Driving liberals, dhimmis and illegal alien apologists absolutely insane since 2005...

Why The Bailout Idea Sucks

By Greg L | 29 September 2008 | National Politics | 39 Comments

One hundred and thirty-three million Americans filed individual tax returns in 2005, and I would imagine that the number of filers in 2007 couldn’t have exceeded an even one hundred and forty million people.  If we look at the size of the bailout package that almost got rammed through the House of Representatives today, our CongressCritters were about to saddle these taxpayers collectively with seven hundred billion dollars of debt.  Individually, that would have meant that each one of us who files a 1040 (or equivalent) would have been on the hook for $5,000. No, not the $400,000 that some emails I’ve gotten have alluded to (which would amount to $56 trillion), but five grand.  Your five grand.  They didn’t do it, thankfully.

Although corporate taxes would contribute to paying down this debt, those corporate tax costs are passed on to customers making them a net wash, another testament to the useless fiction that taxing corporations makes any sense. Yeah, they placate economically ignorant folks who want to make sure business “pays its fair share”, but those taxes end up coming out of our pockets, not those of some business. That five thousand dollar hit on our wallets, which we take through a mix of higher prices and higher taxes, is money taken from our families, from our retirement funds, and from the college funds that we hope to establish for our children.  Its our money.  We need it.

Last year’s federal budget totaled a bit more than $2.5 trillion dollars, making this proposed bailout program represent a 27% hike in federal spending. If you let your expenses jump 27%, how likely would you think your employer would be to handing you a 27% raise just because you went on a spending spree?  Certainly not, which is why we, as the “employers” here need to give our “employee” the “hold on a minute, Bubba!” we would expect to get.  Of course this is for a good cause, well, because every time the federal government wants more of our money they say it’s for a good cause. So just what is that cause?

The root cause is our own government policies. Chief among them is the Community Reinvestment Act (CRA), which sounded nice, but was really nothing more than a follow-on to liberal policies forcing banks to loan money to people who weren’t creditworthy. This piece of regulatory malfeasance required banks to meet specified targets for the racial and geographic characteristics of their customers, otherwise they would be prevented from participating in the mortgage business. In order to maintain the required “CRA scores”, banks had to continually chase more and more potential customers  of decreasing credit-worthiness in these targeted groups not because they would be good customers, but because this would fulfill socialist goals for “affordable housing” and stopping “redlining”. Banks regarded this as a cost of doing business in this regulatory environment, and as banks competed trying to obtain the correct demographic of customers and maintaining “CRA scores”, underwriting guidelines were successively cast away.

For example, “a high-ranking Democrat telephoned executives and screamed at them to purchase more loans from low-income borrowers, according to a Congressional source.” The executives of government-backed mortgage giants Fannie Mae and Freddie Mac “eventually yielded to those pressures, effectively wagering that if things got too bad, the government would bail them out.” But they realized the risk: “In 2004, Freddie Mac warned regulators that affordable housing goals could force the company to buy riskier loans.” Ultimately, though, Freddie Mac’s CEO, Richard F. Syron, told colleagues that “we couldn’t afford to say no to anyone.” (source)

Easy money always causes a boom, making some folks think that everything was hunky-dory while all we were doing was creating a huge ponzi scheme with our credit markets. As long as housing prices continued to rise, houses continued to appraise for ever-higher and unrealistic amounts, and documentation requirements were gutted, if enforced at all, lots of people were in a position to make a lot of money during this artificial boom.

No one was taken greater advantage of during this boom than our recent immigrants. They didn’t understand what buying a house involved, and they couldn’t understand the documents they were being asked to sign, but they sure could understand what a dream it was to own a home. And there was no shortage of folks ready to “help” these newcomers have their piece of the American Dream. They “helped” them prepare their loan applications, encouraged them to take exotic mortgage products that weren’t appropriate for them, and provided the necessary fictional data elements required in order to have an application obtain approval. The level of fraud among these applications, much of which no doubt happened without any knowledge of the applicants, is stunning according to the real estate professionals I’ve talked to. Some of them, the honest ones, were completely surprised they were being foreclosed on, or that their adjustable mortgage would reset, or that they had to pay all this money in the first place.

