I don’t like the idea of indiscriminately paying the interest payments of borrowers facing foreclosure. ALL borrowers?

Here’s the thing, if you are way under water on your home investment, facing a principal balance far higher than any ballpark approximation of current value, then bankruptcy is your bailout. It seems quite foolish to me to provide a 6 month prop up of such loans when the borrowers are going to be in same underwater boat 6 months from now. The only loans that deserve propping up are the sustainable ones that:
•#1 currently represent a good investment

_and_

• #2 are within the means of the current borrower to keep paying on

The rest of them have to be flushed. If bad loans that fail one or both of the tests above are propped up, that means we flush a big pile of money down the toilet for no good end, really, and then these borrowers still declare bankruptcy later when they understand that there’s no sense in sustaining what is now an unreasonable financial burden.

I understand WHY folks approach this issue from the emotional perspective of losing one’s home and why bankruptcy thus feels so unpalatable. But the fact is that bankruptcy is a consumer protection when undertaken by a homeowner. If you owe $450,000 and your house is now only worth $300,000, then walking away is the smartest thing to do unless you are sitting on a l pile of additional assets that you’d lose as well.

For folks with burdensome loans, I don’t think we help them by propping up what are now a terrible investments. Instead, we encourage them to do the right financial thing by walking away. And then we help them with later credit to make a good investment down the road.

1. Add a stay on foreclosure on of mortgages for 6 months. The stay on short selling helped stop the market tailspin. Now give ordinary people a similar benefit.

2. Say that at least a quarter of any dollars spent in any rescues, take the form of insurance guarantees as the minority rebellious Republicans wanted. So if a firm wants $1 billion of overpriced mortgages to be taken onto the government`s book, then at least $250 million must be in the form of an insurance guarantee by Freddie and Fannie.

3. Allocate an additional $100 billion to the bailout package which will be used only to pay interest on mortgages of ordinary people who face foreclosure because they cannot pay the interest. This $100 billion ordinary person support fund must be recovered by increasing taxes on all financial corporations – no exceptions – until it is fully repaid to the government.

4. Say that an intensive effort must be launched immediately to hunt down any persons who broke any laws while designing and selling subprime mortgages, and lay charges against them, with suitable punishment (including significant financial penalties).

These four changes should do the trick.

I also think it’s unfair to characterize Republican opposition as blindly in favor of the free market. From my understanding, the nay votes had more to do on disagreements over the details of the bailout and not much to do with any disagreement on the need for government intervention.

Finally, this is not a crisis purely of the free market’s making. We can’t forget the significant role played by the Fed and its interest-rate policies as well as the “special relationship” given Fannie Mae and Freddie Mac. Government manipulation of the free market is as much to blame as the god awful decisions made within the free market. In my mind, there’s enough blame for everyone. Us citizens very much included.

My gut tells me that the imaginary component of valuation really can’t stand more than a 35-50% total drop before any hopes of a correction being semi-orderly vanish. It’s nice to think that we could come through a few rough years stronger. But we could come through a few rough years weaker with even rougher times to come.

Folks, we’re guessing.

I honestly hope you’re right. If we can change things, without irreparably breaking them, I’m all for it.

… just seems like an awfully high tight-rope to walk.

Todd

2-1? Probably more like 10-1. About 40% of the Democrats and over 60% of the Republicans voted against this thing. We’re not talking slim margins here, folks.

The government scared us into imprudent action after 9/11, and it feels like they’re trying to scare us into imprudent action now. We need a genuine correction. Not just a “market” correction, but a fundamental change in personal and political fiscal behavior. That’s not going to happen if the government artificially props up a failed system.

We’re in for a few years of rough times, but if we’re smart and learn from this, we will be stronger as individuals and as a country for having gone through it.

No mention of who killed the bill? It is a situation that presents the greatest amount of irony that I can ever imagine concocted in a fiction or nightmare on Wall St satire, ie; you can’t make this stuff up- nobody would buy it!

So let me get this straight. The financial markets are teetering on the edge of the cliff. Already on the way down from the crumbling weight of failed institutions of Finance, the Government finally gets involved before it’s too late, but who gets in the way and derails the whole process? Well it must be the Democrats who would stop at nothing to get back at this Republican President they’ve faught for so long. No, it’s the House Republicans, from the Administration’s own party who, after presiding over this whole debacle for the past 10 years, now fails to see the urgent need to fix it.

So, for the sake of this Free Market Capitolist ideology that the Conservatives stubbornly cling to that many believe caused these problems in the first place: Ideals such as no Govnmt intervention or oversight in the markets, that Wall St. will always self regulate and balance themselves without intervention, we will take this great risk and pray that the far Right doesn’t take us down into the abyss with them.

For too long now, we’ve treated politics as sport. Through redistricting, and changes in the media environment, we’ve elected hype-partisans (on both sides) to represent our interests in Washington. Compromise has long since become a “dirty” word. Should we be at all shocked that this bill didn’t pass?

… especially given the fact that the American people opposed the bill something like 2 to 1.

I suppose you could say that our politicians have failed to lead by properly educating us on the true need for passage of this bill. However, I think we are really the problem. We don’t want to listen, because most of us already think we “know more” than our elected officials. (in much the same way that we would have called different plays when our favorite football team loses)

Seriously, this economic crisis is so complicated that economic phds and nobel laureates aren’t even in agreement about what to do …

While at the same time, every moron with a YouTube account knows Exactly who’s “fault” this is, and Exactly what we need to do or don’t need to do to “fix” it.

… and we the people trust the morons on YouTube more than we trust the morons on Capital Hill.

We reap what we sow.

The stock market has responded by dropping over 500 points as the entire financial system holds its breath to see what happens. The bill wasn’t perfect. But I don’t think there is a perfect bill. It’sa horrible situation that will ……