Massive financial bailout fails in the House

Here is a 2008 lending practice survey from banks that you all may find interesting.

Shows how serious banks are about tightening their credit lending.

www.federalreserve.gov...

Originally posted by grimreaper797
reply to post by St Udio

 

Because bad mortgages aren't going to directly crash the economy. Bad mortgages are going to hurt the banks, which is turn will further freeze credit markets. THAT is the issue, not mortgages. Its what the bad assets lead to that is going to be the issue.

Ok, if this is "just" "all about bad mortgages" and the govt really really want's to help Americans and feel that by putting American's into further debt is the way to go, then give American's (those in the middle and lower income level) the money to pay off their mortgages. Bad loans are then paid off, people have more money to live and put back into the economy as their homes are paid off. Bail out the citizens, not the corporations. We'd probably be looking at around the same amount of money in the end.

Originally posted by amazed

Originally posted by grimreaper797
reply to post by St Udio

 

Because bad mortgages aren't going to directly crash the economy. Bad mortgages are going to hurt the banks, which is turn will further freeze credit markets. THAT is the issue, not mortgages. Its what the bad assets lead to that is going to be the issue.

Ok, if this is "just" "all about bad mortgages" and the govt really really want's to help Americans and feel that by putting American's into further debt is the way to go, then give American's (those in the middle and lower income level) the money to pay off their mortgages. Bad loans are then paid off, people have more money to live and put back into the economy as their homes are paid off. Bail out the citizens, not the corporations. We'd probably be looking at around the same amount of money in the end.

If the homeowners in question weren't in on the scam along with the bankers, that might be a legitimate response. These people knew they couldn't afford those homes, but they still took out the loan. These people paid too much for the home, and only now do they realize it. Some of these people have already abandoned those homes and they are now in foreclosure.

This is a big messy problem and there shouldn't be any easy way out of it for anyone involved. People need to learn the virtues of honesty, hard work and sacrifice.



[edit on 30-9-2008 by bruxfain]

Originally posted by Bunch
This country have fought for independance and won, this country have fought all the evils you just mention and won, we even fough each others then heal our wounds and manage to build this prosperous nation.... so who's forgetting history here?

And in none of those times was it out of desperation. We fought for this countries freedom, not in desperation, but desire. They weren't desperate and homeless just trying to survive. They were gaining strength and had the DESIRE to be more than just a colony.

Everytime this country has seen real desperate times, more of our freedoms were lost, and there was a further centralization of government. Thats history, not opinion. If we allow our country to slip into such desperation, history shows we will suffer the same old fate.

Look, we agree on many things so dont let the basic fundamental disagreement that we have to think I dont understand your point. But it seems to me that you are willing to let our government to do anything "out of panic", and let me tell you "out of panic" you loose your rights, out of panic we have go to wars, out of panic you let your government make anything.

This isn't panic. This is a legitimate worry. These banks, just today, raised rates for lending, making it even harder to get a loan. This is becoming a serious threat. Companies are going under, the market IS panicing. That is why we need a swift response.

Originally posted by bruxfain
A complete freeze in the credit market, will stop growth. It won't affect credit that has already extended and most businesses are not operating with a 2 week horizon. Furthermore, The credit markets are not just now freezing up, it started in August 2007.

No, because this is the time where multimillion dollar companies are borrowing the most amount of money to stock up for the holiday season. As a result of this tightening loaning practice, many companies are already considering moderate lay-off's and closing stores.

This sudden increase in frozen credit is dangerous. Just today, as I stated, the rates were raised again, making it harder to get a loan.

And even if the credit markets just started freezing up, it is some kind of flash freezing process. Why all of the sudden, within 2 weeks. All the greatest economic minds in Washington, all of the lawmakers and noone who matters was able to see this coming from a million miles away.

Because banks started to go under and these bad assets started to come back to them. As a result, nobody want to lend money, especially not to other banks. Some people have been saying this would happen eventually. Nobody listened though.

Its the "that doesn't directly effect me so I don't care" attitude. As it has been said, Congress is reactionary. They don't pay mind to something till it punches them in the face. That is the same for all issues, not just this one.

Your statement that the $700 Billion is not a solution, but instead just a band-aid to stop the bleeding isn't sweetening the offer. When, if ever, will these Banks and Lawmakers try and make a problem actually go away?

If you don't want them rushing a solution that doesn't work, they need time. That is something they don't have right now because the banks have frozen up their lending practices as a result of this crisis. Banks started to fail and that resulted in this sudden jump in frozen credit.