When I and my wife, a legal alien, bought our house, the mortgage company told me that if my wife were an illegal alien, rather than legal, we would have qualified for certain loan programs with big banks. But because she was a legal alien waiting for her green-card (which she had recently applied for), we didn’t qualify. (source)

And there were some that just saw this as an open season on fraud. Among foreclosures in the area, the number of foreclosures where a payment was never made is shockingly high, and perhaps approaching half of all foreclosures. A straw buyer would get a zero-down mortgage on a property, fill it to the rafters with renters and collect their rent payments, never make a payment on the mortgage, and then strip the house of every appliance as it was being foreclosed six months later. If the market was still booming, the house would be sold if a profit could be realized, and the fraudsters would even be rewarded with a capital gain. The false identity of the straw buyer would be cast away, an new identity would be established, and as long as underwriting remained prone to fraud and abuse, there would be another round.

The companies offering mortgage insurance and dealing in default credit swaps (essentially inter-bank hedging of mortgage insurance risk) got hammered. Banks that ended up with properties that could not be economically liquidated and which took huge losses from mortgage defaults got hammered. “Government Sponsored Entities” such as Fannie Mae, which had lowered their guidelines in order to encourage loans for non-creditworthy borrowers themselves, ended up with billions of dollars in worthless paper from the mortgages they bought from loan originators. When this ponzi scheme collapsed, the “free money” that fraudsters walked away with ended up as a huge loss to the credit industry.

Any solution to this mess must end the practice of coercing creditors to extend credit to people who are bad credit risks. The Community Reinvestment Act has been demonstrated to be a complete failure that encouraged fraud, abuse and astronomical losses in the financial markets. Encouraging persons who should never qualify for a mortgage (including a troubling number of illegal aliens) to obtain them is beyond irresponsible when taxpayers are likely to end up paying the ultimate tab.  The federal government can make up for the mess it has caused by providing some sort of insurance to creditors holding these bad loans, but these banks should hold these “assets” to maturity in separate off-balance-sheet accounts where they bear some of the risk for the decisions that they made, instead of having taxpayers purchase all this paper at a huge premium in order to provide banks with liquid assets. There are other means of introducing liquidity in the markets, some of which only require regulatory changes, and throwing taxpayer dollars in there to buy questionable assets is about the dumbest idea that spend-happy Congress could have ever come up with.

While the boom was ongoing, banks were happy to participate in this scheme rather than raise concerns that the rules they were operating under were putting them at grave risk.  Now that the bottom has fallen out, they’re crying to the taxpayers for five grand each in order to let them off the hook.  They willfully participated in this, and in order to discourage future shenanigans, they at least need to bear some portion of the consequences.

What we don’t need is additional regulations to “fix” the regulations that already caused this mess, we don’t need taxpayers assuming responsibility for the bad decisions of an entire industry, and we certainly don’t need illegal aliens unlawfully present in the country as a juicy target for predatory hucksters that will severely undermine our financial markets.  We do need to take time to get this right and consider better options, and taxpayers absolutely must bird-dog our Congress to make sure they don’t start throwing around our money in order to fix the mess they were complicit in.

If we get this wrong, we’ll be right back where we started sooner than any of us would imagine.  Are all of us going to shell out another $5,000 each next time, also?

UPDATE: Reader AWCheney found this fascinating analysis on istockanalyst.com and referenced it in the comments, but it deserves mention here:

The Fed threw $630 billion into the market before the vote, and yet the S&P 500 was down 40 handles anyway, and in fact tanked after the vote.

Note carefully - Paulson’s plan was $700 billion, and Bernanke spend $630 billion - almost the entire amount proposed - and failed to fix the problem.

Got it?  Good.

Now do you see what I’ve been saying?

We were about to piss $700 billion into a tornado and lose it forever.

Go read if you want to find out about how what would have been a disaster was narrowly avoided, and what truly irresponsible malfeasance was almost foisted on the American taxpayers.  Folks, when they dig through this I would not at all be surprised to see criminal charges get filed against those folks who originally came up with this plan and tried to sell it to Congress.  This is shocking.



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39 Comments

  1. Ducky said on 29 Sep 2008 at 11:16 pm:
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    We lost $1 trillion in equities today and that isn’t good, under any circumstances, ever. Let’s blame it on the poor and illegal aliens.

  2. Anchor Baby said on 29 Sep 2008 at 11:35 pm:
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    Couldn’t have said it better myself. If Congress passes this legislation (which for the record I hope they ‘hold the line and NOT pass’) it will reward everyone outside of the law-abiding taxpayer that did nothing wrong.

