[Rhodes22-list] Financial Bailout

[Herb Parsons]

It's their fault.
It's our fault too. We put 'em there.
It's "us" they're trying to "please".

The hubdub will die down, and we'll return to the same basic system. 
We'll probably patch this particular hole, but the hull still needs 
major work.

pdgrand at nospam.wmis.net wrote:
> 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.
>
>
>
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