Are you kidding? Bush was the one who was talking about the “ownership society” since early on in his first term. This was his idea. The legacy of the Bush administration may turn out to be the government take-over of Fannie and Freddie. His brain is mush.
[quote]GDollars37 wrote:
The Mage wrote:
People keep focusing on the 6% unemployment without ever thinking about the fact that this means they have a 94% chance of having a job. And the fact that 5% is concidered full employment because it is known that at least 5% of the population doesn’t actually want a job.
I have known people to work the “unemployment circuit”. And by that I mean people who get a job only long enough to qualify for unemployment benefits, then get fired, but in a way that does not negate benefits. Once the benefits dry up, do it again.
Since the government extended benefits for people, they can wait a few more weeks before they need to actually get a job. Economists know this. (Or at least they should.) But the media still reports the terrible economic news of the rising unemployment.
You realize the government has been tweaking the economic statistics, especially inflation and unemployment, since the 1960s? The real unemployment rate is probably over 9%. Harper’s magazine had a good article on this a couple months ago.[/quote]
Link?
[quote]ajcook99 wrote:
rainjack wrote:
I made the same play with Sirius/XM. Bought in at $1.30 with my gambling money, and am letting it ride.
More power to you brother. I prefer to find investments that I have control over rather than deal with speculative plays. Doesn’t make me right, just my preference. I hope this works out for you. [/quote]
I am a dividend investor first and foremost - I don’t play around in speculation with my investments.
The XM thing is being done with Vegas money, if you will. I have no preconceived notion of making a dime on it. But if they get their debt squared away, look out.
[quote]rainjack wrote:
ajcook99 wrote:
rainjack wrote:
I made the same play with Sirius/XM. Bought in at $1.30 with my gambling money, and am letting it ride.
More power to you brother. I prefer to find investments that I have control over rather than deal with speculative plays. Doesn’t make me right, just my preference. I hope this works out for you.
I am a dividend investor first and foremost - I don’t play around in speculation with my investments.
The XM thing is being done with Vegas money, if you will. I have no preconceived notion of making a dime on it. But if they get their debt squared away, look out. [/quote]
I wouldn’t mind buying the debt if they went bk and getting the re-equitization with a clean balance sheet. Good product, very useful, good price point, but I worry that the build-out was too expensive for the equity holders to ever get repaid. Best case might end up being an offer to the debt holders to convert a portion of their holdings to equity and lower their coupon on the remaining. It would dilute the heck out of you guys but the net result would probably be very beneficial even at the current price. Heck might even work out real nice, because with a clean balance sheet, you might see a cash rich media mogul come and vertically integrate it and own it like they would a cable company.
Just a thought.
[quote]PRCalDude wrote:
Does everyone deserve a mortgage? Our government, mostly Dems, think so.
Are you kidding? Bush was the one who was talking about the “ownership society” since early on in his first term. This was his idea. The legacy of the Bush administration may turn out to be the government take-over of Fannie and Freddie. His brain is mush. [/quote]
While true, I think you’re oversimplifying the matter. It’s a bipartisan morass, to be sure, but Dems have been just as culpable, if not more so, in the FRE/FNM debacle.
[quote]ajcook99 wrote:
I wouldn’t mind buying the debt if they went bk and getting the re-equitization with a clean balance sheet. Good product, very useful, good price point, but I worry that the build-out was too expensive for the equity holders to ever get repaid. Best case might end up being an offer to the debt holders to convert a portion of their holdings to equity and lower their coupon on the remaining. It would dilute the heck out of you guys but the net result would probably be very beneficial even at the current price. Heck might even work out real nice, because with a clean balance sheet, you might see a cash rich media mogul come and vertically integrate it and own it like they would a cable company.
Just a thought.
[/quote]
That was talked about, as well as reverse split - like 3-4 to 1.
[quote]Zap Branigan wrote:
This will bounce back and the Federal government stands to make a massive profit from the takeover if they are smart about it. The sky isn’t falling.[/quote]
Yes but will the taxpayer ever see this massive profit?
[quote]Zeppelin795 wrote:
Zap Branigan wrote:
This will bounce back and the Federal government stands to make a massive profit from the takeover if they are smart about it. The sky isn’t falling.
Yes but will the taxpayer ever see this massive profit?[/quote]
Do you even pay taxes?
[quote]Aragorn wrote:
Well Mage, you have a lot of good points. The problem started in the secondary market. On the other hand, the reason they are failing is that people who had no business qualifying for a mortgage were getting them because there were people in congress telling FRE an FNM that they HAD to give mortgage opportunities to “underserved demographics” ie- low income high risk. Now, in a perfectly privatized environment, they have no right to do this… but FRE and FNM are quasi-governmental. Private but not private, and hence vulnerable to gov’t “instruction” or whathaveyou.
SO FRE and FNM started buying up junk paper. This is a huge problem because what this said is that there is an implicit governmental guarantee of a bail out for bad business practice. Furthermore, the primary people pushing this lending still do not want to reform anything. They want to bail out the companies, then do it again whenever it hits again.