We are so focused on the US situation that people aren't realizing that this is happening in other countries too, maybe not as urgently as here, but it's happening. This is a GLOBAL situation. Here's why:

In 1999, central bankers and finance ministers of 10 of the world's wealthiest nations sent their deputies to the tidy Swiss city of Basel. The world's leading financial regulators labored together to strike a balance between ensuring banks' safety and giving them room to take risks and make money, finally in 2004 producing a recommended rulebook called Basel II.

Basel II is intended to keep banks safe by requiring them to match the size of their capital cushion to the riskiness of their loans and securities. The higher the odds of default, the less they can lend, all else equal.

Basel II is a long (boring) document that basically boils down to this: you must hold 8% of fluid capital buffer. This is to protect against risky loans that might default.

Basel II has some good points. It's based on the notion that bank shareholders need to have skin in the game, so if there are big losses, shareholders get wiped out before depositors or taxpayers are harmed. Like any company, a bank dies if its assets are worth less than its liabilities. Basel II says the riskier the loans a bank makes, the more of a buffer shareholders are required to put up.

So how does something that is supposed to make us safer turn onto the mess we see today? Well, before Basel II was Basel I

Basel I, which financial regulators devised in 1988 to get banks around the world to beef up their capital. It more or less did its job: Unsafe banks got safer. But banks soon learned how to game the system. To avoid having to tie up capital supporting the mortgage loans they made, the banks got those loans off their books by securitizing them. In fact, Basel I was a prime mover in the staggering growth of the mortgage-backed securities market. Basel I didn't require capital backing for lines of credit as long as they lasted less than a year, so banks responded by issuing short-term lines of credit that they rolled over every 364 days.

Source throughout from April 2008

Treasury Secretary Henry Paulson announced a plan, in March 2008, for a sweeping reorganization of financial regulation in the U.S., which would give the Federal Reserve new powers as a regulator of market stability. However, the Paulson plan was never accepted or enacted, which is why we are in a crisis today.

As an added effect, Basel II compliant banks can ONLY lend to other Basel II compliant banks (both nationally and internationally). So far the ONLY Basel II compliant bank in the US is Goldman Sachs.

All countries that are part of the Basel II accords are being affected right now. Many have become complaint (Asian banks for example), many are working on it, and many, like the US, are finding themselves out of time (like the UK).

This Bailout becomes just that, a Bailout. Banks which have known for YEARS that they had to fix things DIDN'T DO IT. Now THEY SHOULD HAVE TO ANSWER FOR IT, NOT THE TAXPAYERS.

Will it hurt the people, yes. But remember, you have had the internet at your disposal too, congress has been in session before now, you could have been more aware of what was happening in your country LONG BEFORE NOW, you could have been speaking out, demanding the changes that Paulson and other have tried to get these banks to conform to get done.

But you weren't paying attention, were you? And don't tell me you were unless you already knew about the Basel II accords and what it meant to life as you know it. We are just as much to blame as the politicians.

Because, let's face it, America would rather worry about MLB or the NFL or the latest celebrity gossip than keep the check and balance they are supposed to have on their gov and it's actions.

Originally posted by grimreaper797


And in none of those times was it out of desperation. We fought for this countries freedom, not in desperation, but desire. They weren't desperate and homeless just trying to survive. They were gaining strength and had the DESIRE to be more than just a colony.

Everytime this country has seen real desperate times, more of our freedoms were lost, and there was a further centralization of government. Thats history, not opinion. If we allow our country to slip into such desperation, history shows we will suffer the same old fate.

This isn't panic. This is a legitimate worry. These banks, just today, raised rates for lending, making it even harder to get a loan. This is becoming a serious threat. Companies are going under, the market IS panicing. That is why we need a swift response.

Yeah we fought our revolution because of England forcing us to use their currency with interest, paying taxes to a government who didnt represent us, and for intruding on peoples property and rights. Wow looking at how things are today you would think that we never fought a war for freedom would you?