    It will reward:

    1. Congress for making poor legislative decisions dating back to ‘77 and ‘letting them ride’
    2. Congress for ‘getting them off the hook’ with the average joe that is being bombraded with messages that the ‘right’ thing to do is bailout.
    3. Financial companies that made risky loans (both in compliance with or beyond with CRA required them to do
    4. Greedy homeowners that KNEW they were buying a home they couldn’t afford and STILL signed that contract
    5. Greedy homeowners that misstated debts or there liquid positions
    6. Congress and special interests for making people think that homeownership is something they’re ENTITLED to rather than something that needs to be EARNED
    7. Real Estate Agents that conspired with lenders or with borrowers to ‘make that sale’
    8. Homeowners for thinking that they could recoup 110% value for the 4th level they added to their house to add an in-law suite and excercise room
    9. Equity companies for allowing people to borrow in excess of 70%, 80%, 90%, 100%, 105% LTV ratio
    10. Wickedly low interest rates

    So, if you did things the right way. You saved 10% or 20% for a downpayment, bought the house on a 15y or 30y fixed mortgage rate and have never missed a payment — yes you’re going to be screwed by the rest of society that doesn’t believe they have to follow thoes rules. I’m sorry. We got shafted and sold a bill of goods when we were told to do things the right way and we did.

    My dad (now a green card holder and future citizen - when I get off my butt to file his paperwork!) taught me something when I was growing up. If you don’t have the money for something - work hard to be able to buy it.

    It’s funny that so many people just don’t live up to that and feel that they’re obligated by society to have a two cars, a house in the burbs, and a 60 inch big screen.

    Society needs a new dose of ‘reality’ tv. And, that reality is a slower economy where people of good credit are rewarded and those without have to WORK their way back up to the table. People are soft and they need to toughen up some. And, nothing gets you tougher and thinking more clearly then having to miss a meal or two because you’re behind on your Hummer payment and you don’t want it repo’d.

    Thanks for the forum to vent. Conservatives in the House and Ron Paul Republicans. HOLD THE LINE. Don’t screw the taxpayer.

    -Ab

  3. Arlington Minority said on 29 Sep 2008 at 11:41 pm:
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    My great grandmother used to say, “Hell won’t be full until they’re stacked on top of one another.” Anyone who thinks that there will not be hordes of others lined up to game the system, once a financial industry bailout takes place, doesn’t realize that we’ve already been through too many bailouts in recent weeks. The proposal that failed earlier today is certainly Vladimir Putin’s kind of capitalism, except that it’s even worse, because the state would be taking only the bad assets off the industry’s hands. And we all know how brilliantly our politicians, who have racked up a $106 trillion federal deficit, would be able to wheel and deal in the real estate market with these jeopardy assets in their pockets. If the general public falls for this, they will be behaving just as naively and foolishly as the illegals who were sucked in way over their heads.

  4. Joe Budzinski said on 30 Sep 2008 at 1:54 am:
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    Greg’s done a good job explaining the causes but the problem is the effects. We could all be in a world of hurt if some type of rescue does not take place. It’s past the point of debate; now we need to see what happens when credit tightens up.

  5. Naughtius Maximus said on 30 Sep 2008 at 6:17 am:
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    The bailout is essentially a coverup. They tried to bs us into immediate huge action so that the facts of how we got top this point would not be examined. It’s a financial Amnesty. Pitched by the same coalition that tried to give Amnesty to illegal aliens, rather than examining and attacking THAT problem.

    “We lost $1 trillion in equities today and that isn’t good, under any circumstances, ever.” When that money was based on air rather than tangible things - wealth is supposed to correspond to real things - it will probably be healthy in the long run for most Americans.

    If the Dow falls to what it was 10 years ago - okay. It probably belongs right about there.

    If we worry about unemployment and lack of capital, we should modify the tax code to promote employment and promote investment. Until we have that set up properly, we shouldn’t put one dime in the hands of overexposed banks and lenders or people who took out mortgages they can’t afford. Only a moron would think that throwing 700 billion into Treasury and Wall Street’s hands makes things better. We have 300+ morons in Congress.

    The crisis centers around home values and the insane game that was played with those. We need homes to return to what they are really worth. The market will do that. This bailout would be an attempt to artificially prop up phony home prices and too-high mortgages.

