Bailing out EVERY defaulting homeowner: $92 Billion...

[Junkdrawer]

Bailing out EVERY financial institution who made toxic sludge of these mortgages: $1.2 Trillion and climbing...

Listening to how bailing out Citizens is financially irresponsible but bailing out Banks is the only responsible thing to do: Priceless

[Eric J in MN]

1. Where is the $92 billion statistic from? NT

NT

[Junkdrawer]

3. See below:

[Junkdrawer]

2. NY Fed Subprime and Alt-A spreadsheets:

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4044397&mesg_id=4044397

[HamdenRice]

4. Your calculation is ...

basically correct. Maybe not the exact numbers, but the order of magnitude.

If they had bailed out homeowners 9 months ago.

Now, however, even if they bail out homeowners, it won't save the banking system because no one will accept mortgage backed securities.

[ixion]

5. never fear, the US government is opening shop

and will buy up all that bad paper at a premium. :argh:

[bean fidhleir]

45. "the government will buy up all that bad paper at a premium"

...and then sell it back to the malefactors at pennies on the dollar.

[bentley]

6. I wonder if Boehner will vote yes, for these scam artists and speculators.

"Senate Banking Committee Chairman Chris Dodd (D-Conn.) told Stephanopoulos on ABC: “If we’re going to spend taxpayer money to get rid of bad debt in these places, what is the reciprocal obligation … from the firms? … I think there’s going to be a strong interest to deal with the Main Street aspects.”

"Appearing with him, House Republican Leader John Boehner retorted: “We’ve already dealt with that, when we had the housing bill last summer. I didn’t vote for it, because it’s 300-billion-dollar bailout for scam artists and speculators and others around the housing industry. But there are a lot of tools in there to help the Federal Housing Administration deal with the foreclosure problem that’s out there. We need to rise above partisan politics … and deal with this as adults.”

http://news.yahoo.com/s/politico/20080921/pl_politico/13690

[liberalla]

42. Boehner is such a prick.

Thanks for the link, and welcome to DU. :hi:

:kick:

[Lyric]

7. A lot of people oppose bailing out the homeowners because

they don't see anything in it for themselves. They either don't have a mortgage that's in trouble, or they don't own a home at all.

How about this as a solution?

1. The government pays off half of the balance of all mortgages that AREN'T unaffordable McMansions, and acts as a guarantor to refinance the other half to a more affordable rate, thus keeping people in their homes and keeping property values from dropping like a rock due to half a neighborhood full of empty houses. This would keep the banks and investment houses solvent, because people would be able to pay their mortgages. Then regulate the damned industry.

2. The government gives all other taxpayers a refundable (like the EITC) one-time tax credit that is equivalent to the average amount that the government paid toward the mortgages mentioned above. This could be paid in a variety of ways--healthcare accounts that can be drawn upon whenever someone visits a doctor, money paid into retirement accounts, in college tuition dollars, or in plain old cash for people who don't want/need any of the above. Let the people choose.

3. The unaffordable McMansions are purchased by the government for a fair market value and converted into community centers, halfway houses, shelters for the homeless, daycare centers for welfare recipients, subsidized shelter homes for struggling veterans, group homes for the disabled, subsidized housing for elderly people, etc. American contractors would be hired to do the necessary renovations. Yes, Wall Street would eat a bit of loss, but not nearly as much as they'd lose if these houses were demolished or sold at auction, and they'd be put to a use that benefits *everyone.*

All of that would likely STILL cost less than this bailout as it currently stands. The only difference is that "normal" people would benefit too.

[Junkdrawer]

8. The whole point of owning the media and stirring up an orgy of fear...

is to facilitate a transfer of wealth to the media owners.

Your idea is bad as "land reform". The Owners will never go for it.

It would be a good idea if we had a democracy.

