTW.

The problem is, having more bankrupt banks results in a further CONTRACTION of the money supply, that is, deflation. There might be more cases during the crisis of banks buying out each other, but that is up to the dealmakers themselves to make them happen and might not happen on a scale that is sufficient to stem the present problem (banks not being willing to lend to each other). Having little gov't intervention into a broken system results in the government taking a "crap shoot" with the economy and banking system. Given the stakes, is this what we want our leadership to do?

On the other hand, the proposed bill would result in the Feds (Treasury dept.) buying up a lot of suspect mortgages. One good thing that could come from that is that with the Feds being the new owners (probably under a new Democrat administration), the Feds could negotiate new mortgage terms with the homeowners and thereby practically guarantee that most of the upcoming potential foreclosures won't happen, thereby putting a "floor" under the upcoming recession in the overall economy.
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Old 09-30-2008, 01:25 PM
 
Location: Albemarle, NC
7,730 posts, read 12,689,324 times
Reputation: 1504
Quote:
Originally Posted by ParkTwain View Post
On the other hand, the proposed bill would result in the Feds (Treasury dept.) buying up a lot of suspect mortgages. One good thing that could come from that is that with the Feds being the new owners (probably under a new Democrat administration), the Feds could negotiate new mortgage terms with the homeowners and thereby practically guarantee that most of the upcoming potential foreclosures won't happen, thereby putting a "floor" under the upcoming recession in the overall economy.
It would all depend on who Obama chose for Fed Secretary, but by then, this money would be spent. That's a guarantee.

Even so, there's not enough money in the world to buy up all the bad loans that begin resetting tomorrow, Oct 1. FRB: Interest-Only Mortgage Payments and Option Payment ARMs

Here's a chart.

[IMG] [/IMG]
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Old 09-30-2008, 01:28 PM
 
Location: Santa Monica
4,708 posts, read 7,701,403 times
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"Spending the money" means that DOTreas *owns* the mortgages and can then change their terms, like ARM to become non-ARM. Wouldn't that be a positive development? Yes!

One huge problem, due to stupidity in all the mortgage originations, and sometimes due to borrower FRAUD, is that the CDO instruments are OPAQUE, that is, the owner can't tell the quality or characteristics of the underlying mortgages themselves. Who was able to get the institutional investors to buy these things? I can't imagine who. The new mortgage owner will have to drill down into the CDOs to determine the truth about the underlying mortgages.

Your chart doesn't tell me anything. What do the red arrows signify? Where did you get the $500B number?
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Old 09-30-2008, 01:30 PM
 
Location: London UK & Florida USA
7,922 posts, read 7,817,743 times
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The Govt. Should take back the Fed from private ownership. It costs the Govt. over a Dollar for every Dollar printed. This means that it can never get out of the debt it owes the fed.
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Old 09-30-2008, 01:37 PM
 
Location: Santa Monica
4,708 posts, read 7,701,403 times
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This is what the credit markets pros are worried about:
Bloomberg.com: Worldwide

Actually, after reading the article yesterday in the NYTimes about how Sweden dealt with its liquidity and banking problems in the early 1990s, I think that Congress should consider that approach, though I doubt many of the Repubs would go along with it. It would lead to the Feds investing in the banks with problems, providing them with equity to meet their reserve requirements, but each troubled bank would first have to write down its bad loans thereby causing the present stockholders to take a major hit. Then, as the banks later recovered as the economy recovered, the Feds (the taxpayers) would benefit as stockholders in the new profits gained by the banks.

Here's a link to the NYTimes article:
http://www.nytimes.com/2008/09/23/bu...s/23krona.html

I think the "Swedish model" is getting new attention. I saw it mentioned this morning at Clusterstock.com, for instance.

Last edited by ParkTwain; 09-30-2008 at 01:46 PM..
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Old 09-30-2008, 02:48 PM
 
Location: Beautiful East TN!!
7,281 posts, read 19,026,407 times
Reputation: 2753
Heaven forbid we call in the debts owed to us from all the countries that owe us money, no, we just want to make our national debt bigger.
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