  6. freedom said on 30 Sep 2008 at 8:16 am:
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    I agree with you, Greg. Nothing about this is pretty…and I think that now, many people — except for the Democrats — understand the Community Reinvestment Act (CRA) was the basic and primary cause of the mess that we’re in now. [Oh, and btw, THAT kind of Jimmy Carter/Bill Clinton nonsense is going to happen again, but even worse, if enough single-issue (anti-illegal immigrant) Republicans vote third party or stay home because John McCain has not supported our opposition to illegal immigration and amnesty.]

    Despite the history, the problem remains…and if farmers can’t borrow money to buy seed, to buy tractors, and to buy gasoline….and because of that, the seed vendors, the tractor manufacturers and the gasoline suppliers can’t borrow money to buy their raw materials and pay laborers, the whole economy will slow, unemployment will skyrocket and with it, interest rates will soar to levels comparable to the Carter era. Something must be done.

    Despite their desire to make the uncreditworthy owners of a home, new car, and big-screen TV, even the Democrats surely (in private, at least) recognize the idiocy of lending to those who quite simply don’t have the resources or the potential to repay their debt…SURELY they understand that!!

    There can be no solution to this financial crisis so long as our government dictates to whom money will be loaned for nice-to-haves and luxuries…we’re not talking about loans due to hurricane damage or other catastrophe…we’re talking about things we ALL want but some simply can not afford…and home ownership is not an entitlement, nor is that TV set. If we are to have a capitalistic society, provisions of the CRA must be repealed or ignored.

    Further, something MUST be done to keep the economy from shutting down. Doing nothing is not a satisfactory option. We haven’t heard much about the alternatives to the bailout, but with government as the principal cause, government should certainly fess up to culpability for the failed socialistic experiment and support a free-market, capitalistic based solution. Of course, Nancy Pelosi just won’t get it…:(

  7. Pat.Herve said on 30 Sep 2008 at 9:07 am:
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    I am trying to find the federal legeslation that said that banks had to offer teaser rates, interest only mortgages, and negative amortization loans.

    I am also looking for documentation on where the fed’s said to use home equity as an ATM machine, and live beyond our means.

    Can anyone help me here.

  8. Ducky said on 30 Sep 2008 at 9:11 am:
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    Those of you blaming the Community Reinvestment Act for this crisis may be interested in knowing that the entire Congressional Black Caucus and the Hispanic Congressional Caucus also voted against the bailout.

  9. Anon said on 30 Sep 2008 at 9:12 am:
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    Call Wolf today people. He will vote yes again for this BS bailout of wall street which will do nothing for you and I. It will not help out those of us crushed under the weight of foreclosures in our neighborhoods. It will drive up the cost of oil and down the purchasing power of our dollar. It will create debt slaves out of your children and grand children. Let Wolf know that he will be out of a job in November if he votes yes. He has already failed us miserably on the illegal immigration issue. It’s up to you to fire him now for this.

  10. freedom said on 30 Sep 2008 at 9:28 am:
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    Pat.Herve, Greg’s new post, “A Quick Primer on the Mortgage Meltdown” would be an excellent place to start…

  11. Mr. Anon said on 30 Sep 2008 at 9:53 am:
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    I had to buy PMI to protect the bank’s interests when I purchased my first home. I haven’t heard much about this program, but I suppose in the wake of the social engineering that has occurred to get everyone into a house that PMI went the way of the dodo.

    Let’s be honest here: everyone of us who owned a home has been licking our chops over the past several years as we saw our home values go up and calculated how much we would make if we sold them. People of lesser means, who would have been able to buy a home in most other areas of the US, were frozen out of the market. I don’t think anyone was complaining at the time about these “creative” (cough) programs for lending when our property values were sky high. Now that the chickens have come home to roost, we are quick to condemn the congressmen and the other horrible people that got us into this mess.

    There is nothing wrong with affordable housing, but it has to be earned and not given away. Remember the scene in “It’s a Wonderful Life” when George tells Mr. Potter that the savings and loan exists to help people get homes when the bank won’t lend to them? I hope we don’t go too far the other way when we start regulating the mortgage industry, to the point where folks can’t buy houses anymore.

  12. Beck said on 30 Sep 2008 at 10:10 am:
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    A letter to the editor by Sandy George of Montville, Maine, in yesterday’s Wall Street Journal appears to be right on:

    “In my opinion, the rush to force Congress to create a solution to the fundamentally deadly sin of greed is unworkable. Greed is a character flaw whose remedy cannot be legislated. The bitter pill of failure must be swallowed to remedy the cause of the disease.

