Where is my bail-out?

[momxx5]

With all the whoopla on Wall Street and the government bailing them out, I was wondering when the government is coming to bail me out???

I would love some help with my mortgage, car pymts, etc.
(can you tell this is a bad cash-flow month)

How is bailing out some of these banks/companies going to fix the extremely broken economy?

Anyway, I can dream!!!

 

[james'mommy]

My DH and I were talking about this last night. He's finance whiz and works at a Major Bank. The bail out is a long term thing. What the gov't is supposedly to do is back the bad loans that banks and other financial institutions have. So if you default on your mortgage the gov't will take on the debt instead of the bank having to write it off. The purpose of this is for people to feel secure about their banks. It's supposed to divert a run on bank just like before the depression. The end result is we don't experience a depression. If we were to have a depression it could possibly cause a world wide crisis. This is accoring to my DH the finance whiz after he had barely civil conversation with his pig headed dad. BTW according to my DFIL there are no illegals in Syracuse NY because "they" don't allow it. (thought it might be an interesting side note- it still has me giggling)

 

[Karlzmom]

The wallstreet debacle is directly related to the government trying to buy votes through "low cost housing"- code for making loans to people who couldn't afford them or had terrible credit, and SURPRISE have defaulted on the loans.

Unfortunately, because there is far more money on computers than in circulation -[which is GOOD, as if there was the same amount of money in circulation it would be worth $0], the government is now having to prop up the companies. If not, the notes being called on the outstanding debts combined with run to withdraw funds before there are no dollars available would cause the whole system to collapse.

The short of this is, bad economic policy has created a situation where there are only more bad choices. At the end of the day, if you have been responsible and only borrowed what you can repay, you are going to get handed the bill to fix the mess created by people who were greedy, Its easy to blame the CEOs - they are the visible crooks, but there were far more "Average Joes" who were content to buy a mansion on a cottage budget - gambling the house would go up before the bill came due; the "average Janes" who leveraged every nickel their house seemed to have on paper to buy a new Lexus or Hummer, redecorate, take vacations, etc.

Capitalism works, but only if the government keeps its nose out of it! Without the pressure to make everyone a home-owner, the banks would have continued to make loans based on 20% cash down, credit score and debt ratio. Instead, the lies on the "stated income" loans have come to roost...not to mention the padded appraisals, inflated loans with buyer kickbacks, no-money-down so no equity lost to let it go and negatively amortizing loans.

Its going to be a long, bumpy ride for anyone who is trying to keep it all together financially. Good Luck!

 

[rflorek]

The wallstreet debacle is directly related to the government trying to buy votes through "low cost housing"- code for making loans to people who couldn't afford them or had terrible credit, and SURPRISE have defaulted on the loans.

Unfortunately, because there is far more money on computers than in circulation -[which is GOOD, as if there was the same amount of money in circulation it would be worth $0], the government is now having to prop up the companies. If not, the notes being called on the outstanding debts combined with run to withdraw funds before there are no dollars available would cause the whole system to collapse.

The short of this is, bad economic policy has created a situation where there are only more bad choices. At the end of the day, if you have been responsible and only borrowed what you can repay, you are going to get handed the bill to fix the mess created by people who were greedy, Its easy to blame the CEOs - they are the visible crooks, but there were far more "Average Joes" who were content to buy a mansion on a cottage budget - gambling the house would go up before the bill came due; the "average Janes" who leveraged every nickel their house seemed to have on paper to buy a new Lexus or Hummer, redecorate, take vacations, etc.

Capitalism works, but only if the government keeps its nose out of it! Without the pressure to make everyone a home-owner, the banks would have continued to make loans based on 20% cash down, credit score and debt ratio. Instead, the lies on the "stated income" loans have come to roost...not to mention the padded appraisals, inflated loans with buyer kickbacks, no-money-down so no equity lost to let it go and negatively amortizing loans.

Its going to be a long, bumpy ride for anyone who is trying to keep it all together financially. Good Luck!

Well said - thank you!

