Bailout Reprise by Bill Roberts
This was inspired by my conversations with Jan Wood on her blog. You can read the run up to this here.
Duncan Hunter is MY Congressman. I live in his district. I am very disappointed in him. He is retiring this year. His son, also named Duncan Hunter is running for his seat. Early in the primary campaign Bill Cherry had a quiz on his blog that "matched" the respondent with the candidate that most closely reflected their values. Duncan Hunter was my closest match.
As a matter-of-fact 4 of the 5 Congress people in San Diego County voted against the bill. The only vote in favor was by the most liberal Democrat (Susan Davis) here. It is very demoralizing for me that I seem to be on the opposite side of this issue, but I believe that I am right.
I personally don't give a hoot what happens to the banks, but I do care what happens to us (all of us) and I think that the foreclosure problem needs to be dealt with summarily. If we applied some of the ideas that the conservatives advocated the banks would continue foreclosing on non-performing loans and continuing to fail as a consequence. Workouts would not be an option. Foreclosures are disastrous to our economy.
When I say I don't care about the banks I want to clarify that. I do care about the S&Ls. If the bill had passed the first time around WaMu and Wachovia might have survived. We need more thrifts not less. We need to decentralize mortgage financing. We don't need fewer financial center mega-banks controlling every aspect of our daily lives.
I just hope that the "protections" for homeowners written into the bill will cause Treasury to rewrite these non-performing loans so that more people can keep their homes. It isn't a question of "do they deserve to be helped." A foreclosed house hurts all of us.
Even though I believe in some libertarian ideas, I don't like Libertarians because they put consistency above common sense. Even a Christian Scientist needs to go to a doctor if they've had a traumatic injury. We need to be practical and pragmatic. Save the patient first, and then work on the philosophical things.
Most of the Republicans that voted for the rescue plan put "Country First." Even Newt Gingrich, who was initially against the bill, spoke in its favor because we had to do something quickly and this is what was available. Maybe if we had had the luxury of time we could have come up with something more agreeable.
I hope all is well with you. We will come through this.
Bill Roberts
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I have been a real estate broker since 1975. I specialize in commercial real estate, business opportunities, and finance. I coach real estate investors and teach retirement strategies. DRE #00527512
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Bill R,
"Country First."
Maybe farm country! this thing stinks of pork droppings!
In case you haven't been in the country lately porkers are the worst smelling things on the farm.
There is no excuse for this waste.
Bill
Bill A, You certainly aren't taking the "long view" are you?
I hope you are doing well in Texas. You are missed in Vegas.
Bill Roberts
Bill, I have never been more disgusted with the Republican Party than I am right now. The fact that they would not vote for the bill unless it had tax cuts attached to it is despicable. Did you read what tax cuts (read pork barrels) were included in this bill? Wooden Arrows for gods sakes?
This bill had to pass to calm the financial markets. But in the end I don't believe that it will do any good. Congress was too cowardly to address the core issue - housing. I believe that it will take months before the government gets its ducks in a row and develops appropriate programs to renegotiate notes. By the time they get it together the crisis will be over, and the biggest transfer of wealth in our country's history will have taken place. I've read multiple analysis that suggest that we will see the turnaround in early to mid 2010 - that's when it was supposed to turn around anyway.
Millions of Americans will be homeless and many will have lost everything. The long term strain on the economy in terms of social services will be extreme. By bailing out the banks, without a clear program to help homeowners we have buried our children financially.
The American consumer has just been raped by it's own elected officials.
Bill R,
The long view, me not taking the long view! Just how long do you think it's going to take to repay 700 BILLION? I wished I had your income, because on mine it's going to take a real long time!
What we have is not a "Rescue" not a "Bail Out", but the most expensive attempt ever to buy an election! This was staged by the evil in congress and joined by the stupid! Our great, great, great grand kids will be paying for this.
On a better note, so far so good in Texas, Ike was a new experience.
Bill
832-259-7078
At this point, all we can do is watch what happens.
I am happy to see talk about going after the Freddie, Fannie, Franklin Raines cabal.
I suspect that it's just talk though because they have too many friends on the Hill to seriously in danger.
Kate, I think this bill will speed up the process. Several hundred thousand homeowners who would have otherwise been foreclosed will get to keep their homes.
Bill A, This tax bill was already voted on by the Senate. It passed overwhelmingly. It was "attached" to the Rescue Plan because all spending bills are supposed to originate in the House, but this way the Senate could act first. It wasn't pork barrel spending, but tax breaks that were needed.
BTW to Kate, the toy arrows problem was a screw up from when taxes were originally established on arrows. The tax amounted to about 100% of the value of the toy arrows. All this bill did was separate them out from more expensive arrows that could "handle" the tax.
Lenn, Those are the guys you need for your "perp walks." Everything will depend on who we send to Congress and the White House. If the Dems maintain their majority (or increase it) then (I think you are right: nothing will be done.
Thank you all.
Bill Roberts
Bill,
I do not believe we had any other choice but to vote for the bailout.
Mike, That is my take exactly. Thanks.
