The Recovery Plan From Hell

[bcassill]

Re: The Recovery Plan From Hell

The bankers and the officials at the Treasury and the Fed are living in a pipe dream. They all think that they can keep the game going even though the music has stopped and they are down to the last chair. At this point, there is nothing that can be done to prevent this from turning into the biggest crisis we've seen in many, many generations. And it was largely created by a small handful of individuals who were able to steer policy and (de)regulation in their favor. Of course, there were many willing participants in this great scam, but none of it would have been possible if the rules and the oversight had been in place. What is coming will be a cataclysmic shift in the political landscape of America. I just hope that the criminals that helped cause this carnage have a very deep hole to hide in because they are going to need it.

[bpr]

Re: The Recovery Plan From Hell

There's something I'm not getting in Hudson's scenario for the banks:

Suppose a recent buyer has purchased a home for $500,000, with a $500,000 adjustable-rate mortgage scheduled to reset at 8 per cent. Suppose too that the current market price has fallen to $250,000 – a loss of 50 per cent by the end of 2009. After all, there needs to be enough time for prices to decline. Otherwise, there would be no economy to “rescue.” Mr. Geithner and Summers need to “feel your pain” to come out with the package that I’m describing. The government will swap “cash for trash,” printing new Treasury bonds (interest to be paid by “the taxpayer) in exchange for the $500,000 mortgage that is going bad, heading toward only a $250,000 market price.

This still assumes a gain on housing prices. What if the spiral speeds up? What if it takes fifty years to recover 2005 levels? Employment is still required in order for consumers to reinflate the bubble, and there's no provision for this.

Unless the housing market tanks so horribly — say, back to 1980 levels — that the misearbly low wages J6P earns can make him a worthy creditor under new tightened rules and he can actually afford these homes — without a crash like that I don't see the housing market reinflating the economy.

What am I missing here?

[flintlock]

Re: The Recovery Plan From Hell

Wow classic free market doubletalk. Should be bankrupt? Come again? How many regular Joes with regular jobs who bought regular homes with a regular loan should have factored in Losing their Jobs and having to foreclose and declare bankruptcy becuase of a market crash fuelled by other people's greed? How in your eternal wisdom do you deem them to be deserving of a bankruptcy?

I'm a devoted free marketer, but I have to agree with this completely. Some are trying to portray this like every person in America simply overspent and that is why we are in this situation. I am a "regular joe", I live a fairly frugal life. That means no eating out, one vacation every two years, buy used cars, do ALL the work around my house,( no maid, gardener, repairmen). Yet I may get pulled down by this whole mess anyway. My parents will see a serious reduction in their substantial retirement income due to this. They don't have a penny of debt.

While I agree a lot of people did overspend, and they bear a personal responsibility, that's not all that put us here. Bankers lending money had an obligation to do so responsibly. Corporate leaders had a duty to operate responsibly. And our politicians had a duty to govern responsibly. In my opinion, those three culprits bear the lion's share of the blame. I also feel that until the people responsible( and this may mean thousands) are brought to justice, there will be no confidence in America and nothing they try will work. A few heads rolling would do more to revive the economy than any bogus stimulus package.

[mlg120856]

Re: The Recovery Plan From Hell

With Mr. Hudson's scenario, why would anyone maintain their home since they won't see the profits. They are essentially just renters with very little chance of seeing any type of gain. The cost of home repairs just wouldn't be worth it.

[Rantly McTirade]

Re: The Recovery Plan From Hell

Creditors(bankers, portfolio managers who buy securitized debt instruments, etc.) SHOULD know more about finance,etc. and know when a loan does not make sense-including considering a deterioration in both macro and micro circumstance that make an acceptable credit go bad. It's part of the 'job' of being a creditor-you should know a good deal more than most, nearly all, actually, borrowers.
'Creditors', broadly speaking, deserve roughly at least twice as much blame for our current problems than the broad group of 'borrowers'.
I say this as one who has managed investment portfolios for 25+ years.

[Rajiv]

Re: The Recovery Plan From Hell

You maintain your home, because you live in it!

An unmaintained home soon becomes unliveable. Examples -- leaking roofs -- leaking toilets, leaking gas stoves -- increasing energy costs because of increasing drafts as joints loosen up -- I am sure the list can continue on!

If one cannot afford the costs of keeping up a home, then maybe one should consider renting!

[Roughneck]

Re: The Recovery Plan From Hell

The 10 ton anchor of debt weighing down the system needs to be removed. The banks that made bad lonas should be allowed to fail.The fear is that the whole system will collapse with them. At least that is what spin misters of the banking lobby want you to believe.You must pass tarp now! you must pass the stealfromus package now! You must create a bad bank to absorb all the bad debt and let the poor foolish taxpayers pay for it! Or else! Notice the "plan" anounced was about saving the 10 biggest banks. If we let the chips fall where they may it will get real bad,for a while.But we survived one depression and we can survive another. We would be better off recapitalizing the many smaller banks that did not take on excessive risk.If we continue down the road of throwing borrowed money at the problem we will be hopelessly in debt and our currency ruined. Then the people who saved and played by the rules and acted prudently will be screwed because your savings will be worthless.