    “I find it ironic that the financial crisis was not caused by radical Islamic terrorists or Colombian drug lords. Nor was it created by organized crime, radical right-wing survivalists or inner-city street gangs.

    “It was created by our nation’s best and brightest, our nation’s most educated, affluent and culturally elite, with the blessing of our government leaders, who turned a blind eye and a deaf ear.”

  13. Naughtius Maximus said on 30 Sep 2008 at 10:35 am:
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    Mr. Anon, DEregulating the mortgage industry lead to prices that shut many families out. Letting the prices find natural market level BY NOT PASSING A CORRUPT BAILOUT is in the interest of future American homeowners.

  14. Naughtius Maximus said on 30 Sep 2008 at 10:43 am:
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    Any Conbressperson dumb enough to have voted for this bailout or supported it ought to have a vendetta against them by the American taxpayer. It is and was idiocy.

    Frank Wolf is going to get an earful from me and never get my vote again.

    McCain and Obama both supported it as well. Explain the sense of that to me. These two morons would have spent 700 Billion to keep the stock market propped up unnaturally high at the expense of working Americans, and to keep home prices unnaturally high and subsidized to greater degree by the government. Not an “energy plan”, not “universal health care”, not reduction of “pork barrel spending”. This is what they were going to do, this is what they are about.

    **** all of them. We need to hold this against each and every one of them. It’s time for the American people to really flex their will.

  15. Beck said on 30 Sep 2008 at 11:23 am:
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    Naughtius Maximus comments on the “interest of future American homeowners.” My kids are in their 20s and are delighted about declining home prices. My older daughter has been saving her school teacher salary and has enough for a down payments. This summer my hairdresser and her electrician brother bought a house that had been a foreclosure. They think it’s great that the housing bubble burst.

  16. Anon said on 30 Sep 2008 at 12:16 pm:
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    For every loser in this mess there will be a winner to take his place. Unfortunately for those of us on the losing side it’s no fun, especially since the reason why we have lost so much is due to rampant illegal immigration and the pimping of loans to Hispanics that couldn’t afford them. They walk away scot-free and we pick up the pieces. Manassas Park is a hotbed of for sale signs and foreclosures and I want to know what they plan to do for us and communities like ours before they even mention bailing out wall street fat cats. Frank Wolf can you answer me that? Work for us for a change. We’ve been asking you for years to clean up this illegal immigration and this is exactly why we asked. Now look at this place! You guys running for MP city council better have a plan for getting us out of this mess and getting us some federal help to recover. 50% losses and still dropping. It’s not funny any more.

    VOTE WOLF OUT ‘08

  17. NotFrankPrincipi said on 30 Sep 2008 at 12:26 pm:
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    Yeah, like Judy “Tax Me” Feder is going to be better at all.

    If you want to find someone who just runs to embrace illegal aliens in the mold of Gerry “Welcome Mat” Connolly, look no further than Judy Feder.

    Democratic Underground: “The only thing Feder said that might haven fallen a bit flat on was her support of Bush’s original immigration plan.”

    That’s the amnesty plan that was supposed to reward illegal alien gang-bangers with legal status in 24 hours unless the feds managed to come back with a completed background check documenting criminal history in that impossibly short time period. Judy Feder wants to give illegal alien MS-13 members amnesty, whether they’ve been convicted of felonies in the past or not.

    No matter your gripes with Wolf, he is head-and-shoulders better than this nutcase Feder.

  18. Ducky said on 30 Sep 2008 at 12:33 pm:
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    Anon: Unfortunately for those of us on the losing side it’s no fun, especially since the reason why we have lost so much is due to rampant illegal immigration and the pimping of loans to Hispanics that couldn’t afford them. They walk away scot-free and we pick up the pieces. Manassas Park is a hotbed of for sale signs and foreclosures and I want to know what they plan to do for us and communities like ours before they even mention bailing out wall street fat cats.

    I don’t understand that. You complain when illegals inundate your neighborhoods and then complain when they leave your neighborhoods, leaving houses empty. That doesn’t make sense. You just need something to whine about.

    You and your neighbors are all in this together.