 

[thomas998]

My DH and I were talking about this last night. He's finance whiz and works at a Major Bank. The bail out is a long term thing. What the gov't is supposedly to do is back the bad loans that banks and other financial institutions have. So if you default on your mortgage the gov't will take on the debt instead of the bank having to write it off. The purpose of this is for people to feel secure about their banks. It's supposed to divert a run on bank just like before the depression. The end result is we don't experience a depression. If we were to have a depression it could possibly cause a world wide crisis. This is accoring to my DH the finance whiz after he had barely civil conversation with his pig headed dad. BTW according to my DFIL there are no illegals in Syracuse NY because "they" don't allow it. (thought it might be an interesting side note- it still has me giggling)

I'm afraid your Finance Whiz doesn't quite understand all that he thinks he does... In simple terms... too many people bought houses they couldn't afford... these mortgages are going to go under... So up to that point he is right... where he misses the reality is that the mortgages aren't owned by banks that common people use... your average Joe bank sold the mortgage that he had with them about a half second after he signed on the dotted line... the bad mortgage got combined with other bad mortgages and then sold as investments to rich people.... from the Investment Banks (code word for rich man's bank)... the investment banks are going to go under if nothing is done... and because only 100,000 of anyones bank deposits are insured, the rich men using the Investment Banks will end up middle class like the rest of the country... we can't have that... so the government is going to make good on bad investments owned by rich people and make the common man pay for it in higher taxes.... it's really quite simple... take from the poor and give to the rich. In a perfect world the Investment Banks would just be allowed to fail and there would be a brief downturn in the economy for a year or so and life would go back to normal... except that the rich men would no longer be rich and the idiot that came up with these stupid mortgage to the poor schemes would be working in a burger joint... can't have than now can we.

 

[Mouse House Mama]

With all the whoopla on Wall Street and the government bailing them out, I was wondering when the government is coming to bail me out???

I would love some help with my mortgage, car pymts, etc.
(can you tell this is a bad cash-flow month)

How is bailing out some of these banks/companies going to fix the extremely broken economy?

Anyway, I can dream!!!

Maybe they can paypal it to us?

 

[DonaldDuckFamily]

Maybe they can paypal it to us?

That is hilarious

Karlzmom, I think you are absolutely correct.

 

[Poohbug]

With all the whoopla on Wall Street and the government bailing them out, I was wondering when the government is coming to bail me out???

I would love some help with my mortgage, car pymts, etc.
(can you tell this is a bad cash-flow month)

How is bailing out some of these banks/companies going to fix the extremely broken economy?

Anyway, I can dream!!!

I hear ya. Maybe we can all send our bills to the presidential candidates and they can pay them out of what's left in their election fund.

 

[HeatherC]

I agree...capitalism only works if the govt. does stay out of it.

Sorry, but I don't feel bad for people who bought houses with mortgages they really couldn't afford. No one is helping us pay ours...and we are a family of 5 on one salary. And dh doesn't make tons of money. We are figuring out what to do and others should too.

Now I'm not talking about people who have been hit very hard by something like an illness that wipes them out completely with medical bills. That is another issue entirely and one that I think we need to do something about.

But how in the world does the govt. expect to pay for this 700 BILLION DOLLARS? Yep...we will wind up footing the bill. And so will our kids and their kids for a long, long time.

And if the banks were that stupid to lend money to people who couldn't afford it, maybe they should be out of business. Or at least all their head honchos who allowed this to happen.

I certainly feel bad for all the employees, don't get me wrong. But a true capitalist system doesn't look for bailouts.

Maybe I don't understand all the economics of it, but from what I remember studying in college, you let the market forces play out and while the ride may be pretty horrible, it will calm down and work itself out eventually.

It is scary though, how bad things are now. And I don't think we even know the true half of it.

 

[Kay1]

It's a lot more than loans to people who couldn't afford a house, though it's that too. We had a whole speculative mania mania there and a lot of fraud. Banks were lending like crazy because they could slice, dice and export the debt, making fortunes in fees along the way. Subprime mortgages are only a tiny part of this mess. If we only had to deal with those, this wouldn't be such a big deal.

 

[Mic]

I am financially challenged to say the least...budget is something I have to work at on a daily basis, so I don't presume to understand this bailout and why we need it. However, I do know from a few years of working in real estate sales that most of my clients were required to carry something called "PMI"(mortgage insurance) on their mortgage loan. If memory serves, the PMI benefitted the lender, not the homeowner, should the homeowner default on the loan. But the borrower/homeowner was required to pay this, and it was figured into their monthly mortgage payment. The PMI payment could be as much as 1/3 of a borrower's monthly payment, and could only be removed from the loan when the homeowner had attained a certain amount of equity in their home. So if the lenders were already protected(at the expense of the borrowers), how is it that they now need to be "bailed out"? I understand that, according to most financial experts, the cost of NOT bailing out various lending institutions would be worse than doing so, but I still think it's wrong. It seems those of us that struggle to make our house payments and be financially responsible are being punished for doing so, while CEO's and irresponsible lenders and borrowers are making out like bandits. There truly are areas of the country that have been hit especially hard by the economy...I live in a former furniture manufacturing area that has seen it's share of job losses. Mortgage defaults abound because the manufacturing jobs went to China and Mexico, and there probably does need to be some programs put in place to help out the people directly affected by such job losses, but I doubt it would cost $700 billion dollars! I could be totally wrong in my understanding of what is going on here...so I may need to go to Disney for a week to figure it all out, and let the federal government bail me out when I return! And I have a paypal account!