Privatizing gains while publicizing losses is a bad way to go.[/quote]
Socializing the costs and privatizing the gains is exactly what is going on!
[quote]rainjack wrote:
Zeppelin795 wrote:
Zap Branigan wrote:
This will bounce back and the Federal government stands to make a massive profit from the takeover if they are smart about it. The sky isn’t falling.
Yes but will the taxpayer ever see this massive profit?
Do you even pay taxes? [/quote]
And your point is?
[quote]Zeppelin795 wrote:
rainjack wrote:
Zeppelin795 wrote:
Zap Branigan wrote:
This will bounce back and the Federal government stands to make a massive profit from the takeover if they are smart about it. The sky isn’t falling.
Yes but will the taxpayer ever see this massive profit?
Do you even pay taxes?
And your point is?[/quote]
Think about it. I am sure you will figure it out.
Lehman Brothers is pretty close to outright collapse now. You know, one of these days, this bailout thing is going to start to accumulate on us. ;>
[quote]Zeppelin795 wrote:
Aragorn wrote:
Well Mage, you have a lot of good points. The problem started in the secondary market. On the other hand, the reason they are failing is that people who had no business qualifying for a mortgage were getting them because there were people in congress telling FRE an FNM that they HAD to give mortgage opportunities to “underserved demographics” ie- low income high risk. Now, in a perfectly privatized environment, they have no right to do this… but FRE and FNM are quasi-governmental. Private but not private, and hence vulnerable to gov’t “instruction” or whathaveyou.
SO FRE and FNM started buying up junk paper. This is a huge problem because what this said is that there is an implicit governmental guarantee of a bail out for bad business practice. Furthermore, the primary people pushing this lending still do not want to reform anything. They want to bail out the companies, then do it again whenever it hits again.
Privatizing gains while publicizing losses is a bad way to go.
Socializing the costs and privatizing the gains is exactly what is going on! [/quote]
That is precisely my point, my friend.
Now I don’t know a whole lot about the details of things like this as economics has only recently started to spur my interest in the past few months.
But my major questions would be:
What would be the potential repercussions of not bailing out freddie and fannie and why would it cause these issues?
Also
It would make more sense as a long term solution to me to let these things play out instead of slapping bandaids on severe hemorrhages. It appears that this is just another way to curb any immediate threat while many many still loom and might come to bite us in the asses.
I mean if we are looking at the economy not really turning around for a year or perhaps even more years wouldn’t a bail out like this just make it harder for potential future bail outs to be successful?
Well, that’s a good question. Certainly the bail out philosophy needs to stop. However, the potential consequence of not bailing out Freddie and Fannie is a run on the banks, ala 1929.
Additionally the FDIC has just said it may not have adequate capital on hand…
Not good.
I think what needs to happen is a bail out, which will hopefully ameliorate the short term consequences, followed by the gov’t slicing up FRE and FNM in to pieces and saying, “we’re not bailing anyone out again. YOU deal with your crap.” Part of the problem in the first place was that FRE and FNM, didn’t perform due diligence in looking at new deals.
It’s funny how the market largely regulates itself if the gov’t stays the heck away from it. this may never have happened if the gov’t hadn’t said–“hey, you need to give more loans to low income families! Everyone needs a house, even those that can’t pay for it”
Mccain and palin have a killer opportunity here, if they play it right, to say "hey, look at this–look at what’s happening here. You (the citizens) shouldn’t have to foot the bill for this! And we’re going to make sure you never have to foot it again… " followed by cutting them up.
They’d make spectacular political headway with the voters, just not the establishment.
[quote]AssOnGrass wrote:
Now I don’t know a whole lot about the details of things like this as economics has only recently started to spur my interest in the past few months.
But my major questions would be:
What would be the potential repercussions of not bailing out freddie and fannie and why would it cause these issues?
Also
It would make more sense as a long term solution to me to let these things play out instead of slapping bandaids on severe hemorrhages. It appears that this is just another way to curb any immediate threat while many many still loom and might come to bite us in the asses.
I mean if we are looking at the economy not really turning around for a year or perhaps even more years wouldn’t a bail out like this just make it harder for potential future bail outs to be successful?[/quote]
There are a couple issues playing out here. The first is whether or not there will be a Freddie Mac or Fannie Mae in the future. If there is not, then mortgage rates will rise to be in line with Jumbo rates. Jumbo mortgages have always carried a higher interest rate (as of today it is about 1.2% points higher) because they cannot be bought by these organizations. The spread is not always 1.2% points, but it would disappear. It’s basically the difference of a kid right out of college buying a car on his own, or with a cosigner. If he has the cosigner he’ll get a lower rate, same is true if you have Fannie or Freddie as your “cosigner” to the mortgage.
It’s pretty important to prolong these institutions (at least right now) until we get through the build up in supply in the housing market. It’s getting hard enough for first time homebuyers to qualify for a mortgage, let alone if rates were a full percentage higher. Home prices would have to come down even further in order to be inline with traditional affordability models (ie the black box models that most banks lend on for their own portfolios).