  19. Naughtius Maximus said on 30 Sep 2008 at 12:43 pm:
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    Beck, do your kids and aquaintences have a lobbying PAC working for them? If not their voice may not be heard by the ones who do business with Repuiblican and Democrat crooks. Like Obama. Like McCain.

  20. Naughtius Maximus said on 30 Sep 2008 at 12:45 pm:
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    Hey I have a great idea which can result in lower home prices, lower gas prices, and more economic stability for most Americans. It’s called NO BAILOUT. You say it will cause increased unemployment? Well then I propose a follow-up of NO AMNESTY and GETTING ILLEGAL ALIENS OUT.

  21. Mando said on 30 Sep 2008 at 1:00 pm:
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    From the Times article:

    The Washington Post noted, almost as an afterthought in a 2005 report: “Hispanics, the nation’s fastest-growing major ethnic or racial group, have been courted aggressively by real estate agents, mortgage brokers and programs for first-time buyers that offer help with closing costs. Ads proclaim: “Sin verificacion de ingresos! Sin verificacion de documento!” - which loosely translates as, ‘Income tax forms are not required, nor are immigration papers.’ ”

    The chickens are coming home to roost. And law-abiding, responsible taxpayers are going to pay for it.

    Bingo.

    http://www.washingtontimes.com/news/2008/sep/28/illegal-immigrant-factor/

  22. Naughtius Maximus said on 30 Sep 2008 at 1:06 pm:
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    Maybe not Mando!

    Give Frank Wolf a call -

    202-225-5136
    or
    703-709-5800
    or
    540-667-0990

  23. Anon said on 30 Sep 2008 at 1:12 pm:
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    Ducky what are you talking about? I am complaining that they ever came to my neighborhood in the first place. If they had never showed up in the first place we wouldn’t be in this mess. What is wrong with you? Do you have an ounce of reasonable thought in your head?

  24. Mighty Putty said on 30 Sep 2008 at 1:33 pm:
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    Naughtius Maximus said on 30 Sep 2008 at 10:43 am:
    “Frank Wolf is going to get an earful from me and never get my vote again.”

    Come on Ricky, we all know the insitutionalized and mentally incompetent are not allowed to vote. I’m not sure what your beef with Congress is anyway, since the unemployed don’t actually pay taxes.

  25. Brian Leeper said on 30 Sep 2008 at 2:40 pm:
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    “If they had never showed up in the first place we wouldn’t be in this mess.”

    If they had never showed up in the first place, they wouldn’t have gotten the sub-prime loans that got us into this mess.

    The easy availability of loans certainly was a factor in attracting them here.

    A factoid…in 2005, 36% of the home loans made in Manassas Park were subprime. That information was available in 2006. Apparently City Council didn’t realize the implications of that since in the same year they put out a 5-year budget with a 10% increase in spending for each year.

    They had no clue housing prices were going to drop or didn’t care. Now it’s a crisis.

    You know, the current foreclosure crisis in the City is no surprise when you look at the fact that 36% of the loans made 3 years ago are sub-prime.

    Sub-prime loans are more likely to go into default. It’s why they’re sub-prime.

  26. BattleCat said on 30 Sep 2008 at 3:46 pm:
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    Y’all ready for round 2, otherwise known as “Let’s put a couple of coats of wax on this turd, shine it up, and sell it again as an objet d’art!”

  27. AWCheney said on 30 Sep 2008 at 3:59 pm:
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    Anon said on 30 Sep 2008 at 9:12 am:

    “Call Wolf today people. He will vote yes again for this BS bailout of wall street which will do nothing for you and I.”

    Huh?? How do you figure???

    And now that they voted down the bailout, perhaps you should read about how the Congress was made irrelevant even BEFORE the vote:

    http://www.istockanalyst.com/article/viewarticle+articleid_2661872.html

  28. americangal4ever said on 30 Sep 2008 at 5:21 pm:
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    Its not over yet They plan on voting on this on Thursday. We are not done yet.
    NO BAILOUT!!! ENOUGH IS ENOUGH!!!! NO MEANS NO!!

    ROAR SOME MORE PATRIOTS!!!

    TOGETHER WE CAN DO THIS!!!

    TOLL FREE

    Congressional Switchboard Numbers

    800-833-6354
    866-340-9281
    877-762-8762
    866-808-0065
    888-355-3588
    866-220-0044

  29. Groveton said on 30 Sep 2008 at 6:51 pm:
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    Hmmmm….

    In the immediate future, it really doesn’t matter how this mess happened. The question is “how long can credit markets remain frozen before irreparable damage is done to the economy”. And the answer is, “not long”.

