Posted on 03/01/2009 12:55:40 AM PST by neverdem
Because... the President stated that just because his daughter goes out and gets pregnant , she shouldn't have to be stuck with a baby (stuck with taking responsibility for her actions).
He sees the economic situation the same way.
btt
That would have still left about 14 million empty housing units on the market. The major cause of this whole mess was the changes in the law made by the republicans and the midnight credit default swaps. Total world derivatives are around 550 to 660 trillion.
The treasurer could have bought all the defaulted mortgages for about 10% of the tarp. But then the government would not have been able to say we are helping the people.
They are hiding behind mortgages for a rich banker wall street bailout.
On Obama & Pelosi’s Ipod.
Believe in all the good things
That money just can’t buy
Then you won’t get no belly ache
From eatin’ humble pie
I believe in rags to riches
Your inheritence won’t last
So take your Grey Poupon my friend
And shove it up your a$$!
[Chorus]
Eat the Rich: there’s only one thing they’re good for
Eat the Rich: take one bite now - come back for more
Eat the Rich: don’t stop me now I’m goin’ crazy
Eat the Rich: that’s my idea of a good time baby
Aerosmith.
ping
Kudos to you and ping this thread for future reference.
A bargan yes, but where did the money go?
Yes, the market value of assets (houses) has plunged but somebody got paid for the houses. Where did the money go?
In the equities, paper gains have become paper losses and lost opportunity to convert to cash....that is understandable but where did the money for the houses and “stuff” go? Somebody got paid.
As for financial markets...the value is never really value until converted to cash and even then, with fiat currency, the value is suspect.
Re: 14 million empty houses
I was trying to keep my post relatively short.
Once the US Treasury acquires a bad mortgage, they should instantly sell it to the highest bidder.
At most, 10 million homes would foreclose at an average loss of $150,000, which is about a 40% price decline.
The market would clear instantly.
There might be millions of empty homes, but only because of massive overbuilding.
And, every empty home would be owned by a speculator who is actively searching for a long term buyer.
In exchange for taking on the bad loans, the US Treasury would demand to step in front of all stock and bond holders of the companies that now own these toxic mortgages.
The US Treasury would then instantly sell its (probably 100%) interest in AIG, Fannie, Freddie, Citi, etc. to the highest bidder.
Within 24 hours, each of these companies would be operating as usual, with new owners.
The original stock and bond holders would be wiped out, but the “new” companies would have perfect balance sheets.
Obviously, new regulations and transparency would be required for the “new” companies, but that's an essay for another time.
I don’t think we are going back far enough on how this got started. The fact that most of the industrialized world is sucked into this points the finger at Central Banks (US, Europe, Japan). For the last fifteen+ years they kept telling us inflation was running at 1-3%, while real estate prices were going up 5-10+ percent every year...and they never added that into the inflation numbers. If they had inflation would have been much higher and the central banks would have been compelled to raise interest rates years ago...and this global real estate bubble would never have occured.
None of the comments seem to directly address the author’s question: why did the world-wide collapse seem to start in Europe with a small proportion of mortgage defaults?
I would suggest reading Anthony Downs’ book Niagara of Capital: How Global Capital Has Transformed Housing and Real Estate Markets (2007). Downs explains how after 9/11, foreign investors were looking for a safe haven for their money from the threats of terrorism and America was looking to stimulate its ailing post 9/11 economy. U.S. investment banks concurrently invented collaterlized mortgage bonds and securitized real estate stocks (derivatives) to raise money for foreign investment in U.S. real estate. What could be safer than American real estate? This resulted in a Tsunami of money into U.S. real estate and a spike in the money supply which drove interest rates down, oil prices sky high, and inflation in good and services down but inflation in real estate and oil prices up. So it was essentially the influx of foreign capital that brought about the real estate bubble - hence it would be no surprise that Europe would be first to feel the pain of even a small amount of defaults. Also, positive loan leverage works great; but in reverse it has an exponential negative effect.
And now for all of your common sense and prudence, you get the privilege to pay for your neighbor’s stupidity and greed so he can stay in the luxurious home he swung with no money down and sucked all of the equity out of. Aren’t you lucky?
Thanks neverdem.
bttt
bttt
peter,
Which of my points were off topic?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.