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I wouldn't call it a bail out. The government is just trying to separate the paper from the banks. After selling the paper, the banks can operate normally. And the government isn't forced to sell the paper at distressed prices.
If the banks were to keep the paper on their books, and take write downs, AIG would have to cover their losses, because AIG is the insurer. Ordinarily, I would think the asset would be disposed of by the insurance company, I guess.
However, the banks are in the position of distressed sellers. They would be selling properties for whatever they can get, and driving down real estate values.
But if the government buys the paper from the banks and other investors, then it becomes the owner of the properties, and it can hold them.
There's been some talk about what the paper is worth and how to price it. The best way to value the paper would be to create a government department to maintain the properties, and rent them out. Rents have not fallen. As a landlord, I know I can get at least 5% on a property on the price at which it was selling at the peak of the market. If the house was selling at 190K, I can get 950/month. This would not only set a price for the paper, it would create a real return, and it would probably be of interest to some investors. At least it would create a bottom. That's not to say the government would have to keep the properties any longer than they had to, but at least it wouldn't drag down the real estate market. And the government might learn something about the landlord tenant relationship, and they might pass some common sense laws for a change. Also don't blame the banks and the lending institutions for lending people money. There was alot of political pressure on them to not discriminate. Besides the ones who walked away from their homes are the real culprits. They have an obligation to repay the banks. If they walk away, they should be charged with a crime. Fraud at least.
I'm not so sure the bailout is going to actually happen. Most of congress is against it. Passed or not I would prepare for a serious depression in the US. I live in Canada who's government has been much more responsible financially and have been running a surplus budget and paying down debt for years now. Nevertheless I am very concerned that the US meltdown will have a negative influence on Canada. Canada, like the US has farmed out far too many jobs overseas and that doesn't help matters.
If the Bill is not passed by the end of this week, there is a real concern that it may not be passed at all. The House of Representatives had been scheduled to adjourn by tomorrow – while the Senate had not set a target date – to allow politicians to help fight the presidential election.
Did anyone just watch Bernanke on Capitol Hill? This bill will more than likely get passed now after today, though not in it's God awful orginial form, thank God. He did a pretty good job of speaking in lehman's terms(Ha! Get it?) and connecting all the dots. Anyway, it will not cost us 700 Billion, and there will be plenty of over site, new rules, and there will be no Czar of Finance. Stay tuned, more to follow in the coming days.
I'm not so sure the bailout is going to actually happen. Most of congress is against it. Passed or not I would prepare for a serious depression in the US. I live in Canada who's government has been much more responsible financially and have been running a surplus budget and paying down debt for years now. Nevertheless I am very concerned that the US meltdown will have a negative influence on Canada. Canada, like the US has farmed out far too many jobs overseas and that doesn't help matters.
If the Bill is not passed by the end of this week, there is a real concern that it may not be passed at all. The House of Representatives had been scheduled to adjourn by tomorrow – while the Senate had not set a target date – to allow politicians to help fight the presidential election.
I don't think it's a crisis as far as the financial system goes. AIG is well capitalized now, so they can pay out on the policies. The real concern is falling real estate values. That's it. If the government doesn't buy the subprime mortgage paper, then prices will continue to fall and banks will not lend. Hence the credit crisis.
So that's the strategy. And I think it will work. I just hope people don't go back to spending money they haven't got. Even GDP as it is measured in terms of spending doesn't make sense in this economy. It made sense, way back when people saved up to buy things. Then, increased spending was a measure of growth or wealth. Today, in a spending culture, it doesn't make sense to measure growth in terms of spending, especially as the money is going to China. You're really measuring Chinese growth in that case.
I don't think it's a crisis as far as the financial system goes. AIG is well capitalized now, so they can pay out on the policies. The real concern is falling real estate values. That's it. If the government doesn't buy the subprime mortgage paper, then prices will continue to fall and banks will not lend. Hence the credit crisis.