 

[myprincessgirlisa]

why do they need to borrow 700billion from the hard working taxpayers...why cant they "borrow" it from something else..where does all this money go!!!
why arent the people that got RICH off all this PAYING IT BACK themselves...like restitution, i mean it was kinda like they were stealing!!!

Its all a BIG FAT JOKE & the average joe isnt laughing (but the crooks are....ALL the way to the bank!)

 

[thomas998]

I am financially challenged to say the least...budget is something I have to work at on a daily basis, so I don't presume to understand this bailout and why we need it. However, I do know from a few years of working in real estate sales that most of my clients were required to carry something called "PMI"(mortgage insurance) on their mortgage loan. If memory serves, the PMI benefitted the lender, not the homeowner, should the homeowner default on the loan. But the borrower/homeowner was required to pay this, and it was figured into their monthly mortgage payment. The PMI payment could be as much as 1/3 of a borrower's monthly payment, and could only be removed from the loan when the homeowner had attained a certain amount of equity in their home. So if the lenders were already protected(at the expense of the borrowers), how is it that they now need to be "bailed out"? I understand that, according to most financial experts, the cost of NOT bailing out various lending institutions would be worse than doing so, but I still think it's wrong. It seems those of us that struggle to make our house payments and be financially responsible are being punished for doing so, while CEO's and irresponsible lenders and borrowers are making out like bandits. There truly are areas of the country that have been hit especially hard by the economy...I live in a former furniture manufacturing area that has seen it's share of job losses. Mortgage defaults abound because the manufacturing jobs went to China and Mexico, and there probably does need to be some programs put in place to help out the people directly affected by such job losses, but I doubt it would cost $700 billion dollars! I could be totally wrong in my understanding of what is going on here...so I may need to go to Disney for a week to figure it all out, and let the federal government bail me out when I return! And I have a paypal account!

You are correct on PMI... the problem is the companies that sold the PMI were using a number of expected defaults that was much lower than the current number will in fact be. In other words the PMI folks messed up they sold insurance that they can't afford to make good on because too many defaults are happenig and the losses exceed their ability to cover them... hence the insurers would go belly up (don't want any rich share holder to lose money now do we).

The bottom line is the rich will come out whole and the average american will come out having to pay the bill.

 

[Momto3Girls&Max]

The bottom line is the rich will come out whole and the average american will come out having to pay the bill.

Disgusting.

 

[MrsPete]

... In simple terms... too many people bought houses they couldn't afford... these mortgages are going to go under...

Well, this is part of the story -- maybe even the biggest part -- but it isn't the whole story. At the same time too many people were buying too much house, they were also borrowing so they could go to THE college instead of a less expensive one, they were running credit cards up to their max, they were taking out home equity loans against that house they could barely afford, they were getting a new car every other year 'cause "everyone" has a car payment "forever", and in the midst of it all they were failing to save anything. Too many people lived this live-for-the-moment lifestyle and had nothing for a rainy day. All these things COMBINED built a house of cards that could not stand for long . . . then we were hit with monumental increases in health insurance and costs over the last decade . . . then we were hit with super-fast inflation in gas prices, which drove up other consumer goods, and that house of cards toppled.

The issue with the bail-outs is complicated. On the one hand, many of these companies DO NOT DESERVE a get-out-of-jail-free card at the taxpayers' expense. However, the average citizens whose pensions and investments are tied up in these companies do not deserve to see their hard-earned dollars disappear.

 

[MrsPete]

The bottom line is the rich will come out whole and the average american will come out having to pay the bill.

I don't think so. Instead, the average American will see a good bite come out of his pension and 401K, but the whole sum won't disappear; lots of people are going to end up working a few more years than they'd planned . . . because they have more tied up in the stock market, the rich will lose more than the average person, BUT they'll still have enough to fall back upon. And everyone will end up paying more taxes in the long run because of it.