[MadHound]

9. Frankly I don't want to see either homeowners or the finanical institutions bailed out

This crisis was brought about by the meeting of Greed and Stupidity. The lenders were being greedy, the lendees were being stupid. You don't take out a nothing down, ARM liar's loan on a house that is out of your price range. You don't use these sorts of loans to go into the business of flipping houses. This sort of Greed and Stupidity shouldn't be rewarded with any sort of bailout.

[jwirr]

11. To some extent I agree with you about affordable housing. All one

has to do is watch a couple of days of HGTV house hunters type programs. You see the McMansions they are looking at and the prices on those houses and wonder what kind of jobs these people have that they think they can afford a home like that. However, since I am homeless and would love to have enough money to convert a garage into a living space I may not know what I am talking about.

[knitter4democracy]

23. I watch those shows and wonder where the heck they are.

They'll show a simple ranch style home that would be in the $125-150K range here and say they're going to sell it for three hundred or more. Wtf?! Where the hell are the prices that insane?

[FatDave]

31. Either coast, from what I hear.

I have a friend who bought a house in a suburb of Baltimore a couple years ago. Think he paid around $450K for a moderate sized house. He and his wife both have good jobs, but damn, I can't imagine paying that for a house. California's even worse.

[knitter4democracy]

43. That's just crazy.

Wow.

[druidity33]

44. my brother on Long Island...

paid $680,000 for a 3 bedroom in a middle class neighborhood (Oakdale). No acreage, 1 car garage, split-level...


he's a high school teacher and his wife is a school administrator. The pay rate is much higher there (i think my bro's wife makes over 80G), but it's still OBSCENE.

:(


:shrug:

[Maine-ah]

38. my house in MA would go for at least 300k according to my aunt

who's a broker down there. I could sell it now for about 130/135k maybe 140k. Bought it for 85k in 2002, refied for lower rate plus some equity for a roof in 2004/05.

[bean fidhleir]

46. Where in Mass do you live, that you'd have a hard time selling a house for 140K?

Even in Holyoke - depression center of the world - prices are higher than that.

[Lyric]

12. Indeed, but since one or the other is *going* to happen,

I'd rather see us spend less and help average people than spend more to help rich people.

My idea doesn't just help homeowners, though--it includes provisions that help *everyone.* The people buying McMansions they could never afford in hopes of "flipping" them will lose those houses and get the second option--the tax credit--instead. The only homeowners being "bailed out" here are the ones who (1) have the income to pay the remainder of a reasonably refinanced mortgage, and (2) own one home that they actually intend to reside in.

If we must err, I'd rather err on the side of We The People, because we've been fucked over in enough ways to deserve a bit of leeway. More so than Wall Street deserves it, that's for damned sure.

[knitter4democracy]

22. I'm so sick of seeing that meme.

People here in Michigan who are losing their homes weren't stupid or greedy and didn't take out liar's loans. They're losing their homes because they've lost their jobs. They bought the home because they could afford it, but with stagnating wages (or lost job entirely) and all other costs going through the roof, people aren't making it.

So, because you don't want to reward a small percentage (just like those non-existant welfare queens), you want to punish everyone.

[nichomachus]

26. Exactly

Not everyone in trouble is a stupid, greedy house-flipper. Many are people who just had their economic security yanked out from under them by the thieves in the GOP.

This is not an accident -- this whole debacle has been carefully planned.

Greg Palast warned us about this years ago.

He also told us that their playbook contains plans for dealing with the civil unrest that will result. Be prepared. So, we have posse comitatus suspended, Blackwater trained and ready, local police departments with assault vehicles, new and improved crowd control weapons -- and a host of executive orders on the shelf, just waiting to be enacted. These allows for the complete and sudden takeover of the entire country by the "unitary executive" -- media, transportation, borders, communications -- without any oversight from Congress or the courts.

Welcome to the USSR.

[FatDave]

32. My best friend and his wife.

They bought a house 11 or 12 years ago. A one-bedroom with a finished attic for around $45,000. It was the perfect house for them, and definitely modestly priced.

