Fannie Mae & Freddie Mac - the big bailout?

[Gurgeh]

Originally Posted by Arbitrary

Holding isn't a great option either as houses tend to die when the don't have people living in them. They need protecting and doing so is a large resource commitment.

Yeah, though if bank had a great option, they wouldn't be bankrupting one after another. If houses die the market will go up faster, either they lose a large % of their asset or a large % of the value of their assets, they're fucked either way.

[Gurgeh]

One thing could be that it's better for the banks to sell 1 house at 100 than 2 houses at 50, ie there is more debt generated by 1 house at 100 than 2 at 50, means more money for the bank, that's why it's better in the long run if there is a shortage of houses rather than too many of them. So I guess they'll rather let them decay than sell them at a large discount.

[Lefazz]

Originally Posted by Arbitrary

There is also the possibility that those loans were all bundled together as a AAA rated securities and sold as shares of an investment.

Thanks for the responses...I better understand why they can't so easily sell these homes for significantly less than what they were bought at. However, it seems like having debt interwoven throughout the financial system was an incredibly bad idea to begin with.

The problem I see, as a potential home owner, is that as a single person earning about 40K/year, there is no way I can afford a home without putting extreme financial burden on myself. If they tighten up the lending practices (which they should) it will require higher interest rates and down payments thus making it totally impossible to afford a home at current price levels. Bottom line is, real estate needs to come down significantly...that or our wages need to go UP to match it.

[Gurgeh]

Originally Posted by Lefazz

The problem I see, as a potential home owner, is that as a single person earning about 40K/year, there is no way I can afford a home without putting extreme financial burden on myself.

If you don't own a house and are not in debt at the moment, this is likely to be great news for you, if you can wait 2 years or so. Just be patient and you'll get a house you couldn't have dreamt to be able to afford. Think how deeply in shit you'd have been if you had bought a house between 2006-2008, think that there are a lot of people that are fucked and will not be back on the housing market for a long long time, that the price will keep decreasing for like 5 years, maybe more and that credit shortage won't last forever.

[Gurgeh]

I thought I'd add this graph, on which we can see how out of touch was the housing market last few years, and how it could (should?) drop 50% easily.

Graph from « Long Term (1800-2005) Investment in Gold, Bonds, Stocks
and Housing in France - with Insights into the USA and the UK :a Few Regularities », J.Friggit, 2007

[PosterOfStuff]

Originally Posted by Frieza_Prexus

You advocate communism versus capitalism. I believe you're arguing a false position. Literally, apples versus oranges. A better analogy would be freedom versus slavery.

Under a capitalist society, you are free to enter into a communistic agreement with any willing participants. Under a communist system, I am jailed, or worse, for pursuing my own economic goals.

The difference between you and me is that I want everyone free to forge their own destiny.

You want me to be a slave to yours. And I dare assume you would justify murder and imprisonment in order to deny me my freedom of choice to live and trade as I want.

That was just a brilliant post, nicely put. I have very little knowledge of economics and what you posted was very approachable.

But the only thing holding me back from believing you (sadly) is that you have an education about Communism, that is based on fantasy. Didn’t America go through a period where the public was goaded like sheep into fearing the big bad Communist. And it seems that this still perpetuates to this day. Even to intelligent, well educated and thoughtful individuals like yourself.

There never has been a Communist state, there have been dictatorships parading as Communist states that’s all. Soviet Russia and China have never been Communist states, and they are the only ones I can think of doing the whole jailing/slavery thing you stated.

The original principles/ideals that Karl Marx put forth, I think everyone can agree are unworkable due to a variety of reasons. You don’t need arguments based on fantasy to defeat the ideal of (original) Communism, just logic.

[Soriak]

You could argue that communism has to lead to a police state. Communism doesn't allow for private ownership, so what do you do when some people decide they want to keep shit to themselves? You can easily work communism into a capitalistic society, as there's nothing preventing people fro combining their money: various communes and, of course, most families spring to mind. That's usually where it ends though, because most people don't feel connected to a larger group of people, especially not outside of religion.

As for the bailout, looks like it's a done deal now. Voting may happen on Wednesday though, which may give us a glimpse of "what if the bailout didn't happen": the third quarter ends on Tuesday.

[Hal2005]

Attack of the naked long buyer | A cautionary tale from the future | The Economist

Good idea for a forum btw.

[Frieza_Prexus]

I was debating whether or not I should derail the thread with a tangent about communism. Given that it has been relatively slow the last few days I'll make just a post or two about it.

I'll be the first to admit that I used some hawkish language in my initial post, but I will stand by it. Though, admittedly, the strong stance against communism I took could make it appear as if I were acting on emotion as opposed to strong reasoning, but I'll illustrate why I oppose communism on a logical basis.

Originally Posted by PosterOfStuff

But the only thing holding me back from believing you (sadly) is that you have an education about Communism, that is based on fantasy. Didn’t America go through a period where the public was goaded like sheep into fearing the big bad Communist. And it seems that this still perpetuates to this day. Even to intelligent, well educated and thoughtful individuals like yourself.

Perhaps you arrived at the conclusion that I am uneducated about communism is because of hawkish language I used to decry it. The standard McCarthyist type person who thinks communism will eat their children will oppose it just as I did. Maybe it is my own fault for failing to make a logical distinction between myself and the former.

Ultimately, I use the doom and gloom language to show that communism can only function as a government under one scenario. That one scenario is a very bad place. That scenario is forced compliance by the government. It would appear as if there were two, but if you examine it closely, you'll find that there is only one. The "second" is complete and voluntary participation by the entire populace. The problem with that is if it were entirely voluntary there would be no laws for it. Ergo, voluntary participation between willing participants. IE No longer communism, but freedom!