Bill Roberts
Bill,
History will show us later on that it was the right move at the time. I believe it was history that helped them to make this difficult decision.
Mike, I think it was expediency, not an appreciation for history that "motivated" this vote. But you are right about history" judging the correctness of the move.
Bill Roberts
I just read your 4 part series on foreclosures. You have a very interesting perspective! I will politely disagree with your view on the bailout. In theory, yes we can make money on this if everything is executed correctly.
To see AIG just spent over $400K on a spa and golf weekend in Cali is disheartening.
I still don't subscribe to the bailout and the above example is precisely why. There is too much corruption and too many hands in the cookie jar.
We can agree to disagree,
Your libertarian friend who needs her head examined :)
Renee, It is nice to hear from you. There is a lot wrong with the rescue plan. But that said, we still needed it. As for those idiots at AIG, I just hope that the government does something about (and to) them. They deserve our wrath and retribution.
See you later.
Bill Roberts
Bill - first, I am a libertarian (small l, not a party member but more in the sense of a classic, or Jeffersonian liberal). Foreclosures are not disasterous to the economy, the are an integral and needed part of our economic environment. That may sound harsh, but, sometimes it has to happen.
However, I will agree that the amount of foreclosures (3% of homeowner ship) has been a catalyst for this current bust. We did need a bailout, however, I am not sure that what we received in both the July and October bailouts are what we needed.
There are many out there that can be called "victims" and probably do deserve some needed relief during this process. I am working with a client who very shortly might be in that foreclosure category and his lending institution will not work with him until he has missed two payments. Sheer idiocy. He is the kind of person who certainly needs the assistance.
But there are also many out there that deserve to be foreclosed upon.
Unfortunately, government has a horrendus record of being able to do the right thing right. I am truly afraid that this will be just another one of those times.
Mike, Thank you for your comments. I believe in free markets, but I don't believe that chaos is better than order. There is also the issue of collateral damage. Your (not you personally but you in general) forclosure affects my neighborhood, my safety, and my property value. Your bad behavior is affecting me. I have a right to shield myself from your actions.
We need to get real about this. Freedom is not compromised because we drive on one side of the street rather than all over the road.
Bill Roberts
Truely a compelling case of opinions that I must respond to! Case study: Black Tuesday, 1987, S&L takeover. I was a Executive VP, manager of Money Desk operations for one of the most profitable S&L's in the Country (name not important). My job was to take in large Institutional, Broker cash deposits then reinvest those monies back into the market trying to attain at least a 1.5 to 2% spread with matching maturities. The S&L Industry at that time was involved in the Junk Bond Market. A-C paper. Needless to say when the market crashed, most every S&L on paper, became worthless. Had the Feds waited to takeover the Industry for two weeks, those same S&Ls would have been back in the Black on their balance sheets. Moral of the story! The Fed's wanted to put an end to the leverage buy-out/hostile take-over Junk Bond market. (Mike Milken/Drexel Burnham, Lambert'. Fast Forward! Same thing is occuring right now except the Fed's over played their hand by not taking into consideration that our US Financial Markets are dominated by Global Power Investors. The amazing thing is that Paulson was a Investment Banker for Goldman Sachs/specializing in leverage junk bond financing back in the 80's!!! Why the long commentary? The bail-out package you now see was put on the table years ago. No one, however, anticipated for a Global crash! 700Billion$ is hard to stomach, but in a 100+trillion dollar world-It's what they call Chump change!! What's in your wallet? If your not taking advantage of the exceptional Investment opportunities around you, specifically-Real Estate, you need to find a mentor/advisor to guide you. Your going to need some extra cash anyway to pay your part of that $700Billion.
The fed should offer real property loans at 4%, one per SSN. Existing borrowers could immediately refi into a lower payment, regardless of their situation. Existing owners could tap their home equity at 4% as well, so the benefit would be fair to everyone rather than simply rewarding those who overspent at the expense of those who stayed within their means. Married couples could buy a second home and rent it out, though most renters would become buyers at 4%. The Fed doesn't need a large down payment because they have an advantage when it comes to collecting payments.
Make banks focus on other parts of the economy and let gamblers continue to abuse Wall Street (as they always have) rather than abusing the housing market. With fixed 4% rates and wide availability, housing prices would stabilize and we wouldn't see the sorts of bubbles caused by Greenspan's low interest methadone or neg-am and teaser loans. In fact, banning banks from ever writing owner occupied loans could only be a good thing because banks always do more harm than good in the long run (Greenspan forgot that self interest favors short term thinking for most people) and home ownership is too important to be treated like a casino game.
Matt, Thanks for your "long" comment. The $700 Billion will turn out to be "chump change" I'm sure. As a matter-of-fact we will probablty get it all back with interest. And I agree, everybody should take advantage of this opportunity to pick up bargains.
Frank, The whole mess could have been avoided if Greenspan hadn't "pulled the rug" out from under the flippers so suddenly. Now everybody is hurting, even those who had nothing to do with the real estate market. The financial crisis has coet of millions of jobs.
Bill Roberts