Sub-prime Bail Out

[tw]

Originally Posted by Aliantha

Well again, I wouldn't involve a finance company.

But everything you have suggested can and must involve those finance companies. Who is the at the center of these problems? Who holds those defaulted properties? Who prosper most if these defaults are removed from their books? Everything you have posted is corporate welfare for the most irresponsible financial institutions.

And with regard to market value of homes. The market sets the value. You may want $30000 more than someone is willing to pay for it, but if that's all people will pay, then that's what it's worth.

I should not have to use the word again - liquidity.

My $200,000 home is now worth $100,000. But I cannot sell it for $100,000 since my mortgage is $150,000. I cannot pay my mortgage, cannot sell my house for market value, and my neighbors are in the same position. To sell my home would make me homeless. My home must sell for $150,000 because of a liquidity crisis. I have no choice. Either that or bankruptcy. The market value is only $100,000. But it cannot be sold at that price. Again. Liquidity crisis. Please stop using economic concepts (law of price and demand) that assume no liquidity crisis. Stop making the same assumptions that those big shot finance experts also made to create this problem.

Those simplistic economic rules of supply and demand are based in assumptions that do not exist here. Again, I keep using the word because your posts ignore its significance - liquidity.

[Aliantha]

Originally Posted by tw

But everything you have suggested can and must involve those finance companies. Who is the at the center of these problems? Who holds those defaulted properties? Who prosper most if these defaults are removed from their books? Everything you have posted is corporate welfare for the most irresponsible financial institutions. I should not have to use the word again - liquidity.

The gov buys the houses from the finance companies at their current market value (much lower than the going rate) and then sits on the asset while recieving 'rent' until such time as the 'tenant' leaves. Then the house is either sold at a profit, or re-rented.

It's very simple really, and creates a lot of jobs in the process.

My $200,000 home is now worth $100,000. But I cannot sell it for $100,000 since my mortgage is $150,000. I cannot pay my mortgage, cannot sell my house for market value, and my neighbors are in the same position. To sell my home would make me homeless. My home must sell for $150,000 because of a liquidity crisis. I have no choice. Either that or bankruptcy. The market value is only $100,000. But it cannot be sold at that price. Again. Liquidity crisis. Please stop using economic concepts (law of price and demand) that assume no liquidity crisis. Stop making the same assumptions that those big shot finance experts also made to create this problem.

Those simplistic economic rules of supply and demand are based in assumptions that do not exist here. Again, I keep using the word because your posts ignore its significance - liquidity.

You shouldn't have been stupid enough to buy a house that you couldn't afford. Shame on you.

[tw]

Originally Posted by Aliantha

The gov buys the houses from the finance companies at their current market value (much lower than the going rate) and then sits on the asset while recieving 'rent' until such time as the 'tenant' leaves.

Aliantha would keep houses vacant longer. Your solution 1) gets the most irresponsible finance companies off the hook at the expense of responsible people, 2) leaves homes sitting vacant longer because government always takes much longer to do this stuff and has no structure to process this problem, 3) means homes sit unsupervised and decaying again because government has no organization to maintain vacant homes, 4) ends up making government into the landlord of public housing - 'the projects' - which we all know do not work, and 5) provide best welfare to those who are the least responsible. Only five reasons? More are below.

Aliantha - "gov buys the houses from the finance companies at their current market value ... and then sits on the asset while recieving 'rent'" is the perfect example of corporate welfare to the finance companies AND is what every American knows as "The Projects" - welfare housing. We spent decades eliminating that mistake. Aliantha would bring it all back while also rewarding finance companies.

The best solution already exists in current laws and organizations with this experience. Why would Aliantha use government welfare to subvert what already works best? Why would she advocate public housing - "the projects" - and so few call her on this massive 1960s proven mistake?

Aliantha, do not grasp a fact: nobody is going homeless. People who were so irresponsible have earned the right to years of economic rehabilitation - maybe even bankruptcy. This is called good economics. Either they must move into small apartments or townhouses, OR they must take on two or three jobs for the next five years, OR they must take in tenants, OR they must get rid of the two $30,000 SUVs that nobody needed anyway, OR they must cut expenses such as weekly dinners at the steak house, OR they must start taking public transportation or carpool, OR ... every useful solution means no government and personal financial responsibility. Yes, these are the people Aliantha calls homeless.