A divorce and handful of lost jobs later, and they're about to be foreclosed on.

[Chisox08]

41. I don't think it was stupidity on the lendee's part

HAve you ever read a loan agreement. Most people don't because they can't understand it. Most Americans do not understand what and ARM or an interest only loan means to them in the future. Some of the home owners did everything right but lost their jobs and after the pensions, savings and other funds run out they are stuck with a house they can no longer afford nor can they sell it because there is no one left to buy it from them.

[PSPS]

10. Not by a long shot

By the time all the toxic alt-a mortgages are recast, which won't be until 2011 or 2012, there will be well over a trillion dollars in default. Virtually all of these are "option arms" meaning the vast majority of them will become foreclosures because people simply can't afford the payments. (They haven't been making "real" payments anyway due to the negative-amortization "option" almost everyone chooses to pay.)

Any idea to "forgive" these loans or otherwise have the government prop them up is ridiculous. What sane taxpayer wants to pay for the $750K McMansion someone got by lying about their income? Bailing them (the liar) out would also artifically prop up the false values of housing making it unaffordable for everyone else who now has to actually qualify for a "real" mortgage.

[Junkdrawer]

13. The total Alt-A universe is $727 Billion. Only 52% are ARMS of any sort. (see post #2 above)...

And, for the record, I'm not proposing a direct consumer bailout: just pricing the theoretical cost using actual hard numbers.

[davsand]

14. What about those of us who are NOT in danger of losing our houses?

You willing to pay MY mortgage off too? (This is not directed at your personally, Junkdrawer!)

I dunno, maybe I really am completely out of touch here, but I'm sitting in my 2 bedroom house in the middle of rural America, and I'm wondering just WHY, exactly, it is so freaking important to bail out the people who bought houses they can't afford, and didn't plan to afford in the long run. My house is no palace, but it was what we could afford then, and what we calculated we could afford long term--including the scenario of one of us with a complete lack of income and no ability to generate even minimum wage.

I am kinda pissed at the sweeping assertions that we owe ANYBODY jack shit right now because I've been living within MY means and it sounds like I now have to foot the bill for everybody else to live beyond what they can afford. WHY exactly, is it up to the rest of us to support the people who screwed themselves by not asking questions or even being realistic about what they could afford or maintain?

Am I the ONLY person out here who is saying WTF?



Laura

[Junkdrawer]

16. But isn't it ironic that funding all defaults would be 10 times cheaper...

than cleaning up the bank mess the defaults caused? :shrug:

[davsand]

21. This all smacks of the bogie man and stories you use to scare little kids.

Again, Junkdrawer, this is not directed at YOU personally, but this entire mess is so damn convoluted that nobody can understand it well enough to even MAKE an informed decision. I can read projections that say it will cost more in the long run NOT to do something, but I also am sitting here thinking this same GOP crew told me Saddam was coming to the US to bomb my house and kill me.

I think you can see where I'm coming from--the credibility of any of these guys is absolutely GONE.

From my perspective, there are about a dozen guys out there that, essentially, control/dictate what happens on Wall Street, and they have been using it for not just personal profit, but a massive rape and pillage of the American people. THOSE dozen guys are gonna end up with the US Treasury in THEIR wallets and the rest of us will be in indentured servitude for the rest of time--and NOBODY is standing out there with a pitchfork or torch yelling about it.

They schlubs like me that have tried to be "responsible" adults are gonna take it up the ass ONE more time so the robber barons can go buy a few more classic art pieces to hang in mansions I'll never see (unless I am their maid, I guess...)

You have to know that I wonder sometimes if maybe the idea of complete socialism might not be just about as easy to accept. Hell--let them feed my ass and shelter me and my offspring until we die working in their fields--would it REALLY be much of a difference???

I dunno. I always felt like I was a reasonably informed adult with an ability to understand most concepts given enough time. This time, however, I'm starting to wonder.