Question where did they come up with the number $700B Billion? According to the Treasury Secretaries aid it was not based on any financial info at all. This according to the LA times. The FED pumped in another 630 billion yesterday if Im not mistaking...I mean isnt that close enough to 700 Billion. Grim this whole thing is a sham. They dont NEED the money to survive they WANT the money to take the crap off of their books. They need to balance their losses like every other business. If there is such things as to big to fail then something is wrong in our economy. BTW Citi is now on the To Big To Fail list because of their new purchase. So tell your cousin or whatever all is well. BTW I sold our of my Wachovia stocks and made a nice sum.

reply to post by grimreaper797


Ok let me make this simple. Where in the $700 Billion dollar bailout package does it GUARANTEE the banks HAVE to start lending again? You show me that and I MIGHT be on board. The fact is there is no guarantee and this is the problem with the bill. Why should the banks have to lend they have a printing press in which they are getting billions from the FED. Alls they have to do is shore up their debt and let all the assets tank even more. Then they can go in and buy them all up for even cheaper. This bailout is a scam.

Originally posted by grimreaper797
reply to post by jam321

 

Start naming off every american citizen that took out a loan they had no means to pay back. They are, after all, the ones who willingly went into the contracts.

These people were duped into believing what they were told "go spend more money" Bush said. People went and spent more money.

I know when my husband and I were looking to buy, the mortgage company kept telling us over and over, that we qualified for an amount far above what we were asking for. In the long run we bought a house that was 130,000 instead of the 275,000 that the mortgage company kept pressing us to go for.

In my opinion the banking industry started using some "nasty sells tactics" and people fell for it. The banking industry was salivating at the amount of money they felt they could made from American citizens.

I can guarantee that if we had "spent more money" as bush kept saying, and if we had gone for the mortgage that "we qualified" for, we would as of now be in foreclosure right along with many other American's. As their is no way in this economy we could have been able to afford the payments with the way the cost of living has been going up. Back then, it would have been just fine, with the economy and the cost of living, we could afford such a loan. Not now.

bruxfain, you stated "If the homeowners in question weren't in on the scam along with the bankers, that might be a legitimate response. These people knew they couldn't afford those homes, but they still took out the loan. These people paid too much for the home, and only now do they realize it. Some of these people have already abandoned those homes and they are now in foreclosure."

Not necessarily true as in my situation above. People bought homes that they could afford at the time, not realizing that the economy was going to bottom out on them. Like I said, my situation was if we had taken the 275,000 loan, we could have afforded that at the time, but not now.

[edit on 30-9-2008 by amazed]

My favorite part was Bush saying he was disappointed.

Good!!!!!!!!!

Originally posted by mybigunit
reply to post by grimreaper797

 

Ok let me make this simple. Where in the $700 Billion dollar bailout package does it GUARANTEE the banks HAVE to start lending again? You show me that and I MIGHT be on board. The fact is there is no guarantee and this is the problem with the bill. Why should the banks have to lend they have a printing press in which they are getting billions from the FED. Alls they have to do is shore up their debt and let all the assets tank even more. Then they can go in and buy them all up for even cheaper. This bailout is a scam.

And thats the point I have trying to get across to him also. Businesses wont start lending as soon this bail out passes, there is no such provision for that, the businesses dont trust each other, they dont trust their books, they dont trust their accounting, they dont trust the system.

A credit system relies on trust, company x trust company y in order to lend money, for that they go to the books, to the reports in the SEC and at this point this two sources of information are not reliable. Which is going to make companies that lend to do so at a higher rate, companies are going to cut spending regardless are we are heading into a recession 700 billion or not.

What the 700 billion does is to clean the balance sheet of these companies, prop up the stock value making investor in Wall St happy and thats all. No a single fundamental change to what brought us to this mess.

Remember my friends..

votenobailout.org

Keep the letters coming, do not stop even if the media says it is rejected. Do not stop letting your voice be heard.

this was predicted 3 years ago that the ecomomy would crash in september 08 this is so government can soon come in and inforce the ammero declaring the north american union inorder to "save" or worthless economy what is our money worth anyway but the trees we use to make it thats why our paper standard only helps the bastard ellitists ans the bildaburg corperation we are #ed people its been started

Exactly my friend. So many folks on here are American-centric that they cannot even see that this is happeing globally right now as we speak. This isnt just about the US. The Russian market had to halt trading. The Asian markets are dopping as are European markets. Its not always just about America folks!!!

Originally posted by redhatty
We are so focused on the US situation that people aren't realizing that this is happening in other countries too, maybe not as urgently as here, but it's happening. This is a GLOBAL situation. Here's why:

In 1999, central bankers and finance ministers of 10 of the world's wealthiest nations sent their deputies to the tidy Swiss city of Basel. The world's leading financial regulators labored together to strike a balance between ensuring banks' safety and giving them room to take risks and make money, finally in 2004 producing a recommended rulebook called Basel II.

