It's not a bailout though, it's an equity adjustment

Discussion in 'Politics, Religion, Social Issues' started by miloblithe, Sep 6, 2008.

  1. miloblithe macrumors 68020

    miloblithe

    Joined:
    Nov 14, 2003
    Location:
    Washington, DC
    #1
    http://news.yahoo.com/s/ap/20080906/ap_on_bi_ge/mortgage_giants_crisis

    Yikes.

    I love how they try to sneak this stuff by us on the weekends.
     
  2. Queso macrumors G4

    Joined:
    Mar 4, 2006
    #2
    9%??!? I really hope the international banks learn from this and realise the next time some US broker with a too-good-to-be-true deal comes along, it's because it is.

    I suspect however they'll do exactly what they did this time, ignore common sense and only think as far ahead as their next bonus cheque :rolleyes:
     
  3. BoyBach macrumors 68040

    BoyBach

    Joined:
    Feb 24, 2006
    Location:
    UK
  4. r.j.s Moderator emeritus

    r.j.s

    Joined:
    Mar 7, 2007
    Location:
    Texas
    #4
    Call it whatever they want, it is what it is.
     
  5. leekohler macrumors G5

    leekohler

    Joined:
    Dec 22, 2004
    Location:
    Chicago, Illinois
    #5
    When rich people need help, it's OK. When poor people need help, it's somehow robbery. I'm quite sick of all of this crap. Why do the rich need my taxes, but when it comes to others needing theirs, it's some sort of mortal sin? Oh, I know- only the rich deserve charity. :rolleyes: This is ridiculous. Let Fannie and Freddie fail. They should be treated no different from the rest of us. I would believe conservatives if they did. But you know what? This is a perfect example of why Laissez Faire capitalism doesn't work. Do I expect anyone to learn from it? No.
     
  6. r.j.s Moderator emeritus

    r.j.s

    Joined:
    Mar 7, 2007
    Location:
    Texas
    #6
    It does work, if the government will keep from f***ing it up with stupid crap bailouts like this. I agree, let them fail, no business needs bailed-out.

    If they fail, yeah, things get bad for a little while (you really shouldn't have bought that house you knew you couldn't afford, and the banks should really have used common sense too when approving these ridiculous loans), but they'll get better, eventually.

    This bailout will only make things worse in the long run. People in this country have lost their sense of personal responsibility, and are now just going to wait for the government to come save them from their screw ups.
     
  7. Desertrat macrumors newbie

    Joined:
    Jul 4, 2003
    Location:
    Terlingua, Texas
    #7
    This has been anticipated for several months, now. The two entities hold some $2.8 trillion in mortgage paper, much of it worthless. For the short run, though, there are commitments beyond the $25 billion; the near-term total is more like $140 billion or thereabouts.

    The problem for the government, the Treasury in particular, and for the Fed, is that without Fannie and Fredddie, mortgage lending would pretty much grind to a halt. Only those who could afford large percentage down-payments, working through local banks, could buy homes.

    And it all goes back to Greenspan's Fed-rate policies, ARMs, I-O loans, red-lining laws and the packaging of lousy mortgage paper to sell as worthwhile bonds. Folks buying what they couldn't afford with money they didn't have.

    As usual, Pogo was right...

    'Rat
     
  8. leekohler macrumors G5

    leekohler

    Joined:
    Dec 22, 2004
    Location:
    Chicago, Illinois
    #8
    No- laissez faire doesn't work. If it did, this failure wouldn't be happening in the first place. It happened because no one included human faults in the equation, much like communism hasn't. Sorry- communism and capitalism are two extremes that on their own don't work. The answer lies in the middle, as always. It's a balancing act, but no one wants to admit it.
     
  9. r.j.s Moderator emeritus

    r.j.s

    Joined:
    Mar 7, 2007
    Location:
    Texas
    #9
    No one says there cannot be failures in Laissez-Faire markets. When people are stupid, things fail and the market moves on.
     
  10. leekohler macrumors G5

    leekohler

    Joined:
    Dec 22, 2004
    Location:
    Chicago, Illinois
    #10
    But it certainly isn't an ideal situation. People and banks should not be permitted to do the things they just did, because it affects far too many others. Sorry man, it's one big boat, and we're all on it whether you like it or not.
     