Laura

[Junkdrawer]

25. The public is being terrorized and the politicians are being blackmailed....

If you ever want to see your Economy again, put $700,000,000,000 in unmarked bills in an envelope and put it on Henry Paulson's desk by Tuesday.

We mean it, no funny business.

[davsand]

30. They are every bit as subtle as the "All your base are belong to us." gag.

I think I'll just sit here slack jawed in a media induced panic attack/coma/paralysis.


:crazy:


Laura

[Geek_Girl]

36. Yeah I can't seem to wrap my mind around that

Why would it be cheaper? The bail out should be the same or less. Something doesn't seem quite right these bail out seem exbornent and what was lent so far could cover all the housing foreclosures.

[Junkdrawer]

37. Read HamdenRice's explanation here:

not saying I agree, but I'll bet this is what Congress is being told:

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=4044397&mesg_id=4044534

My question is "If the Treasury will go out of it's way to make sure the public won't be screwed, why not put it into the legislation - in detail - in writing?"

[L0oniX]

27. socialism anyone?

[Naturalist]

35. Socialism

Are you a Democrat? Our schools, roads and many more things are socialist by nature. Collectively chipping in together to get something done at a better rate is Socialism in your book? Have you seen the prices you have to pay for toll roads lately or the price of Private Schools. I pay $1600 dollars a year in taxes for my school system. A private school would run me minimum of $5600 a year.

[L0oniX]

39. I have no problem with socialism when it is for schools, police and health care.

Socialism for wall street? Screw them. Knee jerk much?

[TorchTheWitch]

49. No you're not

I'm not at all happy about bailing out homeowners in trouble either. Yes, I understand that the preditory lending gave people mortgages that in a normal regulated market they'd have no chance whatsoever of getting. But, I just cannot get past anyone buying a house that was 3 or 4 times more than what it would have sold for a year or two previously knowing they would not have been eligible for a mortgage for that same house back when it was 1/3 or 1/4 of the price. How in the world did they ever imagine they could pay for it no matter what rubbish the preditory loan officer told them???? How in the world could they realistically believe that their unaffordable house would continue doubling and tripling year after year into infinity???? How was it not obvious to even the biggest dingus on the planet that the pendulum of the insanely rising house costs was going to HAVE to swing back????

Yes, I understand that because of job losses, illness, rising food/gas/everything prices have been a problem for some of these owners... but that's life. These things have always happened to some people especially in difficult economic times, but I can't fathom anyone thinking that our tax dollars should go to those people to help them stay in their house when never in history has anyone every thought such a thing appropriate. Sorry, but it isn't appropriate. We've been through bad econmic times in the recent past and many people lost jobs, pensions, fell on hard luck and never would anyone have imagined they were entitled to a government bailout.

Either housing prices have to come down to realistic levels or everyone's salary needs to increase at the same rate that the skyrocketing housing prices did (and we know that the latter ain't gonna happen). It was the preditory lending that skyrocketed housing prices so that a $150,000 house suddenly became "worth" $350,000, and the people in trouble now are in trouble because their mortgage is for that overly inflated price. Perhaps there could be some way to calculate a house's "real" worth (as if no bubble had occurred), bring the price back down to that realistic level and re-write the mortage for the re-calculated price... a price that most people could then afford and thus be able to stay in their house. I don't know... this whole business makes my head spin.

[BrainStorm]

15. K & R

:kick:

[BlooInBloo]

17. Just for the sake of being relevant: What's the cost of bailing out *projected* defaults?

And where are the explicit calculations for me to check, plz?

[Junkdrawer]

18. Post #2. And what's the cost of bailing out all the *projected* bank problems?

:shrug:

[SoCalDem]

19. Unfortunately, that's not the "fair" thing to do.

What needs to happen is for a national "re-adjustment/re-assessment" to be done. Bailing out people who took on more debt than they could afford should not "benefit" at the expense of people who have seen their only reall asset depreciate and turn upside-down before their very eyes..