    This fiasco has basically happened twice before.

    The “asset pricing bubble” collapse in Japan from 1990 - 2003 and the S&L crisis in the US. The way that the two problems were handled varied greatly as did the results.

    In Japan, the government would not take definitive action when the real estate bubble burst and brought down the banking system with it (sound familiar). Instead, the government let the problems “work themselves out”. The result was a 13 year long recession whichh could have been shortened by many years had the government intervened aggressively and early.

    The US S&L crisis saw the government take competent action. The government insured the depositers. Many S&Ls were forced into bankruptcy, the Resolution Trust Company was established and the assets of the bankrupt banks were sold by the government. A problem that could have resulted in a 5 year recession was resolved with a far shorter impact.

    As usual, the Republicans don’t like the current proposals but have none of their own to offer. Instead, they ramble on about “bailing out the banks”. Four words. Let’s think this through. Who or what are “the banks”? You could define them as the set of interlocking companies and incorporations that establish the legal entity called “the bank”. Or, you could define “the banks” as being the shareholders who own the bank. If you really want to be absurd, you could define “the banks” as the executives who run “the banks”. By most measures, the best definition of “the banks” is the stockholders and (perhaps) the bondholders who have supplied capital to the leagl entity broadly called “the banks”. Have the shareholders been “bailed out”? How well have shareholders of Bear Stearns, Wachovia, Washington Mutual, Fannie Mae, Freddie Mac or AIG done? Pretty much a total loss. No bailout there. The executives? Many hold stock or stock options - so that hasn’t worked out too well. Others have golden parachutes which should be canceled but that is a very minor point in the grand scheme of the US economy. That leaves the bond holders and that’s who’s getting bailed out. If you want to get upset with any group - look to the bondholders. But the big problem is the Republicans who say this will bail out the banks instead of saying this will bail out the banking system. Of course, Reppublican ideologues and truth never mix.

    But even getting upset at the bondholders or ranting at Republican dim bulbs misses the big point - if you leave the credit markets frozen then the whole economy freezes. It is just that simple.

    And here’s the kicker - Japan was a nation of savers with a current account surplus. Leaving their credit markets frozen tanked their economy for 13 years. The United States is a huge debtor nation. George Bush has presided over a massive build up in government and a dramatic drop in taxes. Guess what? You can have one of those but not both. Or you can have both of somebody else will finance the deficit. Our economy is now propped up by credit extended by Russia, China, Europe, post recession Japan, etc. And what happens if they lose faith? They sell - just like you or I would sell if we lost faith in the management of a corporation. If that happens - the Japanese experience of the 1990s will look like a walk in the park. And if the dolt Republicans keep dithering on this matter, that’s exactly what will happen. The money will run out of the US just like it ran out of Asia after the Long Term Capital meltdown. And you know what happens if that occurs? Neither do I. But it will be bad and bad in a big way.

    So, for all of you who are wrapped around the rhetoric instead of immersed in the economics - you are playing Russian roulette with the United States and its economic future. When the hammer hits the bullet in the chamber $700B will seem like chump change.

  30. CONVA said on 30 Sep 2008 at 8:13 pm:
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    If mortages are the problem why don’t they just pay off everyone’s mortage? The banks would get their money and everyone could then go on a spending spree.

  31. The Bulletproof Monk said on 30 Sep 2008 at 10:55 pm:
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    Anon - 30 Sep 2008 at 9:12 am

    And who are you going to run against him??
    Please think this thru, wonderhead. :rolleyes:

  32. Groveton said on 1 Oct 2008 at 7:33 am:
    Flag comment

    CONVA

    Interesting point. It seems to me that the big risk in this process is not the amount of money being proposed. It is not the lack of oversight on Hank Paulson. It is the posibility that they government will own way too much of the American economy when this is all over. When the government bailed out Chrysler it took warrants in that company. Ultimately, these warrants were sold back to the investing public at a profit to Chrysler. Hopefully, Bush and Paulson have a similar plan here. Once financial stability has been restored, the government must get out of private industry (albiet with much stricter regulation of the banking setor). But will they? An Obama Admistration along with a Democratically controlled Congress might find widespread government ownership of normally private assets irrestable.

