At least Bush is against a housing bailout.

[hipmatt]

http://www.latimes.com/business/la-fi-bailout30mar30,1,1755686.story?coll=la-headlines-business&ctrack=2&cset=true

The article was written to make it sound like the poor homeowners are getting screwed, and they deserve a bailout. I’m so tired of hearing that subprime loans make it possible for people with lower incomes, and bad credit to own a hone, and live the American dream. You call that owning a home, when you put 0% down, and pay interest only, sorry, that is not owning a home.

And as for the American dream part of it, it is way overused. No one is entitled to home ownership, it is a privilege. The fact is that not everyone is in the right position to buy a home. This is OK, and needs no adjustment. If anything, we should focus on educating these types of people about savings, and career advancement. Creating loan products so that even the most fiscally irresponsible and broke people can “say” that they bought a house isn’t helping, as we can all now clearly see the economic consequences.

If financial freedom is the American dream, then these loans will actually take people further away from it, especially in the long run.

[PerryChase]

If we really wanted to make homeownership something that most Americans can afford, we’d stop using homes as piggy banks and stop the financial institutions from using churn to create revenues for the industry.

We need lower prices so everyone can afford good shelter.

1) Remove tax mortgage interest deduction = that would automatically translate to lower prices.

2) Change capital gains exemption to 10 years = that would automatically translate to lower prices as it removes the speculator/homeowners from the market.

When citizens spend less on housing they have more to spend on other things = higher standard of living.

[Diego Mamani]

Well said, Perry. I would add that any bailout, however small, would conntribute to keeping house prices inflated and out of the reach of many americans. Bailouts would only benefit lenders and irresponsible borrowers who shouldn’t have bought houses to begin with.

Letting the market run its course will improve housing affordability, especially for responsible citizens who save for a down payment and honor their debts. Bailouts, even if only symbolic, will keep housing overpriced and will encourage irresponsible lending practices. The sooner lenders accept their losses and the sooner foreclosed houses flood the market, the better we’ll be long-term, even if there’s some pain in the short-term.

[SHILOH]

Can anyone explain how the the US housing market is linked to the the Chinese economy. While our housing market is going down….will the Chinese lose money also – due to transactions directly related to housing?

[Cow_tipping]

The bushies are in the big banks pocket … the bankers will get themselves bailed out while at the same time screwing the homeowners … now somehow … I see that as good for most of the people in here (you know galloping inflation and FB’s scrambling to get the newly printed $$ to the banks while relishing the ramen with free taco sauce they stole from taco bell … ) ya know …
Cool.
Cow_tipping.

[CostaMesa]

Gee Matt, I dono if that’s a very accurate interpretation of how things actually happened. What’s your angle?

Wasn’t it Bush and his business cronies that pushed the changes to mortgage lending practices through Congress (with the explicit blessing of the FRB system) that created this mess so they could avoid the impending ’02 recession/depression?

The Dodd bill enjoys precious little support from either side of the aisle – the data is out there if you look for it. It’s abundantly clear that only the Senators and Congressmen with very close ties to the Banking industry seem to feel that this bill is a good idea – any guess why?

It’s time to let markets work like they’re supposed to – without unfair support for *both* consumers and corporations.

Let the markets work!

[Diego Mamani]

SHILOH: The Chinese sell us all sorts of trinkets. In exchange we pay them with dollars, which is fiat money (not gold). In fact we don’t even pay them with physical dollars, instead, we simply credit their accounts. What do the Chinese do with all this wealth (on paper)? They buy long-term US bonds.

This huge demand for dollar-denominated and US-issued bonds (treasuries and corporate paper) keeps long-term interest rates low. This translates in low interest rates for mortgages. There’s enormous excess liquidity in the system. The subprime crunch only means that deadbeats will always be deadbeats, but there’s still plenty of money available, they only need to figure out who is a better credit risk.

Long-term interest rates will remain low for some time, maybe for years, which will create a floor for how low house prices can drop.

There you go: Trade deficit with China ==> Demand for long-term bonds ==> low long-term interest rates ==> low mortgage rates ==> easy credit to buy a house (provided you have a history of paying your debts).

[SD Realtor]

Very well said Diego… Both points. Whatever may be true or not true about Bush, about Greenspan, about lending practices, etc… The bottom line is EXACTLY what you said. Long term rates are driven by these long term bond purchases.

IMO this is driven the market much harder then anyone seems to post about.

SD Realtor

[Cow_tipping]

The bonds the chineese have been buying are guaranteed by houses (Mortgage backed … so they are guaranteed by people paying mortgages off really) … if they stop paying, chinese are going to stop buying our worthless paper … and that will drive up interest rates and make people think hard about who they are lending money to and at what cost.
Cool.
Cow_tipping.

[cr]

Won’t the FED eventually have to raise rates to allow foreign investors (i.e. China) some way to make money and continue funding our trade deficit?

Otherwise, the dollar becomes more and more worthless compared to the rising RMB, which makes goods in China less affordable, right?

[Cow_tipping]

At present china has indexed it to the dollar. So everyhting we import will go up, except what we import from china (which is everyhting). Its actually cool, its like free money for a while. In fact some inflation is good. We have had none in the last few years. We need some.
Cool.
Cow_tipping.

[one_muggle]

I’d read China was “diversifying” its monetary holdings away from the dollar. Can they still index to the dollar while buying, say Euros, instead of dollars?

BTW: I loved the article (in the Economist I think) that showed how much stuff the Chinese could buy for the $1T in US dollars that it holds–it was something like all the RE in 7 or 8 US states! That is some serious coin.

-one muggle

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