Bush Plans Response to Subprime Crisis

[patientlywaiting]

stockstradr, thank you for the comment. I'm so glad that there are still sane people in America. You made my day. I feel good now.

[h82rent]

Take the personal feelings about Bush completely out this for a second. Here’s what you are looking at. We have a huge bubble, and we have very recent experience with the fallout of the last (tech) bubble. Many People felt the pain of that burst, even though there was a ton of speculation there, too. People invested in the stocks like crazy, were happy as anything as things skyrocketed, but lost their savings and retirements as things came screaming back down. And if they didn’t get out, all they could do is remorse about their speculation. There was no bailouts. Government didn’t do anything to help these people with shattered dreams and wrecked finances. After all, they lost money in the stock market. But it was just money. They weren’t injured, they didn’t lose family, they didn’t lose shelter. They speculated and lost. End of story.

But now, we have another huge bubble, this time in housing. But I think this bubble is much more “real”. We have a nation of homeowners from ALL classes that don’t want this bubble to burst. We also have a nation of lenders, brokers, realtors, investors, etc, that don’t want the bubble to burst either. And they will be very vocal about it. And they will plead to anyone necessary in government to prevent them from losing their assets. Losing their well-being! Losing their shelter! (even though they could rent, but nobody ever seemst to mention that).

And so whoever is in office – Bush, Clinton, Obama, Guliani, whoever – are going to have to respond to this. And Bernanke is going to hear the pressures to lower interest rates. At first, I was convinced that this bubble is going to pop. Very loudly and very quickly. But given the political ramifications of this issue, I’m not so sure anymore. And if all the Bush-bashers out there think he screwed up today, don’t think it’s over. There is going to be much more screw-ups on this issue by him and Bernanke. But it doesn’t stop there. You can bet you’re a$$ that if a Democrat takes office, they will do anything to save Mr. and Mrs. Poor Homeowner. And probably do even more than Bush did today.

And I’m very impartial about politics. I am neither Democrat nor Republican. And I want the housing market (in San Diego) to crash and burn. I just think that politics could very easily keep this bubble fully inflated for a long time. Especially with elections coming up. I wish it weren’t true, but these kind of political decisions you heard about today are certainly not over. In fact, I think it’s just the beginning folks.

[drunkle]

i’ve always thought bush was a moron, but i had no idea just how bad he could fck up. did anyone? i mean, sure, voting for him was stupid (not that i did, but if you did), you still had to believe that the system would be resilient enough to deal with utter incompetence, even malicious intent. so on this basis, i think it’s fair to say that the system has failed.

[cr]

I thought the foreclosure problem wasn’t that big a deal? So say the now silent bubble nay-saying hypocrits.

Screw future generations to save the lifestlyes of reckless, irresponsible and just plain stupid people, all so a couple billion dollars of dirty MBS/CDO’s can line the pockets of the filthy rich. And I emphasize filthy.

What are we teaching these people? Why should they get a tax break or any break at all? They should be forced to to pay off every cent they owe, or go to jail and do community service until every cent is paid off in charitable work. So should the idiots who oversaw the granting of these loans.

We incentivize idiocy.

[POZ]

Andy and lending,

The idea of a bail ot really pi$$es me off (I even went so far as to write a letter to congress and the senate–realized the futility of it and nevers sent it), but we can take solace in knowing that any govt intervention will be wholly incompetent and only make things worse. You need look no further than Katrina, NO, and the rest of the gulf coast to get an idea of how this plan will pan out. The Fed and This administration have given a whole new meaning to the term ‘unintended consequences’.

[cr]

Speak your mind guys:

[email protected]

[JES]

And in the process, they will likely pass more stringent lending rules, real estate laws etc. that will make it even harder for people to buy homes, therby driving prices even lower.

[lniles]

I’m in with the lot who think this is a good thing. I think we’re going to see a load of foreclosures.

Helping people stay in their homes = serfdom to the bank
Tax break on forgiven debt = walk-aways en masse
Stricter lending laws = huge inventory

In fact, I wouldn’t be surprised if the tax break is the real motivation, masked behind “helping low-income people keep their homes”.

