Bailout Thread

I must not keep Hale “bonddad” Stewart to myself any longer. He’s not much of a speller but on $$$ has been right way more often than not during the two years I’ve been reading him. In a post entitled, “Why Paulson’s Plan Could Lead to More Trouble”:

The Treasury’s potential use of all $700 billion to purchase impaired assets would raise the country’s debt to more than 70 percent of GDP. The last time American taxpayers owed as much was in 1954, when the nation was still paying down costs incurred during World War II.

“It’s an alarming level of debt given that we’re not fighting something like World War II,” said Robert Bixby, executive director of the Concord Coalition, a non-partisan budget watchdog group.

The government reaching the requested debt limit would entail every man, woman and child in the U.S. owing more than $37,000 each. The median U.S. income last year was $50,233.

[Related addition: If your home is in foreclosure, should you lose your vote?]

18 thoughts on “Bailout Thread”

  1. The Federal Reserve is no more federal than Federal Express. It is a privately-owned banking institution that make millions in interest off of our debt. We’re on a slippery slope indeed when we bail out debt with more debt and put the “government” in charge of the whole mess. Sound familiar?

  2. My reading has revealed that the bailout plan has been in the works for months. So much for it being a real “crisis.” When you are trying to put one person in charge of that much money with a message of “quick, hurry, do this now or we’re sunk” I’d call that a major power play.

    I can’t wait ’til these clowns are gone.

    If we’re going to do a bailout, why not just pay every man, woman and child in America a million bucks each. It would be much cheaper, help people get out of debt, pay for health care and college for their kids, sock something away which is one of the primary problems in the first place.

    What?! How is that crazier than putting one unelected person in charge of our economic destiny with no accountability?

  3. Imagine the hassle of having to prove that you will be able to pay back the loan before it is issued.

    As far as the message

    “quick, hurry, do this now or we’re sunk”

    it worked before so why not try it again.


  4. Interesting timing for this “crisis,” wouldn’t you say? Spin, spin, spin. Remember the dire warnings about Saddam Hussein and his WMDs!? I’ll wager this is an eleventh-hour ploy to make a lame-duck president look good and keep the country in a state of fear. Congress is wise to take it slow. Personally, I like Yinn’s idea :o)

  5. So how much truth was in the story that if all of the sell orders in after hours trading for one day got put in, the Dow was probably going to drop 3,000 points?

    Besides the home mortgages, there were a bunch of greedy idiots, individuals and financial institutions, borrowing money to buy stock. That should be illegal. No collateral, no loan. No proof of a way to pay it back, no loan. This is not rocket science. That is as bad if not worse than the gambler who has a problem and uses a credit card to get more money to gamble because the bank account is empty.

    By the way, Russia’s market did crash last week, dropping around 20% in one day. It got so bad that they shut down trading.

    We do not learn. Just say Michael Milken, junk bonds, derivatives, BCCI, Neil Bush, hedge funds . . . . . . I bet we have not paid off the national debt that grew under that mess. Derivatives and hedge funds are a problem again and I guess no one learned from the Asian crash about making risky loans with people with high debt ratios.

  6. Several posts ( in other sections) refer to THE PLAN

    The plan does more tha bail out financial institutions and bad mortgages it is a plan to stabalize the economy. In my opinion let me explain how this helps all of us.

    I live in a neighborhood of homes valued at 300k. Lets say my neighbor bought a house across the street and everyone knew they could not afford it. Now their loan is in default and the bank wants to foreclose. When the bank forecloses on my NEIGHBOR this is what happens to ME.

    The bank will sell that house at a very reduced rate thus lowering the value of MY HOUSE.

    My house value will drop so my tax rate will have to increase to keep paying for our schools, and public services.

    As my taxes increase I will have less to spend on other items so manufactures will produce less and need fewer employees so some of my other neighbors will loose their jobs. Unemplyment will increase.

    Umemployment increases so there is a further drain on the economy.

    My other neighbor now looses his job and is forced to sell because they lost thier jobs.

    My property value goes down again, Taxes up again over and over.

    The plan does allot more than bail out the financial institutions and bad loans it bails out all of us.


    P.S. Yes I agree allot of people need to be held accountable but allot of peoplel think they are sitting on the sidelines and they and just as much in the game as anyone else.

  7. Yinn.

    It is my understanding that the “bad” mortgages are bundled in with some good mortages and the only way to drill down to the bad mortgages is to by the bundle.

    I have also read that once the bundle is purchaes the good mortgages can then be resold ( maybe and I mean Maybe) even be sold for a profit.

