The New Bailout

[TheMercenary]

"....millions of jobs." President Obama

[sugarpop]

where ya been Merc?

[TheMercenary]

Originally Posted by sugarpop

where ya been Merc?

St. Pats Rugby Tourny all week end and we hosted 3 people from the UK in our house. Gave them some big ole American hospitality, cooked a whole salmon on the grill, went to a low country boil, made a few fires in the back yard, hoisted a few cold ones, and soaked in the hot tub.

[sugarpop]

damn. and you didn't call? bastard. I coulda used a nice, big British bloke...

[TheMercenary]

And now more failures of the bailout:

March 22, 2009
Some Rich Districts Get Richer as Aid Is Rushed to Schools
By SAM DILLON
RANDOLPH, Utah — Dale Lamborn, the superintendent of a somewhat threadbare rural school district, feels the pain of Utah’s economic crisis every day as he tinkers with his shrinking budget, struggling to avoid laying off teachers or cutting classes like welding or calculus.

Just across the border in Wyoming, a state awash in oil and gas money, James Bailey runs a wealthier district. It has a new elementary school and gives every child an Apple laptop.

But under the Obama administration’s education stimulus package, Mr. Lamborn, who needs every penny he can get, will receive hundreds of dollars less per student than will Dr. Bailey, who says he does not need the extra money.

“For us, this is just a windfall,” Dr. Bailey said.

In pouring rivers of cash into states and school districts, Washington is using a tangle of well-worn federal formulas, some of which benefit states that spend more per pupil, while others help states with large concentrations of poor students or simply channel money based on population. Combined, the formulas seem to take little account of who needs the money most.

As a result, some districts that are well off will find themselves swimming in cash, while some that are struggling may get too little to avoid cutbacks.

Still, educators are accepting the disparities without challenge. Utah, which stands to get about $400 less per student than Wyoming, says it is grateful for the money and has no complaint. There is widespread recognition that the federal money is helping to avert what could have been an educational disaster in some places.

Democrats in Congress decided to use the formulas to save time, knowing that devising new ones tailored to current conditions could require months of negotiations.

http://www.nytimes.com/2009/03/22/ed...22schools.html

[classicman]

Aside/ How exactly is it that our elected representatives signed this bailout without even reading it? They are still now finding things that they had no idea were there. Gotta be done before Nancy goes on her trip...

What the fuck did they do? Oh thats right THEY DON'T KNOW EITHER Grrrrr /As you were.

[TGRR]

Originally Posted by classicman

Aside/ How exactly is it that our elected representatives signed this bailout without even reading it?

Same as they did with the PATRIOT Act.

Nobody had time to read it, damn near everyone voted for it.

[TheMercenary]

Originally Posted by classicman

Aside/ How exactly is it that our elected representatives signed this bailout without even reading it? They are still now finding things that they had no idea were there. Gotta be done before Nancy goes on her trip...

What the fuck did they do? Oh thats right THEY DON'T KNOW EITHER Grrrrr /As you were.

Looks like that is going to be the modus operandi of the democratic congress.

[TGRR]

Originally Posted by TheMercenary

Looks like that is going to be the modus operandi of the democratic congress.

But it was okay for the republican congress to vote for the PATRIOT Act without reading it...because, apparently, the dems were mind controlling them.

[TheMercenary]

Originally Posted by classicman

What the fuck did they do? Oh thats right THEY DON'T KNOW EITHER Grrrrr /As you were.

Maybe that will be Dodd's newest excuse. :p

[sugarpop]

Originally Posted by TGRR

Same as they did with the PATRIOT Act.

Nobody had time to read it, damn near everyone voted for it.

Fear tactics. And of course, Congress has to actually pretend like they're doing stuff for OUR benefit, instead of their own political benefit.

[sugarpop]

So what about the new housing proposal? Wall Street apparently approved, but damn, why does it seem like all the money is going to the people who need it the least?

And people keep calling these mortgages "toxic assets," and while the mortgages might be toxic, the actually properties aren't. The properties are worth something. So I really don't get it.

I think the government should have just divided the money up and given it in equal portions to every adult citizen who makes less than a million dollars a year. It might have been cheaper in the long run, and better for the economy.

[classicman]

Originally Posted by sugarpop

And people keep calling these mortgages "toxic assets," and while the mortgages might be toxic, the actually properties aren't. The properties are worth something. So I really don't get it.

Do the math - If the mortgage amount is more than the current home value, thats is a "toxic mortgage." To compound the problem there were ARM (Adjustable Rate Mortgages) bought by people to get into homes that, IMO, they couldn't really afford. Lets leave the "greedy lenders" out of this for a moment.
The homeowners took a gamble that they would be making more or they could refinance later or or or... before the rate on their ARM increased. Many knowingly did this. It has been done for many years, this is not something new. What changed is the home values.

To further compound the problem many homes did not increase in value, in fact, they decreased and on or around the same time the mortgage payment increased. Now you have a devalued home and an increased monthly payment.

An example of the impact:

A toxic mortgage is when there is a loan for $500,000 on a house that is currently worth only $250,000. This is generally held by an owner whose FICO score is poor (say 600 and below). Under the bailout, the government would negotiate with the current mortgage holder (BANK) and let's say buy this loan for $400,000. The bank is out $100,000 on paper but they now have $400,000 to play with.
The government then holds a $400,000 mortgage on a house worth $250,000 being paid for by an owner who still has a marginal ability to pay even the re-negotiated loan amount.

Assuming he can not or will not pay any more money, the government will either have to reduce the loan down to an amount the owner can pay or else foreclose on the house. If the government re-negotiates down to $250,000, they are (or more appropriately, WE are) out $150,000. If the government forecloses, they now own a house worth $250,000 with no one making monthly payments, plus they're out $150,000 from the initial $400,000 purchase. They must then find a buyer or else leave the home vacant until the property value increases enough for them to break even or make a profit.

Going back to the start, if the house were to increase in value to $1 million, the government would only be able to collect the loan amount of $400,000. They are not entitled to equity gains in the property (unless they owned and held it through foreclosure).

[TheMercenary]

A good discussion of some projected problems which lay ahead.

http://www.taxpolicycenter.org/Uploa...mic_crisis.pdf

[TheMercenary]

Originally Posted by sugarpop

Fear tactics. And of course, Congress has to actually pretend like they're doing stuff for OUR benefit, instead of their own political benefit.

No one was fooled. It was business as usual before, just as it is now.