The other issue that is causing “bailouts” and rescue capital situations is that many of the investment banks have positions in securities where the market has dried up and it is hard to estimate what the capital reserve requirement should be. It’s hard to assign a price to something that the model (even with current forclosure rates) shows should have a price of 90 cents on the dollar but no one is actively showing a bid on it. Whether a price of 90 or 50 is assigned to it makes a huge difference in the holding (equity) requirement to have that security. If Freddie and Fannie failed, we might as well kiss all of our investment banks goodbye. Love them or hate them, they make the economy run. Getting a loan to start a business would be damn near impossible for a long period of time…hello depression.
"The Federal Reserve set a dangerous precedent in March when it helped engineer the takeover of Bear Stearns by JPMorgan Chase (JPM, Fortune 500) by agreeing to guarantee $29 billion in potential losses.
Since then, several Fed members, most notably chief Ben Bernanke, have gone out of their way to defend the action, arguing that Bear Stearns simply was too big to fail. The repercussions of allowing Bear to collapse could have been catastrophic.
So if Bear was determined to be too big to fail, isn’t it likely the Fed would think Lehman is as well?
Probably. That’s because Lehman, the fourth-largest investment bank, is bigger than Bear, which was the fifth-largest at the time it nearly imploded.
What’s more, Lehman, a bond-trading powerhouse, is even a bigger player in the mortgage-backed securities market than Bear was. So the Fed could easily argue that letting Lehman go under could create even more chaos in the already volatile credit markets."
http://money.cnn.com/2008/09/10/markets/thebuzz/index.htm
Banks cannot be allowed to fail. All of us, on the other hand, CAN be allowed to fail. Your wealth and savings can be used at whim by bureaucrats, who don’t want to be left holding the bag when this house of cards collapses.
What if I don’t WANT to help big banks? Then I’ll be forced to help them.
We are slaves. Let’s begin by admitting this.
“Let’s say I’m a foreign investor and I own U.S. Treasury bonds. This implies that I trust the U.S. government; that I loaned you my money for the purpose of running your government. Now you take my money and pass it on to a third party, a private company. So I say to you, ‘What did you go and do that for? If I wanted to loan the money to that company, I would have done so myself �?? directly �?? in the first place. But I didn’t. I didn’t do it because I don’t trust the company. I trusted you. But now I can’t trust you anymore either. Now you’re just one of them.’ So the investor stops buying our bonds or, worse, dumps the government bonds he’s holding, and then we are in trouble. Then we can’t sell our government bonds anymore to pay off the old ones coming due. Then we, the United States government, default.”
[quote]Headhunter wrote:
“Let’s say I’m a foreign investor and I own U.S. Treasury bonds. This implies that I trust the U.S. government; that I loaned you my money for the purpose of running your government. Now you take my money and pass it on to a third party, a private company. So I say to you, ‘What did you go and do that for? If I wanted to loan the money to that company, I would have done so myself �?? directly �?? in the first place. But I didn’t. I didn’t do it because I don’t trust the company. I trusted you. But now I can’t trust you anymore either. Now you’re just one of them.’ So the investor stops buying our bonds or, worse, dumps the government bonds he’s holding, and then we are in trouble. Then we can’t sell our government bonds anymore to pay off the old ones coming due. Then we, the United States government, default.”
http://www.marketoracle.co.uk/Article6184.html[/quote]
From what I have read, the Fannie/Freddie bailout is not backed by the full faith and credit of the US.
But really, purchasing 10 trillion worth of stuff for 100 billion isn’t that bad of a deal. They got in for a penny on the dollar.
Hopefully, they will straighten this shit out, and then do away with yet another Clinton economic clusterfuck.
[quote]Headhunter wrote:
“Let’s say I’m a foreign investor and I own U.S. Treasury bonds. This implies that I trust the U.S. government; that I loaned you my money for the purpose of running your government. Now you take my money and pass it on to a third party, a private company. So I say to you, ‘What did you go and do that for? If I wanted to loan the money to that company, I would have done so myself �?? directly �?? in the first place. But I didn’t. I didn’t do it because I don’t trust the company. I trusted you. But now I can’t trust you anymore either. Now you’re just one of them.’ So the investor stops buying our bonds or, worse, dumps the government bonds he’s holding, and then we are in trouble. Then we can’t sell our government bonds anymore to pay off the old ones coming due. Then we, the United States government, default.”
http://www.marketoracle.co.uk/Article6184.html[/quote]
First of all, I am assuming you didn’t write this. But this paragraph makes absolutely positively no sense. Most of the purchasing of US Debt is done by foreign governments today as a way of exporting their currency and keeping it low ie the chinese. They don’t do it because they trust the government, they do it so that their labor is relatively cheap in the marketplace. We are 10 times more likely to see China stop buying treasuries because of our stance on Taiwan than we are because of these bailouts. These buyers know of the deficit projections for us because of social security and medicare and they still buy our 30 year issues because it gives them the net effect that they want in the currency market. They couldn’t give a damn about Fannie and Freddie and if we bail them out.