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  • November 30, 2007 at 11:10 AM #11028
    andymajumder
    Participant

    Nice article on the consequences of a "Bailout" by the government, though most people on this site are already aware of this. I am really amazed that the media rarely focuses on the fact that a drop in housing prices in places like California would actually make it more affordable (or it least give them a chance to own) for the middle class.


    http://www.fool.com/investing/general/2007/11/30/paulsons-plan-to-punish-the-public.aspx

    Remember, the only reason those teaser-rate loans were made in the first place was because lenders (and thus the investors buying the mortgages from the lenders) could count on a much larger, contractually guaranteed payoff in the future, when those interest rates were due to reset. Take away that payoff and you take away any incentive to loan to borrowers of marginal credit quality. Usher in an era when government and banks reset loan rates at their whim, and you can be sure that investors will never again buy securities based on adjustable-rate mortgages. If you think credit is tight now, just wait until you yank away potential returns from the people putting up the capital for all those loans.

    December 1, 2007 at 1:22 AM #106132
    patientrenter
    Participant

    andy, in a true free market, I’d agree with you, but it’s not a completely free market.

    Here’s how the pols do it: Cajole banks into lowering the reset rates. In return, lower the fed funds rate to increase banks’ margins for as long as it takes to make it up to them. If banks don’t participate, you get rough with them. It’s not going to look good if they are pushing people out of their homes, so it’s easy to destroy a banks’ good public image and force them onto the ropes. Make an example of one or two renegade banks and they’ll all fall into line. Better yet, make it clear you will make an example of any renegade bank and they’ll all fall into line before they get into trouble.

    So who pays so that the borrowers can get a better-than-market deal? Savers who deposit money in banks or money market funds.

    Patient renter in OC

    December 1, 2007 at 1:22 AM #106226
    patientrenter
    Participant

    andy, in a true free market, I’d agree with you, but it’s not a completely free market.

    Here’s how the pols do it: Cajole banks into lowering the reset rates. In return, lower the fed funds rate to increase banks’ margins for as long as it takes to make it up to them. If banks don’t participate, you get rough with them. It’s not going to look good if they are pushing people out of their homes, so it’s easy to destroy a banks’ good public image and force them onto the ropes. Make an example of one or two renegade banks and they’ll all fall into line. Better yet, make it clear you will make an example of any renegade bank and they’ll all fall into line before they get into trouble.

    So who pays so that the borrowers can get a better-than-market deal? Savers who deposit money in banks or money market funds.

    Patient renter in OC

    December 1, 2007 at 1:22 AM #106260
    patientrenter
    Participant

    andy, in a true free market, I’d agree with you, but it’s not a completely free market.

    Here’s how the pols do it: Cajole banks into lowering the reset rates. In return, lower the fed funds rate to increase banks’ margins for as long as it takes to make it up to them. If banks don’t participate, you get rough with them. It’s not going to look good if they are pushing people out of their homes, so it’s easy to destroy a banks’ good public image and force them onto the ropes. Make an example of one or two renegade banks and they’ll all fall into line. Better yet, make it clear you will make an example of any renegade bank and they’ll all fall into line before they get into trouble.

    So who pays so that the borrowers can get a better-than-market deal? Savers who deposit money in banks or money market funds.

    Patient renter in OC

    December 1, 2007 at 1:22 AM #106268
    patientrenter
    Participant

    andy, in a true free market, I’d agree with you, but it’s not a completely free market.

    Here’s how the pols do it: Cajole banks into lowering the reset rates. In return, lower the fed funds rate to increase banks’ margins for as long as it takes to make it up to them. If banks don’t participate, you get rough with them. It’s not going to look good if they are pushing people out of their homes, so it’s easy to destroy a banks’ good public image and force them onto the ropes. Make an example of one or two renegade banks and they’ll all fall into line. Better yet, make it clear you will make an example of any renegade bank and they’ll all fall into line before they get into trouble.

    So who pays so that the borrowers can get a better-than-market deal? Savers who deposit money in banks or money market funds.

    Patient renter in OC

    December 1, 2007 at 1:22 AM #106284
    patientrenter
    Participant

    andy, in a true free market, I’d agree with you, but it’s not a completely free market.

    Here’s how the pols do it: Cajole banks into lowering the reset rates. In return, lower the fed funds rate to increase banks’ margins for as long as it takes to make it up to them. If banks don’t participate, you get rough with them. It’s not going to look good if they are pushing people out of their homes, so it’s easy to destroy a banks’ good public image and force them onto the ropes. Make an example of one or two renegade banks and they’ll all fall into line. Better yet, make it clear you will make an example of any renegade bank and they’ll all fall into line before they get into trouble.

    So who pays so that the borrowers can get a better-than-market deal? Savers who deposit money in banks or money market funds.

    Patient renter in OC

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