Every solution means both the irresponsible financial companies and the irresponsible homeowners must suffer through well proven legal and financial hoops designed to rehabilitate the irresponsible. Necessary so that these mistakes do not happen again AND so that the economy fixes itself. Welcome to what the most sympathetic endorse: economic rehabilitation that has proven for generations as the best and most generous solution.


Where does Aliantha reward Goldman Sachs? GS was a more responsible company who admitted up front to their few mistakes, addressed them early and openly, minimized their exposure, and therefore did not contribute to an American recession. Instead Aliantha would reward Merrill Lynch who operated to maximize profits rather than financial services. It’s called greed. Aliantha would now reward companies whose greed is most likely to create an American recession. Merrill Lynch finally admitted to $8billion in mistakes. Merrill Lynch is rumored to have another $10billion problem. Why does Aliantha reward the guiltiest? Who gets most rewarded by Aliantha's solution? Not Goldman Sachs. Aliantha would reward Merrill Lynch with massive corporate welfare for being irresponsible AND again for not be candid (honest). Aliantha - your solution is a 100% reward to the most guilty finance companies. And you also deny this?

I no longer expect Aliantha to understand this. She is more worried about minimizing pain to America's irresponsible homeowners. Just because one has an ARM does not mean one is irresponsible. We are discussing people who can hardly afford the ARM when its interest rate was low. We are taking about finance companies who loaned money on NINJAs. They had no business buying that house or offering that mortgage. Aliantha would reward both with government assistance.

There is no housing shortage. There are plenty of homes. But there are not enough homes so that the Smiths can keep up with the Jones'. Too many want to live in homes they have no business in rather that in townhouses or apartments. This arrogance (a tribute to others who accurately used that description here) is what irresponsible finance companies preyed on.

It scares me how Aliantha has no respect for others who were responsible. Where do you reward Goldman Sachs for minimizing their exposure AND for being both up front and responsible? Aliantha would even punish both Goldman Sachs and me for being responsible? Where are the others who question Aliantha's socialism of rewarding the guilty? Why would you punish me by helping those who most need to learn from their mistakes? Why would you have me pay for their greed? Why would you only encourage an American recession - maybe stagflation?

Your heart is in the right place. But your solutions are vile - a tax on other who were responsible and may suffer the economic downturn created by the greedy; made worse by welfare to the guilty. How to mimimize the economic consequences? The best solutions already exist – and without government welfare. Plenty of solutions exist including apartments, refinancing, second jobs, public transportation, small used cars, and protections afforded by bankruptcy laws.

[Radar]

Originally Posted by tw

My $200,000 home is now worth $100,000. But I cannot sell it for $100,000 since my mortgage is $150,000. I cannot pay my mortgage, cannot sell my house for market value, and my neighbors are in the same position. To sell my home would make me homeless.

This would not make you homeless. You would do a "short sale" and work out a deal with the bank. They may allow you to sell your home for 100k and take the 50k loss. They may want you to pay them 20k and then allow you to sell the house at 150k.

[tw]

Originally Posted by Radar

This would not make you homeless. You would do a "short sale" and work out a deal with the bank. They may allow you to sell your home for 100k and take the 50k loss. They may want you to pay them 20k and then allow you to sell the house at 150k.

As Radar demonstrates, the best solutions already exist and would only be subverted by the corporate welfare advocated by Aliantha. Aliantha does not intend it as corporate welfare. But she advocated 100% assistance to those most irresponsible finance companies. As Radar notes and as I keep posting - Aliantha - get it out of your head. There are not all these homeless people. There are all these people who must now spend years rehabilitating themselves due to greed and using the so many existing solutions as Radar has exampled. Those with true sympathy would offer better solutions including the protection of bankruptcy.

Again, Aliantha. Your socialism that threatens productive economies is scary. The best solutions already exist if not subverted by what Aliantha proposes. In the previous post are maybe eight reasons why Aliantha heartful sympathy results in the worst possible solutions for everyone.