You get communism only through government force. It cannot exist as a form of government without force. There will always be elements of society that wish to do things their way. The only way then to be a true communist state is the use of force.

I bring up imprisonment and death because there are no other real ways to force a person into compliance. If you're going to have some penalty for non compliance it must be heavy enough to work. Even if it starts out very light, you must take it to its endgame conclusion. A good example of how that can spiral out of control is if you don't pay a $50 parking ticket and see what happens if you let it all play out. If you protest against the penalties hard enough via noncompliance eventually you'll end up in jail.

I've seen the argument made that you simply garnish wages or something of that nature intending to be as non confrontational as possible. But then you have a black market forming. So now police raid the market and the leaders are arrested and so on and so forth. Again, the only way for communism to function as a government is brute force. This scares me.

I use the freedom versus slavery example because I believe it accurately portrays the relationships and differences between a capitalistic and communistic government and its people. However hyperbolic it may appear, I believe the analogy is fundamentally sound.

Originally Posted by Devil's Advocate

It would appear that you are arguing that any use of forced compliance is bad and that any government using it is one not worth having. Are you an anarchist?

Obviously, some force will be used. The great debate amongst philosophers since the beginning is what is an acceptable level of force. Going back to the two fundamental laws I stated earlier:

Originally Posted by Richard Maybury

Do all that you have agreed to do and do not encroach on other persons or their property.

I personally believe an acceptable level of force is something that furthers those two laws.

Originally Posted by Devil's Advocate

By that standard we should just lock everyone down. Then no one's rights will be violated!

This can easily be solved by simply restricting the government in the same way another person would be restricted. If the government is bound by the same laws we are, then there is no problem. We must find the right combination of laws that preserves the maximum amount of freedom for ourselves, while limiting our ability to harm others.

And a final note on the morality of government:

Originally Posted by Thomas Jefferson

It is strangely absurd to suppose that a million of human beings, collected together, are not under the same moral laws which bind each of them separately.

[Kiroy]

So something like 82% of American's are against the bailout, and all our glorious leaders are still trying to figure out how to get it to pass...

le sigh

[prescient63]

Your average American is a retard so what's your point. I like the idea of issuing preffered stock to bolster balance sheets which will let this work itself out rather than buying to a of debt because the US would get an equity stake in the bailout. Either way something is better than complete collapse of banks because that is bad for everyone. people in the US are going to pay for it one way or another. It'll come out of your retirement portfolio, your home value, or you'll just end up losing your job. We might as well spread the losses as evenly as possible and just think of it as insurance.

[Soriak]

Originally Posted by Kiroy

So something like 82% of American's are against the bailout, and all our glorious leaders are still trying to figure out how to get it to pass...

le sigh

FiveThirtyEight.com: Electoral Projections Done Right: News Accounts May Overstate Public Opposition to Bailout

"Do you favor or oppose the economic rescue plan now being negotiated by Congress and the Bush Administration?"

Among Rasmussen's respondents, 50 percent said they opposed the plan and just 24 percent said they supported it. ...

"As you may know, the government is potentially investing billions to try and keep financial institutions and markets secure. Do you think this is the right thing or the wrong thing for the government to be doing?"

When the question is framed in this way, 57 percent of people support the bailout, as compared to 30 percent who opposite it.

Hard to say which one better reflects what people want, isn't it? Not an easy question to pose neutrally.

[Gurgeh]

Originally Posted by Soriak

FiveThirtyEight.com: Electoral Projections Done Right: News Accounts May Overstate Public Opposition to Bailout



Hard to say which one better reflects what people want, isn't it? Not an easy question to pose neutrally.

I think the 1st one is kinda neutral, the second remind me of the poll the french mafiaa ran a couple of months ago asking if people were in favor of internet filtering or would rather be sent to jail instead and then claim 60% (or whatever bullshit number) of the french people supported internet filtering.

If your poll question is long, it's that you put the answer in it. If you ask simply if people are in favor of the bill or if they are in favor of internet filtering with a simple Yes / No you'll get somewhat more accurate number than asking : would you rather have the bailout voted or die from starvation ?

[prescient63]

How about we ask Americans "what three categories is a balance sheet comprised of?", and if they get that right they get an opinion?

[Kiroy]

Just in case anyone wants to read the bailout:

Text of Wall Street Bailout « Senate Conservatives Fund

Went from 3 pages, to 100 pages, to 450ish... someone has a sore hand (it's a little known fact that pageboys have to hand write new bills then senior page boys type them out).

Oh and here are more of the special interests we're paying for:

New Tax earmarks in Bailout bill
- Film and Television Productions (Sec. 502)
- Wooden Arrows designed for use by children (Sec. 503)
- 6 page package of earmarks for litigants in the 1989 Exxon Valdez incident, Alaska (Sec. 504)
Tax earmark “extenders” in the bailout bill.
- Virgin Island and Puerto Rican Rum (Section 308)
- American Samoa (Sec. 309)
- Mine Rescue Teams (Sec. 310)
- Mine Safety Equipment (Sec. 311)
- Domestic Production Activities in Puerto Rico (Sec. 312)
- Indian Tribes (Sec. 314, 315)
- Railroads (Sec. 316)
- Auto Racing Tracks (317)
- District of Columbia (Sec. 322)
- Wool Research (Sec. 325)

Can't say I disagree with helping out the Rum industry.