Why the Feds Rescue Banks, Not Homeowners

Re: bailout plan

That's $2300 per individual--wouldn't amount to a hill of beans, since most people would save it and not spend it, like what happened last year with the tax cut. No stimulus. Also, why waste this on the top quintile of income earners, who don't have a propensity to spend, anyway (we should be taxing them a lot higher, actually, because they don't have the propensity to spend, according to basic economics)?

I like Roubini's idea to go to the mortgage valuations themselves, and just do a broad reduction (80%, 50%?). He likened it to companies going bankrupt and essentially converting liability into capital, so they can start over. All American homeowners would go bankrupt in a housing sense, and start over. I supposed all the bits in various securities would also be reduced by the same proportion. Maybe reduce it back to Robert Shiller's baseline projection, which showed virtually no change in real home values, over many decades, until the idiocy of the 80s and 90s started.

Jeff Henster of TX @ Mar 12, 2009 12:45:17 PM

bailout plan

I wonder what would happen to the economy if the gov took the $700 billion set aside for corporate America and gave it evenly to every American citizen. There are an estimated 304 million people in this country; that would give each citizen $2300+ billion to spend. By the time we paid our taxes on the money we recive, the gov would have made half their mone back over night.

People could choose to invest their money back into their businesses or spend it any other way they choose. My bet is that foreclosures would end, states would have unsurpassed revenue from sales tax, vehicle sales would be up, retail would flurish, savings accounts and the stock market would be healthy once again, and the amount of students enrolled in higher education would increase.

The only thing left to do would be to educate the populice, including private, corporate, and government America, on fiscal responsibility. This , of course, is just my humble and simple opinion and may not boost the economy at all.

Yvonne of TN @ Mar 12, 2009 12:20:59 PM

bank bailout

does it all matter-- they (Government) are going to do what they want in the long run anyways.

Keep playing the political game and the farther we fall into a socialist society.............. Russia here comes America

mark of MO @ Mar 12, 2009 09:09:30 AM

Securitized mortgage problem

Yes the securitized mortgages are a hugh problem. They probably should never have been a "legal investment" in the first place. However the problem could probably be solved if the government simply passed a law stating something like ...effective April 15,2009 US securtiized mortgages will not longer have enforcable contract terms ...except for securitized mortgages held by Freddie Mac or Fannie Mae or for those investors who elect to hold securitized mortgages and provide terms and conditions identical to any that Fannie and Freddie agreed to impose. Then create a massive auction process whereby Fannie and Freddie agree to buy all securitized mortgage packages at $0.10 minimum on the dollar or at whatever bid price they feel is appropriate. Let private investors also bid on the securitized mortgage packages to establish a market price, providing they are willing to have identical terms to whatever Fannie and Freddie establish. The main points being to get this dam securitized mortgage mess on the road to some type of resolution. Provide a floor price to them. Provide an overall last resort holder that actually knows something about mortgages (supposedly Fannie and Freddie). Provide the private sector with the opportunity to bid on any they think they can service and make money on (provided they will hold and service the mortgages on identical Fannie/Freddie terms), provide a level playing field with one set of rules for any party that participates and get these damm securitized mortgages broken back down into individual mortgages held by lenders of last resort who will hold them until maturity and deal directly with the mortgagee. Sure some will be great mortgages and others will be hopeless and have to be foreclosed. But at least we ought to have one level set of rules for all securitized mortgages and get them disaggregated and in the hands of Fannie/Freddie or comparable private sector banks that will hold them or foreclose them. Maybe this will even solve some the unemployment problem and these "lenders of last resort" have to hire tens of thousands of mortgage employees to start going through these millions of securitized mortgages and handling them one by one.

Donald of CA @ Mar 08, 2009 16:02:50 PM

Mortgage Bailouts

This would be like putting a band aid on a severed jugular. Sure you would save a few homes...for a while. However, the key to getting our capitalistic economy moving again is spending. In order for people to spend they need money...jobs. People need to feel comfortable to purchase homes and that's not going to happen if the reports all indicate worse news on the horizon. Sacrifices need to be made and if people lose their homes, but not their jobs, well so be it. Like Allan from CA said, most shouldn't have bought those homes in the first place.

EA of CA @ Feb 19, 2009 01:46:05 AM

How about not just home, but everyone that pays taxes?

I believe that there is no more reason to give the banks so many billions dollars than to give the homeowners. It's the banks fault for giving out outrageous loans to some irresponsible people that can't determine if they would be able to afford their payments or not. But it is also not fair to criticize the homeowners as some may have lost jobs or faced other circumstances. What i think the Washington should do is give out some odd hundred thousand dollars to every U.S. Citizen of the United States. I'm pretty sure if i had $700,000 I would buy a house to stimulate the economy. Give it to people that need it the most, not some banks that decide to give hundreds of their top executives million dollar bonuses for digging us in this big hole.

cruzer7 of CA @ Feb 19, 2009 00:12:15 AM

Banks are a disgrace too if those homeowners are a disgrace

I agree that people who bought houses which they cannot afford should not be helped. However, who gave them an impossible loan to buy in the first place? THE BANKS !!! I think the government should not bailout the banks either.

Also, the problem of the housing market is that the interest rate and property tax are always too high before or after recession. I think if mortgage rate is being controlled around 5% and government can lower property tax, a lot more people can afford houses and won't get into foreclosure.

ZR of TX @ Feb 18, 2009 18:02:39 PM

homeowner bailout

What a lot of people overlook including the president is that their are honest hard working people out there who got laid off

with homes and can't afford to pay their mortgage.I'm talking about regular ones not subprime.These people have exausted there savingsand are really struggling.wwwhy not help themwith a bailout instead of waiting for a TRICKLEDOWN affect to take place.

darryl of IL @ Feb 18, 2009 17:06:34 PM