 

[MrsPete]

If memory serves, the PMI benefitted the lender, not the homeowner . . . The PMI payment could be as much as 1/3 of a borrower's monthly payment, and could only be removed from the loan when the homeowner had attained a certain amount of equity in their home.

Yes, people dislike PMI (Private Mortgage Insurance) because the homeowner must pay the premiums, but he or she has no chance of ever benefiting from it. You make a good point -- PMI should be covering a portion of the housing losses across the country, and I'm sure it will in some cases. In other cases, though, the individuals don't have PMI because they own 20% or more of their house. Still other people used a creative borrowing system -- like an 80-20 loan -- to avoid PMI. And lots of people have 2nd mortgages or home equity loans that aren't covered by PMI. And the biggie -- because housing's down, many people owe more than the house is worth, which is just a whole other can of worms.

No, it doesn't cost 1/3 of the payment. Waaaaay back when we bought our first house and were required to have it, it was more like $20-30 per month. It was an irritation because it was wasted money, but it wasn't a major expense.

 

[Handbag Lady]

I am so not a finance wizard, but with the logic all posted here, should houses be plummeting as far as costs go?

They are not in my area.

 

[MrsPete]

I am so not a finance wizard, but with the logic all posted here, should houses be plummeting as far as costs go?

They are not in my area.

They aren't going down in my area either; we're growing. But they have dropped like a rock in other parts of the country, and it's enough to send a ripple effect through our economy.

 

[Karlzmom]

I am financially challenged to say the least...budget is something I have to work at on a daily basis, so I don't presume to understand this bailout and why we need it. However, I do know from a few years of working in real estate sales that most of my clients were required to carry something called "PMI"(mortgage insurance) on their mortgage loan. If memory serves, the PMI benefitted the lender, not the homeowner, should the homeowner default on the loan. But the borrower/homeowner was required to pay this, and it was figured into their monthly mortgage payment. The PMI payment could be as much as 1/3 of a borrower's monthly payment, and could only be removed from the loan when the homeowner had attained a certain amount of equity in their home. So if the lenders were already protected(at the expense of the borrowers), how is it that they now need to be "bailed out"? I understand that, according to most financial experts, the cost of NOT bailing out various lending institutions would be worse than doing so, but I still think it's wrong. It seems those of us that struggle to make our house payments and be financially responsible are being punished for doing so, while CEO's and irresponsible lenders and borrowers are making out like bandits. There truly are areas of the country that have been hit especially hard by the economy...I live in a former furniture manufacturing area that has seen it's share of job losses. Mortgage defaults abound because the manufacturing jobs went to China and Mexico, and there probably does need to be some programs put in place to help out the people directly affected by such job losses, but I doubt it would cost $700 billion dollars! I could be totally wrong in my understanding of what is going on here...so I may need to go to Disney for a week to figure it all out, and let the federal government bail me out when I return! And I have a paypal account!

If will recall, PMI was only required for mortgages written above 80% Loan-to-value [put another way, if the buyer didn't put down 20% cash] In the heyday, the banks were funding loans where the buyer could put down, say, 10% and run a piggy-back 2d trust deed against the 10% equity to equal 20% [fuzzy math if you ask me!] they avoided PMI, so no insurance. Through in the interest only, exploding adjustable rate mortgages and its a disaster waiting to happen. For what its worth, Freddie Mac and Fannie Mae were the primary purchasers of mortgages and would refuse loans that we not sound - then Congress stepped in because it wasn't "fair" that some people were having to be renters, so the regulations all relaxed, add in the fraud [which as a white collar prosecutor I can tell you first hand was involved at EVERY level....

Start with the agents looking the other way on buyer kickbacks for inflated loans, appraisers manipulating numbers to hit target prices, loan brokers who just wanted their cut and would massage numbers to may people "qualify", the banks who funded so they could resell...and so it went. My colleague and I have enough work to keep us busy for years...If I feel bad for anyone its the people who bought houses at inflated prices honestly, and are keeping all together as their downpayments are gone or they are even upside down and stuck.

The interesting part is that yet again its been turned into a class warfare issue. If the government can keep the average Americans pointing fingers and blaming "the rich", when without their capital investments there wouldn't be any money available for you or I to get a loan, then no one looks at their financial wrangling for votes. Heaven help all of us the day that 51% of Americans have their hand out for some government goodie and the other 49% are reaching into our pockets to pay.