why are e going to bail out the two largest subprime lenders?

[hate2bL8]

bottom line they were careless, wreckless and greedy!they did not follow strict lending guidlines it is thier own falt! WE SHOULD NOT BAIL THEM OUT. If they fail and the government does not tinker and prolong the agony thier would be an instant niche for the strong healthy banks. ECON 101

 

[hate2bL8]

sorry Fault

 

[Poahi]

the government does not tinker and prolong the agony thier would be an instant niche for the strong healthy banks. ECON 101

Which banks? Many thought INDYMAC was strong. Remember seeing TV interviews with depositors who were shocked? You think Citi is strong? I used to...

Here's what would happen under your scenario. When a bank fails, and there will be more, depositors will pull their money out. That will cause banks to go below their reserve requirements creating more failures. In addition, no banks will be able to lend so it will be more difficult for quality borrowers to obtain loans. This will cause a drop in home prices, construction, and the overall economy. It's a horrible situation, but this is the least bad of the alternatives. The problem with the mortgage mess is that everyone has to pay for it. The goal is to minimize the losses.

 

[skyboat]

bottom line they were careless, wreckless and greedy!they did not follow strict lending guidlines it is thier own falt! WE SHOULD NOT BAIL THEM OUT. If they fail and the government does not tinker and prolong the agony thier would be an instant niche for the strong healthy banks. ECON 101

If they fail, this country will be in a world of hurt. There will be no secondary market for mortgage debt. We will go back to the pre WWII days when a consumer could only get a five year loan with a ballon payment. Homeownership in America has been the largest wealth creation mechanism in the history of the world.

Without the secondary market for securitized loans, no bank will lend for fear of repeating the S&L crisis during the last housing downturn. S&L made 30 year balance sheet loans with low interest rates. When rates went to the low teens in the 70's/early 80's, all the S&L's had low rate long term assets on their balance sheets. However, they paid high interest rates on their short term deposits they had to back the loans. There was a complete mismatch between assets and liabilities. For example, they loaned at 5%, but then borrowed at 7%. In traditional banking, the profits come from the spreads between borrowing and lending. With upside down spreads, major losses will occur.

In conclusion, without the secondary market, borrowing rates will go up significantly for the consumer significantly impacting homeownership in this country. Without this wealth creation mechanism, our economy will be affected for many generations.

hate2bl8, I am not trying to be flippant or disrespectful, but this crisis was caused by lax oversight by the govt. of the loan originators (NOT Fannie/Freddie), insatiable demand by the investment community (pension funds, investment companies, sovreign wealth funds, hedge funds, investment banks, etc) and the desire of many people to achieve the American dream. Fannie/Freddie were simply adhering to their government mandate to buy loans from the originators.

 

[WMUSIGPI]

This situation will make the savings and loan scandal look like a picnic. One wrong move could bring about the next great depression. Ugly times for many people are unavoidable at this point.

 

[skyboat]

This situation will make the savings and loan scandal look like a picnic. One wrong move could bring about the next great depression. Ugly times for many people are unavoidable at this point.

This I must, unfortunately, agree with....

Fortunately, and I truely believe this, globalisation has made the world smaller. The global economy is much more resiliant to economic shocks. There will be great short term pain, but a global depression, I hope not........

 

[hate2bL8]

your all a bunch of socialists!

 

[hate2bL8]

by the way the great depresion was caused by the smoot-Hawley tarriff (government tinkering) something to think about fellas!

 

[becket]

Almost 50% of ALL mortgages are held by either of these two entities. They hold over 5 trillion dollars in loans...

What do you think would happen to the economy if all of the sudden they became insolvent? This isn't corporate welfare. This is a cornerstone to our economy and way of life.

 

[JT12345]

I thought the Great Depression was caused by people being allowed by the government to buy stocks for 10 cents on the dollar.

All these funds buying oil for 5 cents on the dollar and trading oil contracts in their basements... deja vu'.

This is all allowed by the government to prevent most of us from retiring like we planned. It's a 15 year cycle.

 

[Medeco]

Are F'n kiddng me?

You people crack me up.

Fly your plane and read a bit more before you make such crazy statements.

It's no wonder people think we (pilots) are a bunch of know it all morons.

Medeco

 

[labbats]

Crack open the Wall Street Journal instead of the USA Today and you'll have all the answers to this mess as well as the reasons it began.

I can't begin to recapture the statements in today's paper. Suffice it to say it was near unavoidable in 2008 yet Alan Greenspan was very vocal about fixing it in the early 2000s. No one listened because he was drowned out by greed. End of story. However there is some silver lining if the government will get off their hands and let it Fannie and Freddie die out over the next few years. Sadly that's a long shot due to the very reasons no one fixed it years ago.

 

[dbrownie]

The real reason is they are awash with corrupt former

gov lackies. See if you remember any of these folks..



http://www.npr.org/templates/story/story.php?storyId=92540620

DB

 

[YourPilotFriend]

Eventually they will be able to solve this problem with hyperinflation. Diversify in such away that when the dollar tanks you will have enough money to leave this country.

 

[relief tube]

because if they fail, this economy crumbles.

If 2 airlines fail, there's so many frickin' airlines that that it'll probably be a good thing for the industry. sad as that sounds.