US goverment to buy bad debt

Discussion in 'Business & Economics' started by Asguard, Sep 22, 2008.

  1. Captain Kremmen All aboard, me Hearties! Valued Senior Member

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    12,738
    The Questions I asked in post#11 have now been partially answered.

    Can anyone explain where this $700 Billion is going to come from?
    Is it borrowed, if so from whom?
    (I thought that lack of available money for borrowing was the root of the problem.)
    Or did they have it in some kind of reserve?
    Or are they going to raise it in taxes?
    Or are they simply going to print the money?


    The Money will be borrowed from World Banks and other financial institutions.
    It is common practise with banks to lend money which they do not have, apparently.

    The taxpayer will eventually have to pay the bill through increased taxes and decreased services. $2,300 per citizen has been suggested.

    As an aside on this, the US, with a current double-digit trillion-dollar debt, would not be considered a good subject for a house mortgage.
    Is this just another sub-prime loan, but on a larger scale?

    Banning people because they have "fucked you off" is an abuse of power.
    Bad decision Asguard.
     
    Last edited: Sep 25, 2008
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  3. Carcano Valued Senior Member

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    Buying over-valued mortgage debt is FAR from 'money for nothing'.

    From the Financial Times:

    "The $700 billion would come from selling debt to the public, raising the total federal debt, which is approaching $10 trillion now.

    But it's not direct government spending, which shows up as part of the U.S. budget. If the mortgage debt loses value over time, however, the U.S. would have to record those losses as spending. That could increase the budget deficit, which eventually must be offset by higher taxes or lower spending.

    So taxpayers face the risk of losing some part of the $700 billion -- but could also turn a profit if the U.S. ends up selling those holdings for more than the purchase price."

    http://online.wsj.com/article/SB122256539004883001.html
     
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  5. extrasense Registered Senior Member

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    551
    How would you sell holdings, that have been proven to be backed by houses of a low value, and make money?

    You must to buy them for a price below their actual value. But the holding seller will not be bailed out with such purchase, would he?


    Interest rates must go up, the taxes must go down, Federal Reserve must be nationalized. This is the only way to get economy on the right track. All else will fail.

    eS
     
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  7. iceaura Valued Senior Member

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    It is money for nothing - certainly the part of the price that is bubble, is nothing. That is what a bubble is.

    You bet. Step right up.

    And the next 500 billion, when the L4 rollovers are due ?

    I say not a nickel that isn't backed by an equity stake in the houses themselves, at current market value. Then if the housing market recovers some day, we won't be dependent on the fine print of the "holdings" to get our money back.

    Better yet: not a nickel that isn't backed by a surcharge on the capital gains tax, sufficient to repay the loan in ten years. We're saving the whole US financial market, right? So that's who should pay the piper.
     
  8. extrasense Registered Senior Member

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    551
    @@ if the housing market recovers some day @@

    Housing is overvalued more than 400%.

    If market to recover, 75% still must be lost.
     
  9. Carcano Valued Senior Member

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    Its nowhere remotely close to 400%.

    Please Register or Log in to view the hidden image!

     
  10. Carcano Valued Senior Member

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    Thats assuming everyone with an over-valued house has not paid a percentage already, and will NOT pay off the balance.

    Remember that inflation will make it easier to pay down the mortgage over the next several years.
     
    Last edited: Sep 28, 2008
  11. extrasense Registered Senior Member

    Messages:
    551
    Your picture convinces me even more, that my estimate is correct. But even if we would take it at the face value,
    $350 billon must be written off.

    But, there is no housing shortage, so the selling price will be lower than cost of building, so you will have to write off even more, and wait for market to recover even longer.

    The bubbles flood in economy, is result of too cheap credit.

    Which is result of rates manipulation by FED.
    Which are caused by its private company status.

    Treasury could do all the useful part of FED activity much better, keeping interest rates practically unchanged.

    eS
     
  12. Carcano Valued Senior Member

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    Then you havent really looked at it...try again.
     
  13. extrasense Registered Senior Member

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    i guess, you assume that initially prices were correct too

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  14. iceaura Valued Senior Member

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    No, it's assuming that the mortgage debt currently owed reflects significant bubble "value", and that enough of the individual loans are not going to be paid off to bust the institutions currently holding the debt.

    If that isn't true, we have no problem in the first place.
     
  15. extrasense Registered Senior Member

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    551
    Quite wrong.
    The problem with Republicans was that they've often surrendered to Democrates demagoguery.

    Qbama is a disaster of absolute demagoguery, from which we would not recover in 70 years.

    eS
     
  16. Mickmeister Registered Senior Member

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    812
    So the bill has been rejected 205-228 today. A great number of the democrats and republicans voted against it because they were overwhelmed by the average person to vote against it. So what I am going to be glad to see is the credit industry being squeezed and people not having credit available to them. This needs to be stopped. Americans are too much into using credit for everything. I think this is going to be the good thing about the failure. People will be forced to not use credit like they have been. This may actually be a good thing. People will be forced to pay cash.
     
    Last edited: Sep 29, 2008
  17. S.A.M. uniquely dreadful Valued Senior Member

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    The Dow fell by more than 700 points.

    http://www.kptm.com/Global/story.asp?S=9091844&nav=menu606_24_11_1
     
  18. Roman Banned Banned

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  19. S.A.M. uniquely dreadful Valued Senior Member

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    Nope, I have too much G#^$#&*T$&* family in the US.

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  20. Mickmeister Registered Senior Member

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    I am not worried about the market. This is just a correction of the market. I am not selling any of my securities.
     
  21. ashura the Old Right Registered Senior Member

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  22. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    Volume was very heavy, especially at the close. 45 minutes after CoB it seems to have finalized at the interesting drop of 777.7 points or 7% down.*
    due to both big bank being taken over in US and several more in Europe and the 700 billion bail out bill failing in Congress. {McCain could not even lead 2/3of the Republicans to follow the foolish GWB / Paulson plan, fortunately.}**

    "A day of 7s" and largest point drop down in history for the DOW.

    But do not worry, October 2008 is still slightly more than 24 hours away. I told you three year ago that the run on the dollar would begin after 1 October 2008.

    --------------
    * In the seventh hour of the seventh month (SEPTember) as originally named before Roman empora Augusta and Julius Ceaser screwed the decimal calender.

    **For a plan that does address the CAUSE of the problem and All the symptoms see: Poll "Paulson Plan - do it or not?"
     
    Last edited by a moderator: Sep 29, 2008
  23. ashura the Old Right Registered Senior Member

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