  11. Desertrat macrumors newbie

    Joined:
    Jul 4, 2003
    Location:
    Terlingua, Texas
    #11
    leekohler, for all that I agree that we need governmental oversight to try to maintain a level playing field between competing interests, in this case there was too much government interference back in the 1980s. They passed a body of law to deal with the S&L problems, which led to the creation of the giant financial investment firms that now have been failing. Congress enabled banks to go beyond basic banking and get into the investment business.

    Before the 1980s laws, banks did banking, S&Ls did home loans, and stock brokerages did investment stuff. The new laws allowed combining all this. Also, there were few big chain-store banking systems. Many states did not allow branch banks. We now see the result of government "help".

    And that's why there's a roar of laughter at, "I'm from the government, and I'm here to help you."
     
  12. leekohler macrumors G5

    leekohler

    Joined:
    Dec 22, 2004
    Location:
    Chicago, Illinois
    #12
    Might I remind you that it was Republican who led that bailout? Would you like me to name him?
     
  13. r.j.s Moderator emeritus

    r.j.s

    Joined:
    Mar 7, 2007
    Location:
    Texas
    #13
    You're right, but the banks should have those checks in place to make sure they wont go under (it's not the governments job). The government bailout is going to affect all of us a lot more than these two banks failing would have. I never said it was going to be a smooth ride, and yes, I know we're in it together.

    But common sense isn't too much to ask when buying a house (it's not an impulse buy). My wife and I saved for four years for the down payment, we sat down and did the math on ever house we liked. We didn't just look at the advertised mortgage rate, which is significantly less than our monthly payment, we took everything into account, including property taxes, insurance, and maintenance. If people would just do that work, they generally would not get into situations like this.
     
  14. Queso macrumors G4

    Joined:
    Mar 4, 2006
    #14
    But weren't the laws that restricted banks to banking etc. just another example of government interference? Surely in a truly free market a financial institution should be allowed to trade in whatever area it wishes?

    Exactly why I think this bailout is a bad idea. Not only should the collapse of the firms be allowed, but the FBI should investigate how it occurred and charge anybody who created the situation for the collapse with conspiracy to commit fraud. That's the only way banks in the future won't put the entire global economy at risk by taking these bonus-inflating gambles.

    And before anyone says anything, I think the assets and mortgage book of Northern Rock in the UK should have simply been handed to another UK bank too, with similar charges brought against management. That's the way the Bank of England would have done it without Downing Street getting involved.
     
  15. r.j.s Moderator emeritus

    r.j.s

    Joined:
    Mar 7, 2007
    Location:
    Texas
    #15
    Damn straight.
     
  16. leekohler macrumors G5

    leekohler

    Joined:
    Dec 22, 2004
    Location:
    Chicago, Illinois
    #16
    Should'a, would'a could'a. Those don't exist in the real world, now do they? Common sense applies to both parties. The people buying shouldn't have. The people lending shouldn't have, but both did. Obviously neither were capable of self control. I absolutely believe laws need to be in place to prevent this kind of crap from happening again. The banks have proven on more than one occasion in history that they are incapable of regulating themselves. Again, you fail to factor human imperfection in the equation.
     
  17. r.j.s Moderator emeritus

    r.j.s

    Joined:
    Mar 7, 2007
    Location:
    Texas
    #17
    I did. When you factor that in, you get where the banks are today. Remember, failure is always a possibility, but better in the long run than the government always stepping in to save people from themselves.

    What's next, the airlines?
     
  18. mactastic macrumors 68040

    mactastic

    Joined:
    Apr 24, 2003
    Location:
    Colly-fornia
    #18
    A conservatorship? Isn't that the arrangement Brittney Spears has with her father right now? Sounds suspiciously like a celebrity-type deal, and we all know how bad celebrities are...

    And here come the jackbooted thugs ready to steal from the poor and give to the rich at the point of a gun, to paraphrase our conservative friends...

    That sounds like an excuse. So what if the mortgage market does collapse? Why should my hard-earned tax money be given to bail out people who can't take responsibility for their actions? Why should the wealth of this nation be re-distributed to protect people's poor decisions?

