Pelosi is an idiot with all the diplomatic skills of a bull in a china shop. I am very angry at her for politicizing during such a disaster. Someone needs to plug her pie hole. Pep, I thought your article did a great job of summarizing the problem:

That is a frightening prospect. Pelosi has shown this week that she cannot lead and would not put country before partisan politics.

Do you believe these assets can be sold for their true market value in the future? That is what I do not understand. Would that mean sitting on them until housing prices rose again?

The package will be passed eventually when the political posturing is finished. The only org who can unplug the credit log jam and sit on the assets for any length of time is the govt.

Pelosi must have been on drugs yday - have never seen such a severe case of foot in mouth disease.

Some one needs to send her the book: How to Win Friends and Influence Your Enemies.


The problem is that no one knows the true value now. The Securities are worthless - it will take some time to figure out the values. We wont see all the money come back because it will be some govt bureaucrat making the decision.

It doesn't matter which party is doing what. I don't trust any of them.

I tend to lean Republican, but even they will get played by Wall Street right now.

I found this on-line and think it's pretty spot on regarding the problems behind a bailout.


http://www.americanthinker.com/2008/09/the_trilliondollar_question_ar.html

I just want to keep pointing out that this very crisis was foretold back in 1999 in the New York Times when FM and FM lowered underwriting standards. THEY WERE RIGHT:

New York Times, 1999
That is EXACTLY what has happened as a RESULT of lowering the underwriting standards at FM and FM.

ugh, I SOO hate economics and hate being forced to try and understand it.

A couple things to ponder:

Anytime you rely on the govt for your personal salvation and well being - be prepared for an extreme disappointment. Ask anyone in NOLA after Katrina.

The last time the Dems had control of both houses and presidency - Jimmy Carter. Now those were some bad old days. I believe that my father had to pay 66% of his salary in taxes after Federal, State, Local and FICA. Anyone ready for those days? I recall my car loan was 22% and the inflation rate was in double digits.

Either way, with or without a bailout, this will happen. It's a lose/lose proposition. If we bailout the lenders, we flood the market with worthless money and if we don't bailout the lenders, the ensuing credit crisis will disable business. Either way, we are headed toward a painful recession of historic proportions.

We wanted a "Global Economy" and that's what we got. Now, the first thing that "Global Economy" is going to do is level the playing field.

Want2Stay

So you want our country to be "levelled?" What are you saying exactly?

Very astute Wants

http://www.telegraph.co.uk/finance/...l-become-significantly-less-wealthy.html

Corporate America has just lost a chunk of its value the size of the Indian economy.


Enlightened:


One of the reasons why I think one party rule is dangerous. The GOP became corrupt because of the power and they lost their way. Dems are no different. The founding fathers were very wise to set up check and balances within the three branches of govt.

Just an observation: Bush made the mistake that he thought US politics would be similar to Texas politics. He thought he could work with the Dems (like he could here) but was not able to and he never had the full majority or a mandate. Politcs here is Texas first and party second - altho that seems to be changing also. DC is a diff story - the party leaders would sell their country to highest bidder for the power.

Do you ever wonder if the Dems may be smiling over this crisis?

Understanding $700,000,000,000.00

The Bottom Line: If the Treasury simply took the $700 Billion and started paying off taxpayer mortgages, they could pay off every mortgage in the country worth less than $75,000... Or put another way, $700 Billion could pay off well over half of all outstanding first mortgages in the entire country.

Nice. This would have never happened in the absense of irresponsible federal policies and lack of oversight. Lenders would have never made bad loans if the FED didn't encourage and buy them up. This is a crisis brought on by our own government and if those problems are not addressed and corrected, this will continue to happen.

True it couldn't have happened, but it also couldn't have happened without our ME ME ME country. We talk about entitlement on this site all the time and that's exactly what brought us to this position. People believing they were entitled to the good life even if they went into debt up to their eyeballs to get it. Over-sized homes and expensive cars. It's all contributed to this mess. Admittedly, I'm just as guilty as everyone else. As an example, you could fit 3 of my grandparent's house in mine. A house they raised 6 kids in where LaLa and I only have 2. We are falling victim to our own gluttony.

Want2Stay

This is an outstanding article written by a top economist who lectures at Harvard:

Commentary: Bankruptcy, not bailout, is the right answer

By Jeffrey A. Miron
Special to CNN
link

Editor's note: Jeffrey A. Miron is senior lecturer in economics at Harvard University. A Libertarian, he was one of 166 academic economists who signed a letter to congressional leaders last week opposing the government bailout plan.


Economist Jeffrey Miron says the bailout plan presented to Congress was the wrong solution to the crisis

CAMBRIDGE, Massachusetts (CNN) -- Congress has balked at the Bush administration's proposed $700 billion bailout of Wall Street. Under this plan, the Treasury would have bought the "troubled assets" of financial institutions in an attempt to avoid economic meltdown.

This bailout was a terrible idea. Here's why.

The current mess would never have occurred in the absence of ill-conceived federal policies. The federal government chartered Fannie Mae in 1938 and Freddie Mac in 1970; these two mortgage lending institutions are at the center of the crisis. The government implicitly promised these institutions that it would make good on their debts, so Fannie and Freddie took on huge amounts of excessive risk.

