Woo be the Sub prime victims!

[cannon_fodder]

quote:Originally posted by inteller

probably why I'll vote for mccain because he is not extending the kind of pity on these idiots that the dems are.

You make your mess, you live with it!

+1.

I do feel sorry for people.  But a house is not a right, freedom to contract is a right.  And many used that contract right to enter into deals that in hind sight are losers.

But who draws the line and says "you're too stupid to contract for yourself so the government should bail you out."  Without such a proclamation, the government is bailing out the greedy as much as the ignorant.  People who over extended themselves planning on "flipping" the house, or just wanted to live the high life but couldn't really afford it.

Now, personally I don't think we should bail out the stupid - but certainly not the greedy.  A government bail out is a tax on all of us who made responsible choices in order to help those who made poor choices.  That just doesn't seem right to me.

[inteller]

quote:Originally posted by cannon_fodder

quote:Originally posted by inteller

probably why I'll vote for mccain because he is not extending the kind of pity on these idiots that the dems are.

You make your mess, you live with it!

+1.

I do feel sorry for people.  But a house is not a right, freedom to contract is a right.  And many used that contract right to enter into deals that in hind sight are losers.

But who draws the line and says "you're too stupid to contract for yourself so the government should bail you out."  Without such a proclamation, the government is bailing out the greedy as much as the ignorant.  People who over extended themselves planning on "flipping" the house, or just wanted to live the high life but couldn't really afford it.

Now, personally I don't think we should bail out the stupid - but certainly not the greedy.  A government bail out is a tax on all of us who made responsible choices in order to help those who made poor choices.  That just doesn't seem right to me.

at some point the stupid have to fail and fail miserably and decisively.  Generations of stupid have been bred and supported for too long.  We are bucking natural selection and it is going to bring this country down if something isn't done.

[cannon_fodder]

I agree with you Inteller.  But many argue that people were tricked or duped into bad mortgages.  I was merely preempting such an arguments in favor of government support.

[inteller]

quote:Originally posted by cannon_fodder

I agree with you Inteller.  But many argue that people were tricked or duped into bad mortgages.  I was merely preempting such an arguments in favor of government support.

that evidence has to be presented on a case by case basis....otherwise everyone will say they were "tricked" (this is a common excuse for stupid people).

really what needs to be formed is a legal investigative vehicle for people who think they were really tricked to press charges and launch an investigation.  If they truely are getting a bargain they didn't sign for, a legal investigation will show that out.

[Conan71]

Truth in lending agreements are explicit as it is, I don't know how anyone could possibly have felt duped, unless they didn't understand the index their ARM would be tied to.

Having had a background in lending, I assure you there are a certain amount of mortgages in default by stupid borrowers who still have the money to pay.  When they heard their lender was going tits up or their loan was being sold to another entity they quit paying because they thought they got a free house.

When I worked in lending, many moons ago, it never failed.  If we bought a loan package from an S & L (tells you how long ago that's been []), at least half of the borrowers we eventually sued had the money, they just quit paying because they thought they got off scott-free when their lender went under.

I'm curious, as a part of a bail out package, if the government is going to waive lenders issuing borrowers 1099's for the deficiency balance on their loans?

[inteller]

well the kind of "trickery" I'm talking about is when people submitted one thing on their application, but was then changed (income, etc)by the loan officer because they wanted to get them into a bigger house.  That is true fraud.

[Conan71]

quote:Originally posted by inteller

well the kind of "trickery" I'm talking about is when people submitted one thing on their application, but was then changed (income, etc)by the loan officer because they wanted to get them into a bigger house.  That is true fraud.

Still borrower stupidity.  If total take-home income was, say $4000 and the house payment was $3000, the borrowers knew they couldn't possibly make ends meet before they signed the documents, regardless of a lender changing credit apps.  The income information still has to be verified with tax info.  I've never taken out a mortgage where copies of tax info including W-2's weren't required for income verification.

[we vs us]

quote:Originally posted by cannon_fodder
+1.

I do feel sorry for people.  But a house is not a right, freedom to contract is a right.  And many used that contract right to enter into deals that in hind sight are losers.

But who draws the line and says "you're too stupid to contract for yourself so the government should bail you out."  Without such a proclamation, the government is bailing out the greedy as much as the ignorant.  People who over extended themselves planning on "flipping" the house, or just wanted to live the high life but couldn't really afford it.

Now, personally I don't think we should bail out the stupid - but certainly not the greedy.  A government bail out is a tax on all of us who made responsible choices in order to help those who made poor choices.  That just doesn't seem right to me.

So what about Bear Stearns, then?  I mean, the moral hazard argument pretty efficiently deals with individual home buyers but what about something on the scale of a major investment house like BS?  They made some exceptionally moronic loans, and invested in a stupendous amount of shaky debt.  But because they're considered "too big to fail," the Fed feels justified in bailing them out.  Not so with the individual investor, who is just the right size to fail.

So the question is, is the difference between sink-or-swim and federal bailout only a matter of scale?

[Conan71]

quote:Originally posted by we vs us

quote:Originally posted by cannon_fodder
+1.

I do feel sorry for people.  But a house is not a right, freedom to contract is a right.  And many used that contract right to enter into deals that in hind sight are losers.

But who draws the line and says "you're too stupid to contract for yourself so the government should bail you out."  Without such a proclamation, the government is bailing out the greedy as much as the ignorant.  People who over extended themselves planning on "flipping" the house, or just wanted to live the high life but couldn't really afford it.

Now, personally I don't think we should bail out the stupid - but certainly not the greedy.  A government bail out is a tax on all of us who made responsible choices in order to help those who made poor choices.  That just doesn't seem right to me.