So that's the strategy. And I think it will work. I just hope people don't go back to spending money they haven't got. Even GDP as it is measured in terms of spending doesn't make sense in this economy. It made sense, way back when people saved up to buy things. Then, increased spending was a measure of growth or wealth. Today, in a spending culture, it doesn't make sense to measure growth in terms of spending, especially as the money is going to China. You're really measuring Chinese growth in that case.
China just stopped lending to US banks. As of about an hour ago.
Do you think spending $700billion we don't have as a nation is a good thing as long as we don't do it individually anymore? How do you pay off debt with more debt? It's a spiral.
China just stopped lending to US banks. As of about an hour ago.
Do you think spending $700billion we don't have as a nation is a good thing as long as we don't do it individually anymore? How do you pay off debt with more debt? It's a spiral.
Well, in this case, it's to your benefit. This is what will happen if they don't pass the bill. You'll see a flight to quality. In some areas of the country, real estate prices will sky rocket. But many areas of the country will be in a depression. There will be a run on the banks. Many will fail. Not all. The bigger banks will relocate in the better parts of the country. There will be unemployment and crime. Bush's plan isn't a perfect solution but I believe it will work. Good that China stopped lending. Now we have to stop buying Chinese made products, and start producing. As far as spending 700 billion we don't have, the government has to monetize the debt; print money. The worst that can happen is interest rates will go up. That's a good thing for savers. Get back to being a saving nation!
Well, in this case, it's to your benefit. This is what will happen if they don't pass the bill. You'll see a flight to quality. In some areas of the country, real estate prices will sky rocket. But many areas of the country will be in a depression. There will be a run on the banks. Many will fail. Not all. The bigger banks will relocate in the better parts of the country. There will be unemployment and crime. Bush's plan isn't a perfect solution but I believe it will work. Good that China stopped lending. Now we have to stop buying Chinese made products, and start producing. As far as spending 700 billion we don't have, the government has to monetize the debt; print money. The worst that can happen is interest rates will go up. That's a good thing for savers. Get back to being a saving nation!
Printing more money creates inflation. Since we don't know what the real inflation rate is, we may not be able to afford doing nothing, or something. How many US dollars are actually in circulation (both real and virtual)? I'm not sure the Federal Reserve even knows. They quit publishing the M3.
Printing more money creates inflation. Since we don't know what the real inflation rate is, we may not be able to afford doing nothing, or something. How many US dollars are actually in circulation (both real and virtual)? I'm not sure the Federal Reserve even knows. They quit publishing the M3.
Interest rates should be 20% or more. You have to stop people from borrowing money! Unfortunately, you can't continue borrowing money for stupid things. It will affect homebuyers too, but it has to happen. When the Fed lowered interest rates, it was the dumbest move I ever saw. At that time rates should have gone up, making it harder to borrow. But nooo. They had to keep people in the market. This was Bush's fault.
Regular folks don't belong in the market! True, you can blame alot of this on the market, and greed, and financial advisors, TV, newspapers, advertising, etc. You can even say people were manipulated to put their money in the stock market because rates didn't go up.
Anyways, now rates have to go up. If they don't, then it could be bad news. Then you can blame the administration.
"A brief proposal sent to Congress by the Treasury Dept.—with a request for action before Congress adjourns on Sept. 26—would authorize the Treasury to buy up to $700 billion of toxic mortgage-related assets and gradually resell them, with few strings attached. That is roughly what the U.S. has spent to prosecute the war in Iraq to date, and nearly $2,300 for every man, woman, and child in the country. Added to the $200 billion that could go toward shoring up Fannie Mae (FNM) and Freddie Mac (FRE), and the $85 billion the government has pledged to acquire most of insurance giant American International Group (AIG), the potential price tag for taxpayers soars to near $1 trillion. That's just under half what the country spends annually on health care."
Do you agree with this latest $700 BILLION (yes you read that right) bail out?
Why are we rewarding these companies that caused this? This is absolutely CRAZY IMO. I have already written to my senators to vote against this absurd proposal. What do you fiscal conservatives think about this?
NO BAIL OUT!! It will destroy America!!!! Bailing out these financial hogs plays right into the wrong hands!!!! It's a quick fix but NOT a good fix!
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