For example....

you bought a house at a reasonable price..let's say $175K, and you are (and have been paying on time) the mortgage for that home...but you have to move away, and now that house is "valued" at $125K...but you still OWE the mortgage of $175K....the value has dropped through no fault of your own, but because you are not in "default", you have no recourse, but to eat the loss and then not be able to even buy a home at your new job location... If you "sell" that house at $125, you will still have to pay a realtor's fee (6% in most places), and still OWE $50K on the original note...

ramifications?

short-sell and ruin your credit
IRS could tag you for taxes on that $50K loss-income
have no money to put down on another house
lose the money you put down on that house when you bought it
walk away and ruin your credit

the "fair" thing to do is to re-assess all property/adjust the debt owed down to current levels, and the lending institution would have to "eat" the losses..

[Junkdrawer]

20. Again, for the record, I'm not proposing a direct consumer bailout:

just pricing the theoretical cost using actual hard numbers.

And pointing out the irony that funding all defaults would be 10 times cheaper than cleaning up the bank mess the defaults caused.

[dailykoff]

24. Ironic isn't it?

So is Dumbfuck's trickle-down defense which I heard him mumble out in a speech yesterday.

[Heather MC]

28. LET IT ALL FALL DOWN

The only way to fix this is to let the shit hit the fan and then repair it.
I am sorry but people are delusional if they think they can keep the housing marking up at the rate it currently is.

in 2001 when my husband and I purchased our modest home. we were only allowed to borrow 805 of our combined annual income. When the Houses went up. and companies started making loans based on over inflated housing prices and not sound market judgement, all hell broke loose.

No matter how much money we throw at it. We are tossing a bucker of water on a forrest fire.
Let it burn then rebuild. I know we are all afraid of another Great depression. But falsely through money on it isn't going to solve the problem
we skrewed up, Our Goverenment, people who bought houses they couldn't afford, and the banking industry
the only innocents are the people who lost their jobs, or had mounting health care expenses and lost their house as a result.

I hope I am wrong, but we have yet to see how much bad debt is really out there, we still don't know how many more people are going to lose their jobs. This BailOUT is fake out.

[lonestarnot]

29. Fucking A real!

[alfredo]

33. Who's to blame

http://slashdot.org/

Who do you blame for the US Financial Situation
The Republicans (9487)
The Democrats (2414)
Your Mom (3573)
Poor People (2417)
Rich People (10062)
Me (956)
CowboyNeal (2555)

[Junkdrawer]

34. Kick

:kick:

[Junkdrawer]

47. Kick

:kick:

[erpowers]

40. Supported Bailing Out Home Owners

I supported bailing out home owners in that I felt it was needed to prevent the economy from falling. It seems like it would have been a better idea to bail out the homeowners, especially since the government was willing give people money to buy the new converter boxes needed to switch to digital tv.

[Waiting For Everyman]

48. It's a no-brainer - AND we'd have collateral. And jobs from it.

On the "liquidity" part of it... a Dem on tv (didn't catch which one, Bayh I think) was saying that we could give insurance and not buy anything. They're beginning to think now. There ARE better ways to deal with this.

It's really two separate things: take over the failing banks and put them in the RTC where they can still function while they're being fixed.

Separately, fund a mass refinance of these defaulting mortgages. Do it for everybody - people who lost homes before, first time buyers, whoever - just the way the FHA has always done it but make sure it's very affordable for all, like maybe 5%. Then people could spend more on consumer needs. Make it a one-time thing, so they wouldn't give the home up quickly. That would promote stability.

Then in January revamp the whole banking system. That's the appropriate way to do this.

Hedgers' derivatives? Let 'em fall. Put the bank in the RTC if that's what happens. The good news is in the RTC process, wrongdoing gets prosecuted too.