Basel II is intended to keep banks safe by requiring them to match the size of their capital cushion to the riskiness of their loans and securities. The higher the odds of default, the less they can lend, all else equal.

Basel II is a long (boring) document that basically boils down to this: you must hold 8% of fluid capital buffer. This is to protect against risky loans that might default.

Basel II has some good points. It's based on the notion that bank shareholders need to have skin in the game, so if there are big losses, shareholders get wiped out before depositors or taxpayers are harmed. Like any company, a bank dies if its assets are worth less than its liabilities. Basel II says the riskier the loans a bank makes, the more of a buffer shareholders are required to put up.

So how does something that is supposed to make us safer turn onto the mess we see today? Well, before Basel II was Basel I

Basel I, which financial regulators devised in 1988 to get banks around the world to beef up their capital. It more or less did its job: Unsafe banks got safer. But banks soon learned how to game the system. To avoid having to tie up capital supporting the mortgage loans they made, the banks got those loans off their books by securitizing them. In fact, Basel I was a prime mover in the staggering growth of the mortgage-backed securities market. Basel I didn't require capital backing for lines of credit as long as they lasted less than a year, so banks responded by issuing short-term lines of credit that they rolled over every 364 days.

Source throughout from April 2008

Treasury Secretary Henry Paulson announced a plan, in March 2008, for a sweeping reorganization of financial regulation in the U.S., which would give the Federal Reserve new powers as a regulator of market stability. However, the Paulson plan was never accepted or enacted, which is why we are in a crisis today.

As an added effect, Basel II compliant banks can ONLY lend to other Basel II compliant banks (both nationally and internationally). So far the ONLY Basel II compliant bank in the US is Goldman Sachs.

All countries that are part of the Basel II accords are being affected right now. Many have become complaint (Asian banks for example), many are working on it, and many, like the US, are finding themselves out of time (like the UK).

This Bailout becomes just that, a Bailout. Banks which have known for YEARS that they had to fix things DIDN'T DO IT. Now THEY SHOULD HAVE TO ANSWER FOR IT, NOT THE TAXPAYERS.

Will it hurt the people, yes. But remember, you have had the internet at your disposal too, congress has been in session before now, you could have been more aware of what was happening in your country LONG BEFORE NOW, you could have been speaking out, demanding the changes that Paulson and other have tried to get these banks to conform to get done.

But you weren't paying attention, were you? And don't tell me you were unless you already knew about the Basel II accords and what it meant to life as you know it. We are just as much to blame as the politicians.

Because, let's face it, America would rather worry about MLB or the NFL or the latest celebrity gossip than keep the check and balance they are supposed to have on their gov and it's actions.

reply to post by grimreaper797

So you are ok with the loss of your job as a result, as well as a lack of a place to live?

Actually this is not totally correct. There are so many mortgages that have gone belly-up (over a million) that there is no way that everyone would have to leave their home. There is no way that the government can collect and "watch" these homes. People out of fear will abandon their home when in reality they can buy a lot of time by just staying it in until forced out, but...

There is not enough enforcement to push everyone out of their homes with collapsed mortgages. I have a friend that has not paid on her mortgage in over a year, and so far there has been no processing of it, and her attorney told her to remain in the home. She is living there for free. All she has to do is keep up with the utilities.

You seem to be over-reacting. One demise does not necessarily lead to all others. Is it possible that you could be "buying" into the scare tactics - yourself, that is being promoted by "the suits?"

I am also for a complete collapse in the system, as all we would be doing otherwise is; painting over rust and we know what that accomplishes!!!

Originally posted by Bunch

And thats the point I have trying to get across to him also. Businesses wont start lending as soon this bail out passes, there is no such provision for that, the businesses dont trust each other, they dont trust their books, they dont trust their accounting, they dont trust the system.

A credit system relies on trust, company x trust company y in order to lend money, for that they go to the books, to the reports in the SEC and at this point this two sources of information are not reliable. Which is going to make companies that lend to do so at a higher rate, companies are going to cut spending regardless are we are heading into a recession 700 billion or not.

What the 700 billion does is to clean the balance sheet of these companies, prop up the stock value making investor in Wall St happy and thats all. No a single fundamental change to what brought us to this mess.