[Borat]

This country deserves what it gets for voting that guy in twice. Now we will helplessly watch them steal our money while promising to protect us, just like they did with that Medicare drug giveaway. Worthless speculators will get to keep their houses, our savings will be eroded and we’ll all still be on this board b****ing about how houses are too expensive. Welcome to the third world everyone.

Hey, but at least you didn’t vote for the guy who said he invented the internet. Or the FLIP FLOPPER. You can all feel good about that.

[patientlywaiting]

Tax break on debt forgiveness = big loophole for the filthy rich who “owe” millions to their corporation.

I own my own company. I can just have the corporation give me a HUGE mortgage on my house. I “default” and that is a huge tax free transfer of wealth. Hell, for that kind of deal, I’ll be happy to work for $1/year salary.

Plus the corporation gets a nice write off. Double dip. 🙂

[LA_Renter]

“At first, I was convinced that this bubble is going to pop. Very loudly and very quickly. But given the political ramifications of this issue, I’m not so sure anymore.”

“I just think that politics could very easily keep this bubble fully inflated for a long time.’

I have to respectively disagree in this regard….The bubble Popped!…..very loudly and very clearly. I say this because in light of the wall to wall coverage of bad mortgages (if hear subprime one more time I am going to scream) and resulting credit and liquidity crunch, plus the entire global financial markets being obsessed with Ben Bernanke’s words and how he said them, and the President of the United States holding a press conference on the emerging housing crisis, that pretty much means the horses are out of the stable. There is no way they can keep the bubble inflated at this time, we have passed a point of no return. The primary objective right now is not to save housing and keep the bubble inflated, the primary objective is to pry the credit crunch’s grip on the market and it ain’t budging. In all the hoopla today the secondary market for mortgages are in effect still Closed with no sign of opening anytime soon. Commercial paper is still falling off a cliff. The credit crunch remains in tact. In my mind the Bear Stearns hedge fund disaster was the shot heard around the world. Investors did not take a loss in these funds……they took a total loss. Since then FEAR has gripped the markets. Bubble over. Are we going into a recession or a depression is the real question here…and no that is not hyperbole. If the Fed begins firing ammo at this and those credit markets stay locked up……the consequences will be severe.

[pencilneck]

This part made me laugh out loud (Ok, I have a sick sense of humor):

On FHA Secure: The program would let homeowners who have good credit histories but can’t afford their current mortgage payments to refinance into mortgages insured by the FHA.

This will help the subprime crises how?

[h82rent]

LA_Renter, I agree with you to the extent that we are at an inflection point. I just don’t see/hear a “pop”. More like a slow hiss as the air comes out, maybe? I just know that I make a good salary, and have a good amount for a downpayment, and I’m stunned at the fact that I can still only afford a POS, or live somewhere where I will spend a large part of my life fighting traffic.

I am a (hopeful) housing bear, and in fact enjoy the fact that I made a little extra money from SRS (the housing short ETF), but I’m not too sure how things will tumble over the next year. With the political ramifications going into November 2008, we might not see too much of a decline. I hope I’m wrong.

[Sandi Egan]

The Bush administration has been pushing Congress to enact overhauls that would eliminate the required 3% down payment and raise the size of the loans the FHA can insure to as much as $417,000 from $362,790.

I see this as a good thing for San Diego and other expensive markets. It will widen the gap between conforming and jumbo loans, putting additional downward pressure on the 500K+ prices.

[bsrsharma]

Patiently – I think I have a problem understanding your logic. This Tax break will allow all homeowners who are upside down to walk away harmless and start from a clean slate. Imagine the mountain of REOs and the downward pressure on prices! The lenders will be so screwed I can imagine the whole mortgage market practically shutting down! 40% down payment will become de rigeur in many markets.

Coming to your example; Your corp has LOANED you a Huge mortgage, right? You default; The Corp has a loss. It may take a writeoff. The seller of the house would have paid tax on it anyway (beyond 250K/500K residential exemption, if any). I don’t see a big problem. As long as the tax writeoff is accompanied by a foreclosure or bankruptcy entry on your credit, I don’t think I would begrudge your “good fortune”.

[Author]

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