Worse, beginning in 1977 and even more in the 1990s and the early part of this century, Congress pushed mortgage lenders and Fannie/Freddie to expand subprime lending. The industry was happy to oblige, given the implicit promise of federal backing, and subprime lending soared.

This subprime lending was more than a minor relaxation of existing credit guidelines. This lending was a wholesale abandonment of reasonable lending practices in which borrowers with poor credit characteristics got mortgages they were ill-equipped to handle.

Once housing prices declined and economic conditions worsened, defaults and delinquencies soared, leaving the industry holding large amounts of severely depreciated mortgage assets.

The fact that government bears such a huge responsibility for the current mess means any response should eliminate the conditions that created this situation in the first place, not attempt to fix bad government with more government.

The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company.

Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.

In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy's allocation of its financial resources.

Thoughtful advocates of the bailout might concede this perspective, but they argue that a bailout is necessary to prevent economic collapse. According to this view, lenders are not making loans, even for worthy projects, because they cannot get capital. This view has a grain of truth; if the bailout does not occur, more bankruptcies are possible and credit conditions may worsen for a time.

Talk of Armageddon, however, is ridiculous scare-mongering. If financial institutions cannot make productive loans, a profit opportunity exists for someone else. This might not happen instantly, but it will happen.

Further, the current credit freeze is likely due to Wall Street's hope of a bailout; bankers will not sell their lousy assets for 20 cents on the dollar if the government might pay 30, 50, or 80 cents.

The costs of the bailout, moreover, are almost certainly being understated. The administration's claim is that many mortgage assets are merely illiquid, not truly worthless, implying taxpayers will recoup much of their $700 billion.

If these assets are worth something, however, private parties should want to buy them, and they would do so if the owners would accept fair market value. Far more likely is that current owners have brushed under the rug how little their assets are worth.

The bailout has more problems. The final legislation will probably include numerous side conditions and special dealings that reward Washington lobbyists and their clients.

Anticipation of the bailout will engender strategic behavior by Wall Street institutions as they shuffle their assets and position their balance sheets to maximize their take. The bailout will open the door to further federal meddling in financial markets.

So what should the government do? Eliminate those policies that generated the current mess. This means, at a general level, abandoning the goal of home ownership independent of ability to pay. This means, in particular, getting rid of Fannie Mae and Freddie Mac, along with policies like the Community Reinvestment Act that pressure banks into subprime lending.

The right view of the financial mess is that an enormous fraction of subprime lending should never have occurred in the first place. Someone has to pay for that. That someone should not be, and does not need to be, the U.S. taxpayer.

The enemy has been spotted and its us. You hit the nail on the head and jest of my earlier post. The politicians were just making us happy and they allowed us "kiddies" all the candy we wanted. Now we are going to have a mighty belly ache.

Its not oversized homes that are the problem. Homes are an inanimate object. The problem is buying things we CAN'T AFFORD. I live in a pretty massive house [3200 sq ft for 2 ppl] but I can AFFORD IT. I put 25% down and I can well afford the payments, taxes, insurance, upkeep, etc. My bills are paid; I have money in savings. I am not a glutton and live within my means.

This problem comes from ppl who don't live within their means and when the price of gas went up, and other economic problems, they could not make their payments and defaulted on their loans.

One of the most interesting books I have read is the Millionaire Next Door. I think that is the title.

Anyway - basic rule is that one should base the their prosperity on Net Worth and not how many things one owns and/or their gross income. Sort of like the Texas saying - he is all hat and no cattle (one of my favs.)

How's this?

LINK

W/ a prominent Democrat admitting it, for good measure.

LINK

That Pelosi is a real gem.

The best defense is a good offense.

Blame the Democrats
Blame the poor
Blame the minorities


The FBI's website own website explains Mortgage Fraud and how prevalent it is/was and how it's GROWN since 2003.
Link to FBI page on Mortgage Fraud

And...how little was (as of Jan. 2008) done about it [only 1200 cases open after 48,000 suspicious activity reports in 2007 and the page quotes a report by a third party that studied 3,000,000 subprime mortgages indicating 30%-70% of all such defaulting subprime mortgages were found to contain significant misreprentations]:


OUR financial problem is a criminal one. A criminal matter the Bush adminstration and it's incompetent Republican Appointees FAILED to prosecute utilizing EXISTING laws. Even the website explains that the criminal activity accelerated the problem by fruadulently increasing neighborhood values such that even so-called legitimate mortgages were over-valued based upon legitimate appraisals utilizing unbeknownst fraudulent numbers. IMO, systemic criminal behavior is what brought us to the point today. Absent the crime...this mess would be more than manageable.

Our EXECUTIVE BRANCH has failed us, not the Legislature that enacted the laws that YEARS later the criminals exploited. Using that logic, I guess we could blame the Federal Reserve Act of 1913 which was mostly drafted by Republican Senator Nelson W. Aldrich of Rhode Island (though substantially modified and ultimately passed by the new Democratic Majority after the election of 1912...btw...such "modifications" irked the Republicans that favored the Aldrich Plan of giving Private Banks near complete control of money versus substantial federal control. Years later the depression and THIS financial mess are clear indications the Democrats were right in 1913 to NOT give private banks that much power and control).

Yeah...it's all Aldrich's fault.

Mr. Wondering