Its not even that. They are not going to lend to eachother and to us because they WANT assets and crap to get cheaper. They want this so they can go in and buy them all up for crack money. These banks have already got more than a trillion dollars from the FED and what has it helped? Nothing and that is because they WANT assets to keep losing value. They did the same thing in the depression. That was one big power and asset grab. So if we give them this money they can get rid of all their bad debts, shore up their books, and sit on all that cheap money while the Shiite hits the fan. Then with all of this cheap borrowed money and no bad debt they can go in and buy it all up and THEN start lending to create the bottom so their cheaply bought assets can gain value. This is robbery and it sucks because like GRIM does point out and he is correct they have us by the balls. This is why the system needs to crash and we need to abolish the fed and get back to our constitution.

reply to post by mybigunit


With more reason then this bail out is irrelevant, I said yesterday these economy is THE MATRIX of economics, an economic fallacy and if there is no way to stop it as it has to continue as is, then why bother with a bailout.

Just cook the books a little here, a little there by repealing the "mark to market" and continue bussiness as usual or let it correct itself as is doing right now.

[edit on 30-9-2008 by Bunch]

reply to post by mybigunit

Ok let me make this simple. Where in the $700 Billion dollar bailout package does it GUARANTEE the banks HAVE to start lending again? You show me that and I MIGHT be on board. The fact is there is no guarantee and this is the problem with the bill. Why should the banks have to lend they have a printing press in which they are getting billions from the FED. Alls they have to do is shore up their debt and let all the assets tank even more. Then they can go in and buy them all up for even cheaper. This bailout is a scam.

The government - we can count on it, is applying rational reasoning to a very irrational situation. They are counting on the public panicking and will play us as the sheeple they believe us to be!

Here is where they do not necessarily understand human behavior as well as they think they do. You put a person up against the wall and most will fight, the "flight or fight" syndrome. Many will most definitely fight and will stand up and say: "or else what? Give me your best shot! What else can you do to me?"

When a person lives in this mode of survival there is very little blackmailing that can be done to them. I speak from experience.

The blackmailing that can be done and will be successful, are to those who have not had to live in survival mode, but have lived a fairly entitled life. They are the ones that will experience the most negative of transitions! These individuals and groups will try, or attempt, to con others to buy into their fears.

Any way we look at it, we are in exciting times!! The next 2 weeks are going to hold a lot of stunning interest for us.

Originally posted by MatrixProphet

The government - we can count on it, is applying rational reasoning to a very irrational situation. They are counting on the public panicking and will play us as the sheeple they believe us to be!

Heh your preaching to the choir here my friend. I know what this is all about. Its the same thing as scaring the people into Iraq, scaring the people to sign the patriot act, and now they are trying to scare people into signing this bailout. Make no mistake the government has seen it work a few times so why not try it some more? The problem is the people are really getting sick of the government. You push people to much you end up like King Louis. We the people have let a lot slide but let me tell you more and more sheeple are waking up. Not as fast as I would like but it is happening.

reply to post by amazed


That's crap. Just because a bank says you QUALIFY for a $275k loan does not mean you can AFFORD a $275k loan. I simply do not believe that most of these people were so stupid as to not know what their monthly payment would be when they signed for that $275k loan... the banks tell them that!

People who signed for sub-prime mortgages were hoping their house would appreciate, and when their equity (from the appreciation) was enough to get a standard loan, they could still have the house they couldn't originally afford. There were no guarantees. IMO they gambled and lost... just as much as the banks. They all were simply looking for the quick buck, screwed up, and now want someone else to bail them out.

I drive around in complete and utter amazement at how many beautiful million dollar homes there are... each with new luxury cars, boats, etc. in the driveway... and wonder where the hell everyone is getting their money from to pay for all of this. My wife and I both are smart, college educated, hard working, but still have to live paycheck to paycheck.

Now, I think I get it. This is the typical American way... make as much $$$ as you can, doing as little work as possible, and when that doesn't work, claim you were treated unfairly... Screw that!

I don't mind helping out the average, hard working Joe Lunchbox, who lost his house because of a layoff, or unforeseen circumstances. But I'm DONE bailing out the rich... the lazy... and the incompetent!

They've had their fun for the last decade on my dime. Its always the hard working that get screwed in the end. Now it's time for these people pay their dues. All of these people are con-artists. Its their nature, and they are trying for the biggest con in history. Well I say tough $hit! Crash and burn baby... CRASH & BURN!


[edit on 30-9-2008 by mecheng]