    So roughly 660 B is needed to but the whole bundle and 550B of good paper can then be resold thus covering the 110B in bad paper.

    Hope this explanation makes sense


  8. it would be about $2300 not $1,000,000 if they issued a check to every citizen.It would be about $3200 if they cut a check to everyone over 18, a tax rebate of this amount would be more effective on spurring the economy then a bailout.

  9. I fail to see how your neighbors foreclosure would legitimately affect your spending power.Lets see, if your property tax is $8000 and your property dropped 25% in value and the county properly reassessed -you would pay $6000.To recoup lost revenue property taxes would need to be raised about 3 points-thats a pretty significant raise and would equal to about a $200 raise per year ($8241) -yes all those little tax raises do add up.But falling prices/tax revenue is a straw man argument to support the bail out.

  10. Chadwick Not sure what the straw man comment is meant to say.

    All I am trying to point out is that everyone has some skin in this game not just those with the bad mortgages..

    If someone’s foreclosure drops the value of my property that does have an affect on me. My house is paid for but if the credit market dries up and someone cannot get an auto loan that will also have an afffect on me.

    If no one can buy a new car because the credit market is dry then the auto makers lay everyone off and that has an affect on me.

    Just trying to point out this can really affect more than just those with the bad mortgage.


    PS Lets say someone owns a house with a current value of 200k but owes 175k on the mortgage. He currently does have equity in that home of 25k. If neighbrhood foreclosures drop the vaule of his home by 25% they now have a morrtage of 175k on a home valued at 150k. The spiral keeps going downward.

  11. I bought a foreclosed house in 2000. The neighbors then were totally happy that I bought the thing as they were all worried about their own property values and/or if someone bought it and turned it into a rental which would affect their property values.

    In the past, to send kids to college, many parents took out home equity loans at very low interest rates. With property values down and it being harder to get credit, it then becomes more difficult for parents to send their kids to college because they cannot get home equity loans anymore. If their property values drop and the equity gets wiped out, even if parents have good credit, they may not have enough equity to get a loan. Enrollment rates for both Kish College and NIU are down.

    Fewer kids going to NIU (and Kish to a lesser extent) means fewer kids spending money in town. Fewer kids spending money means even less revenue for sales tax. Any wagers on how soon the city starts crying about the sale tax revenues dropping?

    It also means more 18 to 25-year-olds looking for work instead of going to college. Well, the warehouses could hire the high school graduates and there is talk of low-income housing by the city, which probably means taxpayer money in there somehow, some way.

    Just about everything involved with money is connected to something else through money.

  12. Nope, I’m kind of hooked on the $1 million idea ’cause it’s dreamy. Meantime there is no way any “rescue” will stop at $700 billion. The leap to a trillion and beyond, the added zeroes backed up really by nothing but wishful thinking, will be next.

    I do agree that any real spending power that can be given over to the people would have an overall more beneficial effect than giving it to the gamblers who got us into this mess in the first place. But I’m pretty sure they prefer the current system of wage- and debt-slavery.

  13. Quiz. Who has the higher credit score

    Person 1 has 5 credit cards. All carry a balance. That person pays the minimum on each card every month and always pays on time. This person is always in debt

    Person 2 has one credit card and pays the entire balance off every month. This person is never in debt

    Who will have the higher FICA score??


  14. Correct. We live in a ” credit economy”

    We started to list several “things” at work the other day in which the credit score is used for items other than credit.

    Premiums on everyone’ auto, home and life insurance are based on a person credit score even if paid up front in cash.

    The cost of leasing a car or property is based on someone’e credit score.

    Employers often look at someones credit score in the job application screening process.

    The small business office space rental in based on their credit score.

    Point is the credit economy has it effects on everyone not just those borrowing money and even though the rescue plan may stick we cannot go on without it


  15. IMO, basing insurance premiums on credit scores is wrong, since it doesn’t matter if you pay up front, pay on time, never have a claim, etc. And looking at credit scores for employment purposes seems to be an invasion of privacy. Fair Isaac reaches too far; scores should be used solely for securing credit. And it is a vicious cycle as well: if your score isn’t stellar for whatever reason, you pay higher rates, making it harder to make your payments, which lowers your score, and on and on. Easy to see how credit spirals out of control.

  16. What I’m gathering from the story is that the group is making sure that ALL of those who have a foreclosed home and do not presently reside there are not using that address for their voters registration. That voter does have the ability to register their new address before the deadline in order to be able to vote. This group is not taking away a vote as much as making sure that it doesn’t count as a second vote. That is the way that I’m reading it.

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