    The problem with capitalism is that it eventually runs out of other people's money...
     
  19. leekohler macrumors G5

    leekohler

    Joined:
    Dec 22, 2004
    Location:
    Chicago, Illinois
    #19
    You still missed it. We need laws to prevent this kind of reckless behavior, I disagree with bailouts as well. Banks will never regulate themselves to prevent these kinds of things. Laws should be there to prevent this kind of reckless lending/buying from happening in the first place. Why? Because we all get burned.
     
  20. Desertrat macrumors newbie

    Joined:
    Jul 4, 2003
    Location:
    Terlingua, Texas
    #20
    Queso, not all government interference is unwise. To me, the whole idea of government means interference of one sort or another, whether you're talking about robbing banks or robbing banks' customers.

    The idea is to think things through, working hard to avoid unintended consequences. Unanticipated side-effects. Sure, there's no omnipotence in Congress as it attempts to work on problems, but note that there is little review of the effects of laws, nor analysis of past mistakes.

    The previous interference meant that there could not be a gigantic concentration of financial power in any one entity. The drawback to that was that Japan, Inc., didn't have that separation, and even our large banks couldn't compete. Bank profits come from loans, and we just weren't big enough to get the business. So, about the same time as the S&L bust, we also set up laws to allow this international competition. (Y'know, I'd forgotten about that.)

    Sure, philosophically, such as Northern Rock should have been allowed to go bust. Same for Bear, Stearns et al. Or Fannie and Freddie. The drawback, there, is that a hard landing at the end of a bubble would occur. Our society has lobbied for soft landings. We don't like hard landings. The problem with that idea is that corrections of fiscal mistakes are deferred to some future time. We've had several soft landings in the US, following bubbles of one size or another since 1982/1983's hard landing.

    And now we've deferred as long as luck allowed. We're outta luck. The folks at the Fed and at Treasury are having serious Maalox moments, and there's little or nothing meaningful which can be done. Kinda like the common cold: You can't cure it; you gotta let it run its course. This, however, is gonna last longer...

    'Rat
     
  21. leekohler macrumors G5

    leekohler

    Joined:
    Dec 22, 2004
    Location:
    Chicago, Illinois
    #21
    You never answered my question. I guess I know your answer.
     
  22. r.j.s Moderator emeritus

    r.j.s

    Joined:
    Mar 7, 2007
    Location:
    Texas
    #22
    I think more banks would if they knew they were in for hard times if they didn't. But since they know the govt will bail them out ...

    I guess I could go for laws against predatory lending, e.g. make it clear up front what the person is getting into, in plain English.
     
  23. leekohler macrumors G5

    leekohler

    Joined:
    Dec 22, 2004
    Location:
    Chicago, Illinois
    #23
    Completely agreed on both points. That wasn't so hard, now was it? ;)
     
  24. Queso macrumors G4

    Joined:
    Mar 4, 2006
    #24
    I don't think power of interference or oversight should be in the hands of government at all, but instead lie with totally independent central banks. Politicians are too concerned with playing to the gallery to make the right decisions when it comes to economics, and civil servants are too concerned with sucking up to the politicians.

    A bank should never be allowed to get itself into these situations. Economists were warning back in 2002 what would eventually happen as the credit boom took off. Correct central bank oversight would have made the previous five years less pretty, but it would have avoided the complete disaster that followed.
     
  25. mactastic macrumors 68040

    mactastic

    Joined:
    Apr 24, 2003
    Location:
    Colly-fornia
    #25
    And herein lies the issue. Conservatives have no problem advocating hard landings for the poor. Personal responsibility is bandied about to no end. Talk of theft at the point of a gun is spoken of.

    But whenever it's the rich, hard landings suddenly become unacceptable. Corporatists will say "well sure philosophically I'm opposed to bailing these rich guys out, but practically I'm ok with it". It's the kind of hypocrisy that puts on display their "me first, country second" (to quote John McCain) true colors.

    And the government will come to "help" us, stealing from the poor and giving to the rich. Again. And the rich will fail to learn any lesson other than that they can count on the government to bail them out time and again.
     

Share This Page