So what about Bear Stearns, then?  I mean, the moral hazard argument pretty efficiently deals with individual home buyers but what about something on the scale of a major investment house like BS?  They made some exceptionally moronic loans, and invested in a stupendous amount of shaky debt.  But because they're considered "too big to fail," the Fed feels justified in bailing them out.  Not so with the individual investor, who is just the right size to fail.

So the question is, is the difference between sink-or-swim and federal bailout only a matter of scale?

Here's what I don't like about a Bear Stearns bail-out or any other sort of government bail out for the sub-prime market:  

Bailouts for orgies like this only encourages more shenanigans in the future because execs will point to the "great bail out of '08" and say: "Don't worry about it, we'll have enough to retire on by the time this house of cards collapses.  Besides, the gov't will bail us out, they've done it in the past..."  And so it goes.

Builders, lenders, real estate brokers, and sellers all made money while the getting was good which helped heat up the economy.

IOW- I don't think it's a good idea to prop anyone up under the circumstances given in the sub-prime fiasco.  Overbuilt condos in Miami? Over-priced dreck tract homes in Orange County?  **** 'em.

The only bail-out circumstance I'd be more than luke warm about would be lenders or borrowers adversely affected by a major natural disaster like Katrina.  People can't earn money, can't make their payment, can't use their home that's pretty understandable, but that's also what homeowner's insurance is for.

I still have a hard time conjuring pity for folks who don't have flood insurance who live 28 ft. below sea level.  

[cannon_fodder]

Wevus:

No.  I believe the facilitating a buyout of Bear Sterns to stop a potential economic collapse is a good thing.  But the ultimate risk of failure must remain with investors - NOT tax payers.

The instant collapse of Joe Smalltime will not effect most people.  But the instant collapse of Dumbass Megasinvesting House will have detrimental and possibly cascading harm to a large swath of the economy.  So a facilitation of a slower demise via a takeover can be justified.  BUT AGAIN, the ultimate risk must remain with the investors as the tax paying non-investors did not choose a high risk/high reward investment and would not have gained if the scheme went as planned.

Currently, if all goes to plan my understanding is no cost to the tax payer.  We have a guarantee on it though, which I am not comfortable with.  Congress is looking into it and the deal is too complex for me to really understand anyway... but that's my 2 cents.

The excuse "too big to fail" is crap.  Generally it serves to bolster failing companies or strategies to bennefit a few at the cost of the many (same with import tariffs, most tax incentives , and a ton of other junk.  "Hey, we 'saved' 5,000 American Steel jobs." Umm, but you cost 50,000 car manufacturing, construction, ship building, etc. jobs you dolt).  Inefficient companies and poor investment strategies need to fail to cull the herd.   It might be useful to make it a slower death, but please don't bail them out (we'll come back to this when Congress is discussing bailing out the motor companies in a  few years).

If individual home buyers make bad choices and get a government bailout, why can't I have the Fed force a lower rate on my bank too?  Or exempt me from payments for a while?  Shouldn't I be rewarded for good behavior?

Argh.  I trust you see my basic take on it.

[TUalum0982]

quote:Originally posted by Conan71

I feel only slightly bad snickering like Muttley when I read a story like that.

It hasn't even been 15 years since the last time the bottom fell out of the RE market in Orange and Riverside Counties.  You'd think they would have learned after the last time.

I don't understand how trading in your corvette for a suburban is considered cutting back.  If anything the money you saved on the car is going to be drained by the amount of gas you will have to buy.  Why not size down to like an escape or a murano or something.  GEEZE!!

[we vs us]

quote:Originally posted by cannon_fodder

Wevus:
The instant collapse of Joe Smalltime will not effect most people.  But the instant collapse of Dumbass Megasinvesting House will have detrimental and possibly cascading harm to a large swath of the economy.  So a facilitation of a slower demise via a takeover can be justified.  BUT AGAIN, the ultimate risk must remain with the investors as the tax paying non-investors did not choose a high risk/high reward investment and would not have gained if the scheme went as planned.

This is the bothersome part to me, because "too big to fail," (better known as "possibly cascading harm to a large swath of the economy") protects the Captains of Industry (tm) who're sailing these massive ships so recklessly, and who will, come good weather or bad, still retire with titanic severance packages.

It's the captains who need to have the fear of failure pounded back into them, but they're virtually inoculated from any danger whatsoever. And while I agree that a private entity should assume the responsibility for all of its risk, I just don't see any alternative for some of these larger entities.

I've been thinking back in horror to Bush's "privatize social security" plan, and wondering what sort of abject recklessness an infusion of billions of dollars of our retirement money might have encouraged at Bear Stearns. And, you know, who, if anyone, might've been finally held responsible if all that moolah had gone down the toilet.

[bokworker]

I am not sure there are any "titanic" retirement packages left at BSC (Bear Stearns). The biggest holders of BSC stock were the employees who say the value of the stock go from over $170/share to $10/share. That's a chicken licken'....

[cannon_fodder]

Wevus, I agree that the captain should be made to go down with the ship.   Investors & management should suffer alike.  I have ZERO interest in protecting parties that are responsible for or sought to gain from failed investment strategy.

However, I can not deny the argument that allowing some companies to just die over night would be detrimental to a wide swath of the economy.  I had/have no money in Bear Sterns nor their buyer, but certainly the market at large would take a beating and very possibly start a run to get out  because of an overnight collapse.

Panic is usually more dangerous than reality.  

So it's a tight rope walk I guess.  These companies need to be allowed to fail but if the fed thinks it can help mitigate damage WITHOUT cost to the public or ill-rewards to the losing investors/management... I hope they try.

I think that makes it clear.   Let me know if it does not.