Its being assumed by many that the 800 billion the government wants to spend on buying up bad mortgage related debt will eventually come out of taxpayers pockets.

This isnt necessarily the case, as similar rescue efforts of the 1930s reveal.

http://online.wsj.com/article/SB122186662036058787.html

"By 1933, four years after the infamous stock-market crash, about 1,000 American homeowners a day were losing their houses to the bank. President Franklin Delano Roosevelt and Congress created the Home Owners' Loan Corp., an ambitious government agency designed to prevent foreclosures on an enormous scale.

The agency bought defaulted mortgages from banks, then refinanced them at lower rates for fixed, 15-year terms. Over the three years it accepted applications, the agency was swamped with 1.9 million requests; about half of the applicants had monthly incomes of between $50 and $150.

Ultimately, the agency issued mortgages, averaging $3,039 apiece, to some one million homeowners. About one in 10 Americans with nonfarm, owner-occupied dwellings secured aid from the agency, according to a 1951 paper by C. Lowell Harriss of Columbia University.

The current mortgage crisis involves securities backed by subprime home loans. But during the 1930s, there was no secondary market for securitized mortgages. So the agency had to hold the mortgages for the full terms. It finally closed up shop in 1951, with about 80% of borrowers having paid their loans off on time or early.

The agency earned the government a small profit. "You save 80% of the people from being tossed out of their homes, and it didn't end up costing the government a dollar."

This time it is happening faster so that we do not have to endure as much pain. The good news is we know how to handle situations like this..it is not the first time. Bad news is that the Republican congress reversed the Glass-Stegal act in 1999 and Clinton signed it into law...real stupid.

A talking head this morning (on BBC) said this is largest transfer of wealth from middle class to the wealthy in US history. Many arse hole bankers who were the ones who made this mess will now make even more money because they will benefit from this bailout.


The sad thing is that Junior ran all of these other companies into the ground and so people joked he'd do the same with the USA, I doubt even they are laughing now.

A talking head this morning (on BBC) said this is largest transfer of wealth from middle class to the wealthy in US history. Many arse hole bankers who were the ones who made this mess will now make even more money because they will benefit from this bailout.


The sad thing is that Junior ran all of these other companies into the ground and so people joked he'd do the same with the USA, I doubt even they are laughing now.

Who exactly are these "other companies" you're talking about??

From here (http://www.campaignwatch.org/more1.htm)
Bush sold $828,560 worth of Harken stock [on June 20, 1990] just one week before the company stock posted unusually poor quarterly earnings and Harken stock plunged sharply. Shares lost more than 60% of their value over 6 months. When Bush sold his shares, he was a member of a company committee studying the effect of Harken’s restructuring, a move to appease anxious creditors. According to documents on file with the Securities and Exchange Commission, his position on the Harken committee gave Bush detailed knowledge of the company’s deteriorating financial condition. The SEC received word of Bush’s trade eight months late. Bush has said he filed the notice but that is was lost

The fact is under Bush Juniors management the USA started and are still fighting two wars at the cost of over a trillion dollars (we won WWII quicker for Christ's sake) and now the entire economy is tanking.

Elect dimple dumb to office and this is what happens. I wonder where his MILF doppelgänger wacko Palain will take the USA?

meh, people get the government they deserve. We Americans deserve to have incompetent dip shits leading the coutnry.

And heres a little talk on the government involvement in the Savings and Loan crisis of the 80s.

http://www.youtube.com/watch?v=Q7cj50nNkdg

Hey Billy did you read the opening post?

I dont even know what that means.

Its being assumed by many that the 800 billion the government wants to spend on buying up bad mortgage related debt will eventually come out of taxpayers pockets.

This isnt necessarily the case, as similar rescue efforts of the 1930s reveal.

http://online.wsj.com/article/SB122186662036058787.html
...Yes. That is basically what I am suggesting and it differs from Paulson's blank check to aid banks plan in that back then the paper the Government bought was secured by one real asset, the house of the mortgage, not by some "derivative" of paper which has been multiplied 32 times by leverage on different original mortgage papers.

I too think the banks can be saved, Joe American can be moved into a house, apartment or trailer he can afford, without having any debt to the bank associated with mortgage on the house he bought and is going to foreclosure now. If it is financially "under water" he will still owe the bank the difference: (mortgage balance + auction fees, lawyers included - price it sold for) unless he files bankruptcy papers, which will both cost and make it hard for him to get back on his feet economically.

My plan helps the banking system: EVERY MORTGAGE is worth it face value and everyone knows this, so it could sold to raise cash for new loans, not frozen in the current limbo as does not have any known value. (Admittedly there will be losses and legal cost to pull them out of the packages they have been place in to make various "derivatives," but that is only "fair reward" for those who made this mess by writing those "derivative" packages. This can be "un-wound" slowly, and may need some government help and certainly new regulations on "derivatives.”)

My plan does, like the old one make the US government enter the land-lord business for a few years, but terminates that ASAP probably with small profit. One does not want to fully recover the falsely high values houses had at their peak. One only want to take many off the market to stop the current slide down in value, which is putting more owners "under water" every day, collapsing the economy now.

See plan at:
http://www.sciforums.com/showpost.php?p=2020983&postcount=53

But PLEASE act on post 9 suggestion also, NOW.

I would also favor a decade retroactive "Excess bonus and parachute" tax that takes all bonuses and golden parachute payments back above the salary of Supreme Court judges, but that is another subject.

(If the recipient cannot immediately pay, then the US takes title to his/her houses and yachts etc., renting one back to the debtor who abused Joe American so badly.) I would ear-mark much of the recovered funds to compensate the firms that have losses due the "unwinding of the derivatives" - those "derivatives" should never have been allowed and the bonuses for making them up should never have been paid - this taking them back, is just effort to correct the wrong they did.

Thieves are never allowed to keep their stolen loot if it can be restored to the rightful owners. CEO collectors of big golden parachutes, when they lost their job, should IMHO be provided with a new job - in the prison laundry perhaps.

That is basically what I am suggesting and it differs from Paulson's blank check to aid banks...
Its NOT a blank check.

Even Warren Buffet came on board in support of the plan today:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aRef_DUx6AcU&refer=home

"I think the Treasury will pay back the $700 billion and make a considerable amount of money'' Buffett said, adding that if he had $700 billion on the government's terms to buy distressed assets, he would. "Unfortunately, I'm tapped out.''

"I think the Treasury will pay back the $700 billion and make a considerable amount of money'' Buffett said, adding that if he had $700 billion on the government's terms to buy distressed assets, he would. Not to question Saint Buffet's always interesting commentary, but he is one of the people being (indirectly) bailed out here - and if the US government were buying anything with this bailout he would have more of a point.

The houses aren't worth the mortgage values, and the derivative paper is only worth the discounted value of the houses at bottom, is the central problem. Buying this debt as if there were collateral behind the underlying mortgages is paying money for vapor.