[Rhodes22-list] Financial Bailout

[pdgrand at nospam.wmis.net]

After reading and digesting everything I could find on the subject,
including all of your posts and attachments, I'm inclined to believe that
most, if not all of the blame lies squarely with congress.  The following
was sent to me by my financial advisor when I requested his take on what
was going on.

It goes something like this.

Congress sets up government agencies (Freddie Mac, Fannie May, Ginnie Mae)
agencies to assure that loans are available to credit worthy individuals.
Based on their guidelines your local loan officer wraps up some of his
mortgages and sells them to the federal government. The government
agencies sell them to investors looking for some nice conservative
investments. After all they are now backed by agencies of the federal
government.  The system works well and life is good.

As time goes by some of our leaders decide that loans should be available
to all of their constituents (thereby assuring loyalty in any future
elections) and affordable housing comes into play. The fact that some of
these folks can’t even come close to affording what they are buying, can’t
save a dime for an emergency, and therefore are turning quality loans into
shaky loans is brought to the attention of congress by the agencies
leaders. For this the agency leaders are brought before congress and
thoroughly admonished and advised that congress knows best.

One problem, but not the only, is the unqualified “adjustable rate”
(sometimes called "teaser rate loans" by people who know little, but like
catchy phrases) borrowers. This is just one group. You have to also add in
the other groups of unqualified borrowers who are also just hanging on by
a thread. With the “adjustable rate” the buyer who reached for the
absolute limit of what he/she can afford is SOL if interest rates increase
followed shortly by his/her monthly mortgage payment. The loan payment
went from almost affordable to not even close to affordable overnight.

The same super deal is available for the “Fixed Rate” borrower who reaches
to far. With no funds in reserve the loss of a job or any other financial
event starts the parade. When financial trouble starts, assuming it hasn’t
been maxed out already; the credit card is brought into play to stave off
the wolf. This rarely works.  As soon as a payment is missed anywhere the
person have credit the credit card vultures start circling and your great
credit card rate is now 29%. This is where some regulation might be
appropriate.

The “interest only” loan assumes the constantly inflating value of you
home will build equity while you spend what would have gone toward the
principal on fun. How much fun do you think folks have when the value of
their property heads south, what equity you had is gone, and the lending
agency is waiting for you to go under?

A system is now in place where by loan companies and government agencies
are pressured into giving loans to folks who can’t even handle a credit
card let alone a mortgage. Are there some companies that went to far

certainly? Is there greed on Wall Street
duh?

Congress sets the stage and then when what they helped create (the current
financial mess) falls apart they start blaming each other and especially
whoever is the temporary resident of the White House. Congress certainly
could not have knowingly had a hand is the problem. These are the
statesmen who look out for all of us. Yeah
sure????

The folks in the know go to Congress repeatedly and tell the tale of
what’s on the horizon is changes aren’t made.  Congress is not interested
and they are sent away.

The horizon arrives and congress is told that $700 billion will return
liquidity to the market place and avoid a melt down. Congress is smarter.
Rather than pledging $700 billion to create liquidity, and have a plan to
get money flowing again, they play politics and listen to their
constituents (that’s a first), who got all there information from the
media, and do nothing.

So now the stock market is down $1.1 trillion, so your leaders could
protect your $700 billion because they were smarter than the pros. I might
add that the $1.1 trillion was your 401(k), IRA, college savings plan or
whatever. Since money (liquidity) still isn’t available, company’s who
must have liquid funds to operate can’t get access it. Congress can get
money printed so they will get their paycheck.  That may not be true for
the rest of us.

Lets be sure we punish those greedy Wall Street types for there incredibly
bad behavior and don’t forget to go after the loan people for taking
advantage of us all by providing all those shaky loans.