Anatomy of the Bailout Breakdown

Giving the proposed bailout fund to FHA is a sound idea and probably one of the best I've come across lately.

It's a great idea that would help the people, however, it won't fly in the house of reps as theres nothing in it for the fat-cat bankers.

The bail-out boondoggle is based on an upside down view of the problem that puts the cart before the horse. The key to understanding the economic problem and solution is that the real estate market tanked, and that is why the loans are upside down, or not worth face value, not the other way around. Say in 2005 a house price was $250,000, and lots of folks rushed to get a $200,000 or $250,000 loan, because the rates were low, the economy, jobs, income was booming, lots of upward mobility, and prices were rising, as they always had in real estate, so it seemed like a good bet... then the FED got scared about inflation, so raised the rates ... every month for about a year and a half, until the real estate market screached to a halt, then hack politicians like Schumer spent a year or so scapegoating and threatening lenders using a few examples of ignorant borrowers swindled by mortgage hucksters., a story older than used car salesmen and crooked lawyers. But this go around. the banks became the bad-guys for lending money, especiially when wallstreet speculators wanted the casino to refund thier lost bets, so what did Banks do? the Banks stopped lending, .... this is what caused the real estate market to really melt down, no money, no buyers. .turning home mortgages from the safest investment in the world to toxic waste. so now the $250,000 house is now worth $100,000 and the homeowner/borrower is begging the bank to take it back, so they can buy the same house next door and cut thier mortgage payments in half, which they must do because thier jobs and incomes have also fallen. On top of all this other housing expenses - taxes, utlities, and homeowner insurance spiked over the same time frame, exactly when household incomes and wealth/equity were dropping. Home equity is the main form of household wealth, so america is now poorer, thus spending less, while burnded by higher housing and gas costs, with little disposible income left over, this is spiraling down demand, employment and incomes - this is the key to our sluggish economy.

The FED tried too little too late to get the banks to lend by giving them a really low discount rate, below 2%, but the banks instead borrow billions and speculate on wallstreet, just as other wallstreet invstors migrated out of mortgage back securities to driving up the price of commodities, like Oil futures, causing gas prices and inflation to rise.

The answer to this problem is very simple. Instead of bailing out Goldman Sacs executives, and thier kind, fund FHA to refinance homeowners at very low rates, similar to the 2% the banks already borrow at. This costs little, because the fed is already lending banks bazillions at these low rates, but the discount window 'tool' is futile if banks do not in turn lend as intended. We can eliminate the middle men and go directly to FHA mortgage loans and fix the problem. Allow homeowners to refi at the short sale value of thier home so they can keep thier home instead of buying the house next door, this will give banks the liquidity without passing on "bad loans", as new loans will be created based on current market and credit conditions. The effect will be to reduce the mortgage and housing costs of the middle class under the FHA umbrella. This will restore household incomes, the housing market, home equity, wealth, and employment to the middle class..

This is a chance that we revisit "Das Capital" and its author .. the great man Marx. The protagonists of Capitalism were speaking of 'free market', go-as-you-like economy and now asking for "bail out" with public money bestowed with the Govt.
When there was a 'windfall profit', the private individuals got away with it and now, when the milching cow has stopped giving milk, they are asking for public money ...to save them .. . what an utter paradox .. !!
And now .. the draconian Banks are ready to be an "Univarsal Bankers" meaning that their 'hybrid instruments' may not be effective any more.

Meanwhile, these events have made the world economy to a change.. days of these cunning Bankers have ended... !!
May the FBI probre the intention in detail .. was there any malafides ?

It's about putting the money up for the bigger banks to buy up the little guys. Can anyone spell Monopoly?

Should make more sense now.

Its ridiculous. Of course this was rejected. They aren't going to pay out to save privately owned banks.

There is more than enough blame to go around, but the real blame needs to be pointed at a greedy deregulated banking industry that took advantage of a select group of the populace that wanted nothing more than what everyone else has, a home of their own.

A 700 billion dollar bailout of Wall Street is not going to change anything. Banks are still offering sub-prime mortgages to people who by all intent and purpose should not be able to get a loan. Banks are still pushing Adjustable Rate Mortgages on their new home loan customers, rather than a solid fixed rate mortgage. Banks make money on foreclosures, just not when so many happen in so short a time. Banks created this situation, Regulation will cure it.

If someone wants to point a finger of blame for Bush's grand giveaway failing, point it at the American public. I personally sent out over 2000 e-mails yesterday telling my representatives that America Is not stupid enough to believe for an instant that by giving Wall Street 700 Billion of our tax dollars, it will repair a non-existent crises in our markets.

With no oversight, nothing will get better in the Banking Industry. To hell with Wall Street, deal with the banks. We need oversight and regulation reinstated in this country. Blame everyone who voted to repeal it.