  33. Groveton said on 1 Oct 2008 at 7:34 am:
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    Sorry - “… at a profit to Chrysler” should have read “…at a profit to the government”.

  34. Ducky said on 1 Oct 2008 at 8:37 am:
    Flag comment

    With banks in miser mode, credit markets stay taut
    By MADLEN READ, AP Business Writer
    Tue Sep 30, 7:11 PM ET

    NEW YORK - Stocks are rebounding and a new bailout package could be coming soon, but the credit markets — where day-to-day borrowing occurs to keep the gears of the economy turning — are still stuck.

    Even relatively healthy businesses are being left out in the cold.

    Randall Stephenson, the CEO of AT&T Inc., said Tuesday that when the telecommunications company tried to get short-term cash last week by selling corporate debt known as commercial paper, no one was willing to lend anything for longer than overnight.

    The crunch is being felt by others, too. Many small businesses can’t get funding for supplies and in some cases are falling behind on their payrolls, said John Castellani, president of Business Roundtable, an association of CEOs of companies that employ more than 10 million people.

    Castellani said the credit problems have been going on for several months but have accelerated in recent weeks as lending tightens further and consumer spending wanes.

    “It feeds into itself,” Castellani said. “It just continues to spiral down.”

    http://news.yahoo.com/s/ap/20080930/ap_on_bi_ge/credit_markets;_ylt=Aqzebq5oHu_.o5N8EwRPyeOyBhIF

  35. Naughtius Maximus said on 1 Oct 2008 at 11:41 am:
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    Ron Paul may get my vote, unlike McCain and Obama he isn’t endorsing a move towards socialism - http://www.cnn.com/2008/POLITICS/10/01/paul.qanda/index.html

  36. BothPartiesColludeAgainstUsAndMarketToYourFears said on 1 Oct 2008 at 11:55 am:
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    Well I’m caught in some kind of identity-check space time warp - I’ll just change my ID. This is the artist formerly known as Rick Bentley.

    Ron Paul doesn’t endorse this socialist bailout, so I’ll vote for him.

    http://www.cnn.com/2008/POLITICS/10/01/paul.qanda/index.html

  37. Frank said on 2 Oct 2008 at 9:14 am:
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    “Greg’s done a good job explaining the causes but the problem is the effects.”

    Greg’s done a horrible job of actually backing up his assertion that the CRA is the chief cause of this mess. He’s simply regurgitated what has been floating around the webosphere. He hasn’t offered any actual numbers supporting the idea that CRA was the biggest reason for the mess.

    http://www.traigerlaw.com/publications/traiger_hinckley_llp_cra_foreclosure_study_1-7-08.pdf

    CRA-covered entities made 23% of all home loans, but 9% of all high-risk loans, in the 15 most populous MSAs in the country.

    9% of 23% of CRA covered entities loans were high risk. Only a certain % of those went into foreclosure. I’m no fan of the CRA, but I’m also no fan of reading the same thing over and over again without any actual numbers backing up the assertion that CRA is the mian reason for the current mess.

  38. AWCheney said on 2 Oct 2008 at 12:33 pm:
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    I just found out that the new version of the bailout that they’re voting on today and tomorrow is WORSE than the first…it’s an omnibus pork bill with something for everyone whose vote they need to get it to pass, plus the $700 Billion, of course. Anyone that thinks this bill has anything to do with the best interests of the American people after this is brain dead!!

  39. Herndon Bob said on 2 Oct 2008 at 5:12 pm:
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    Oh golly, Gee.

    Christmas in October for wall street. It’s the Wall Street Entitlement Act of 2008. Unlimited free money for financial institutions. Don’t forget, all you have to do is ship your bad debt to the Federal Government and they will make you whole. Oh Sally Mae, send in your bad debt also. Car financiers, send yours as well. Golly Gee it’s Christmas time. Your bonus checks are safe with the fed. Your commissions are assured. Yippee do.

    Oh by the way, keep loaning out money to those who cannot pay it back. Just give money to them, take your commission, and send in the bad paper. The Government can print it faster than you can lend it. Make sure you lend to illegal aliens so they can buy houses. They work awful hard, you know!

    Please remember we need to loan all that money to the public so they can fund their Christmas in December. Our economy will surly collapse if there is no money for all the gifts under the Christmas tree.

    Go Baby GO!!!!!!!!!!!!!!!!!!!

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