Can anyone explain to me how this bailout is going to save housing values?

[Indenturedebtor]

To my thinking it isn't at all.

I suppose that some might say that somehow this will save the economy, and that home values will go up again in a couple of years.

Given the fact, though, that we haven't even begun to address all of the massive financial weights on the American consumer I think that the economy will continue to crash and people will increasingly view their homes as massive weights around their necks. So all of this government assumed debt will be very debt. The dollar will fall even faster because of our greatly increased debt load, commodities will go up, etc etc.

Yes we need to do something to shore up our financial sector so that business doesn't completely grind to a halt. But wouldn't we be better off forgiving the debt of our consumers? Wipe out all of the credit card debt and institute national healthcare for example? Then people could pay their mortgages and "go shopping again" as they say.

[MercutioATC]

1. It won't. It'll just save the institutions that made the bad loans.

...and it does absolutely nothing to fix the system that allowed this to happen.

They're taking a handful of high-rollers who lost at the casino and giving them their money back...out of the casino employees' pension fund.

...and they're extending those high-rollers new markers.

[lostnotforgotten]

2. Bingo - We Are Providing Golden Parachutes To Bush's Cronies

eom

[Indenturedebtor]

3. And in the process flushing the dollar value down the toilet no?

Sigh... there has to be a better way. This doesn't do anything AT ALL to address the fundamental problems that led to this collapse.

[lostnotforgotten]

6. Its All By Design!

"You have to realize that what they’re trying to do is to roll back the Enlightenment, roll back the moral philosophy and social values of classical political economy and its culmination in Progressive Era legislation, as well as the New Deal institutions. They’re not trying to make the economy more equal, and they’re not trying to share power. Their greed is (as Aristotle noted) infinite. So what you find to be a violation of traditional values is a re-assertion of pre-industrial, feudal values. The economy is being set back on the road to debt peonage. The Road to Serfdom is not government sponsorship of economic progress and rising living standards, it’s the dismantling of government, the dissolution of regulatory agencies, to create a new feudal-type elite."

http://onlinejournal.com/artman/publish/article_3702.shtml

[Wetzelbill]

4. MercutioATC is right on

At least as far as I can tell.

You know what I'm nervous about? I'm worried that some people will see this as a way to exploit it like what happened after 9/11. They rammed through the Patriot Act, enacted the Bush Doctrine and beat the drums on a war with Iraq. When I start hearing people affiliated with Bush administration start saying that we absolutely need to do something NOW and without question, ASAP, I start thinking we need to look the fuck out.

[mike_c]

5. I'll be terribly disappointed if it does "save housing values...."

One of the major contributors to this mess is massively overvalued housing, IMO. People used outrageously inflated property values to drive the credit engine to stratospheric levels of greed. During the time this was ramping up, I saw housing values TRIPLE in my neighborhood over five years or so. Fewer than 12 percent of people in my community can afford a median priced home today.

I'd much prefer to see that bubble burst as hard and as deeply as possible. If there's to be any gov't bailout, it should be a rollback of homeowner debt to better reflect the real worth of mortgaged property rather than the grossly inflated values that contributed to this crisis.

But-- but-- that'll destroy the value of millions of homes! Yes, and it should, IMO.

[Indenturedebtor]

8. It probably should. But many, like me, are just going to walk away

let them take the house and move on with my life. I mean how many people want to pay 600k (including interest) in debt for a 200k house? Why not just take the credit hit and walk away? To do otherwise is to be a serf for decades.

[Dreamer Tatum]

7. It provides liquidity

Without the feds stepping in, there was a real fear of a run on banks, which means that (a) there would be
no money to lend, regardless of credit quality, and (b) there would have been a substantial crash that would
have been felt in the very near future - massive job loss, credit constriction, deflation, and a few other
unpleasantries.

If you actually *think* about it, the government would have had to have stepped in no matter what. If there
was a complete meltdown, the only way to prevent a new Depression would be for Uncle Sam to provide liquidity
to the barren financial markets.

At least now there is the possibility that people and business can continue to borrow, albeit at tighter terms
than before.

[coalition_unwilling]

9. That's what Bush and his cronies

would have you believe, that this was merely a crisis of liquidity BUT that the underlying system, i.e., state capitalism, is fundamentally strong.

Do you REALLY believe that line? If so, I have a bridge (to nowhere) for sale :)

[Dreamer Tatum]

10. No, my friend, it's the truth

The market was dangerously close to seizing - the money market was set to evaporate.
That means no money for anyone or anything: no credit card loans. No mortgages.
No nothing.

The institution of capitalism is absolutely strong. The environment that provides liquidity,
well, that's another story. I think you confuse the two. Greedy people did stupid things, and
now we all get to pay.

If the money supply suddenly constricts, we have the makings of a demand-driven recession. Without
liquidity, we have a depression. If you want to avoid a depression and there are no private incentives
to invest, then the government has to step in and do more or less what it did last week.

At this point, it's matter of picking your poison. How did you want the government to intervene? If you
didn't want intervention at all, we would all be screwed.

[coalition_unwilling]

14. I'm not confusing capitalism and liquidity, AIG was heavily invested

in the Credit Default Swap (CDS) market. That market is worth an estimated $65 trillion. Please note that those credit default swaps are derivatives written against collateralized debt obligations (CDOs), i.e., commercial and residential mortgages, automobile loans, credit card loans and so on.

If the value of the underlying collateral has largely vanished or is currently impossible to value correctly, then all CDOs written against that collateral and all CDSes, derivatives, would seem to me to be in a position of lacking value.

That does not mean capitalism is strong. It means capitalism is on the ropes, because capitalism demands proper valuations to make decisions and profits. Solving the liquidity crisis is just applying a band-aid to an underlying crisis in valuations.

[MadHound]

11. For the short term only, and I do mean short term, a matter of months

This is the great bridge that will allow Bush to skate out of office after providing his corporate masters one final payout. But here in a few months one or two things are going to happen. US Treasury Bonds will be downgraded, and the countries holding that debt will start selling them off. This alone has the power to collapse both our government and economy. The second option that could also occur is that the government starts frantically printing money in an attempt to pay off our debts. This too will destroy our economy and country. Both of these could, and probably would be combined allowing the chance for the perfect economic storm to destroy government and our country, all in one fell swoop.

This bailout is a huge mistake that we'll regret. Yes, not doing a bailout is going to lead to an economic crisis, but the fact of the matter is providing this bailout will only lead to a much worse crash.

[Dreamer Tatum]

12. I don't see that happening

Not in the least.

And I am failing to see how this bailout provides huge payouts to more than a couple of guys, at least one of whom
is firmly in the Obama camp (Fred Raines). Add to it that financial stocks, the last week notwithstanding, have taken a mighty
beatdown and will not be back anytime soon. Many execs are stock-heavy in compensation. They're still overpaid, but
at least they got smacked by the market.

Our debt could be downgraded, but you have to start defaulting first, which is not likely now and even less likely
later. Although this raises howls here, the simple fact of the matter is that the economy now is in much better
shape than it was in 1982, the last major recession. It is simply an empirical fact.

Major holders of our debt instruments would be shooting themselves in the foot if they rushed to sell them. Who's going
to buy them, Burundi? Also, contrary to popular (and populist) belief, US debt is not secured by land, buildings,
factories, monuments, hamburgers, electric guitars, or anything else. It's just debt. There is no such thing as foreclosure,
else much of Latin America would belong to the United States right now.

It's not a pretty picture, but neither is the sky falling.

[NNN0LHI]

13. This is a reverse-Robin Hood system