Can anybody seriously explain to me what happened and why we need the bailout?

[SnoopDog]

Correct me if I am wrong here...

The Bush Administration purposely dismantled regulation barriers and the word got out - make as many loans as possible and we don't really care if people can pay them back.

President Hosts Conference on Minority Homeownership
October 15, 2002

Freddie Mac recently began 25 initiatives around the country to dismantle barriers and create greater opportunities for homeownership. One of the programs is designed to help deserving families who have bad credit histories to qualify for homeownership loans.”


Most of these loans were then sold to investment firms who then packaged up these loans into mortgage backed securities. Thru credit swaps', people like AIG 'insured' them so they were sold to other invest firms. These investment firms bought these mortgage backed securities because they could get a return on their investment. Everyone on Wall Street made a ton of money. And this has been going on for 5 years.

But, then foreclosures started to occur. Homeowners could not pay the mortgage and they were thrown out of their homes. Hundreds of thousands of foreclosures have occurred. The investment banks now realized they OWN these houses but no money is coming in because the homeowner was foreclosed upon. Looks like they made a bad investment. They still own the asset but it is not performing.

I guess banks did the same thing. What gets me is that banks make loans based off of deposits. They have a fiduciary responsibility to originate sound loans. So why are the banks failing unless they too broke their own rules of lending.

So.... because these investment banks purchased bad investments, all their money is tied up? So, what? Money comes to them to invest right? They don't LEND money do they? Banks lend money. Just because Goldman Sachs has bad investments - are we supposed to buy their bad investments? If they bought billions and billions of stock in Tulips - and tulips busted - do we have to bail them out as well?

They are saying we have a liquidity problem... Show me where? Once again investment firms take in deposits for investments - they don't lend money.

And if there really is truly a liquidity problem, should not the government look to make sure BANKS can lend money - like on a NEEDS basis. "The US Government hereby will lend money to Banks or guarantee loans made by banks to the tune of $700 billion." Problem solved.

Oh, the investment banks - well they will have to wait for the economy to get better. That's what the US Gov will have to do to sell those houses.

Here is what I see as happening - we are already in a severe recession - almost a depression. We have millions of Americans out of work, what jobs are available are low wages, our living expenses have skyrocketed. There is nobody looking for a loan because people can barely afford basic living expenses. States and local governments have to cut their budgets by billions. Sales tax revenues are significantly down. So, with this bailout, the Bush Admin truly wants to scoop out every last dollar from the Treasury and give it to their friends - $700 billion - nice heist. That 'bailout money' will never get paid back until people are working. And it is the policy of the United States of America to SHIP ALL JOBS OVERSEAS.

How is this bail out a good thing?

[kirby]

1. Cuz shit rolls downhill, and we are at the bottom n/t

[spindrifter]

2. The recovery needs to be viewed as multi-faceted--

We already know that the situation is complex and involved, among other things, financial instruments that were new and not well-understood. We know that Wall Street and Main Street BOTH made a lot of mistakes that boil down to greed. We also know that we need jobs in order for people to start making the economy work for them. And let's be honest. The jobs need to be here in the U.S. We also need regulation. It is foolhardy to think that everything about the economy will self-correct. The people who are making the buy-sell-borrow decisions are not freaking geniuses.

[kstewart33]

3. Won't do your work for you.

Dig alittle deeper and you'll find that this $700 million bailout stands a good chance of not costing us one thin dime.

[SnoopDog]

5. Say what?

That's an answer from someone who has no answer.

How do you know it won't cost us a dime? Since mortgages are are very finite things and since all these pooled loans must be accounted for - shouldn't we know exactly what the total dollar amount is for all the loans? And how do we make our money back?

Thanks for the post but it was not helpful...

[floridablue]

4. Milo Minderbinder

cornered the world market on cotton and found he had no buyers.