The sooner people take responsibility for their own shit ,the better.
The "new loans" (cash out refinancing) people got were spent in most likelihood on goods and services they cannot afford. Who are you gonna blame for that ?
You're right, they're equally responsible.
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When devils will the blackest sins put on, they do suggest, at first with heavenly shows - Othello
The success of the pending rescue of the U.S. financial system probably depends as much on the central banks of China and the Middle East as on Congress and the Federal Reserve.
The U.S. is turning to foreign governments and other overseas investors to buy a good chunk of what could total $700 billion in Treasury debt expected to finance the bailout. Foreign investors also are needed to shore up the depleted capital of the nation's financial institutions, seen in the plan by Japan's Mitsubishi UFJ Financial Group to buy a large stake in Morgan Stanley, which is weighed down by bad debt and market distrust.
This is a bittersweet moment in U.S. economic history. In one sense, the growing importance of foreign cash represents the triumph of a half-century of U.S. proselytizing for a global financial system in which money flows from those who have it to those who need it. But it is also an unmistakable sign of U.S. economic decline. The global financial system the U.S. designed had anticipated that American banks and financial firms would be the world's financial lifeguards; now those institutions are like exhausted swimmers a stroke or two away from drowning.
The financial crisis makes clear how much the interests of foreign lenders have become a top concern in Washington. A big reason the Fed and Treasury stepped in to rescue mortgage giants Fannie Mae and Freddie Mac, say U.S. financial officials, was to reassure foreign leaders including China, which holds roughly $1 trillion in U.S. debt, that U.S. securities were safe. "Superpowers do not normally ask their diplomats to reassure other nations on questions of credit-worthiness," says former U.S. Treasury Secretary Lawrence Summers.
Just 10 years after the U.S. oversaw the financial rescue of Asian nations, the U.S. now risks becoming the world's largest subprime borrower. This change of fortune has been hard to swallow. In a televised address Thursday, President George W. Bush blamed the current financial crisis on the "massive amount of money [that] flowed into the United States from investors abroad," rather than on greedy decisions by U.S. mortgage lenders and borrowers. In Friday's presidential debate, both candidates railed against U.S. economic dependence on China.
Powerful nations have been humbled before by an overdependence on foreign capital. Council on Foreign Relations economist Brad Setser notes that Britain was forced to end its seizure of the Suez Canal in 1956 because of U.S. opposition. Washington's main weapon: its threat to slash financial support for Britain, whose economy had been battered by World War II.
The U.S. isn't in remotely as bad shape as postwar Britain. It still is the world's sole military superpower, and the U.S. currency is still dominant. The latter is important because even if foreign holdings of U.S. debt grow, as is likely, the U.S. alone prints the dollars needed to pay those debts.
Even so, foreign lenders have a great deal of sway. If they were to dump U.S. government debt -- or be unwilling to buy more -- the interest rates needed to attract buyers of Treasurys would soar. The already fragile U.S. economy would absorb yet another hit.
China, Saudi Arabia and other big foreign holders are unlikely to take antidollar measures precisely because they own so much U.S. debt. To the extent the dollar declines, so does the value of those nations' holdings. Mr. Summers calls this situation "the financial balance of terror."
But it is naive to assume that this so-called balance will protect U.S. interests indefinitely. Senior Chinese economists have voiced growing dismay about the outlook for the dollar, and the introduction of an additional $700 billion in debt might drive the currency's value down further, at least in the short term. "I think foreigners are being taken for a ride by the U.S. government," says Andy Xie, an independent economist in Shanghai.
Sovereign-wealth funds -- huge government investment funds -- have largely sat on their hands rather than buy additional stakes in U.S. financial firms. China Investment Corp., for instance, has been wary of increasing its investment in Morgan Stanley after it was criticized sharply at home for taking equity stakes in U.S. financial companies that have nose-dived.
In the Middle East, too, state investment funds in Kuwait, Qatar and Abu Dhabi say they have no plans to jump to the rescue of ailing Wall Street banks. In one hopeful sign for the U.S., some smaller state funds are looking for bargains in real estate, finance and insurance. "For investors that have the liquidity and have patient capital, I can see good opportunities," said Talal Al-Zain, chief executive of Bahrain's $10 billion fund, Mumtalakat.
The U.S. economy has managed to grow in recent years, even though Americans don't save much and the government has run huge deficits, because foreigners kept lending. The same was true in the 1980s. Now the U.S. needs foreign capitals to keep lending. C. Fred Bergsten, director of the Peterson Institute for International Economics, a Washington think tank, says the Treasury will have to stage a "road show" to explain the rescue plan to overseas lenders who may be considering euro investments instead.
Domestically, the reliance on foreign money means a loss of autonomy that Americans are simply going to have to get used to. Part of the accommodation is already occurring. The controversy over investments by sovereign-wealth funds has been reversed. Last year, lawmakers worried the funds would gain political influence by investments in U.S. companies; now U.S. policy makers are worried that they won't buy new stakes. Efforts to erect restrictions against foreign trade may also lose momentum. The U.S. needs the world's money more than it thought it would and won't want to rile potential lenders.
-- Jason Dean in Beijing and Chip Cummins in Dubai contributed to this article.
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"It's not that the Democrats are playing checkers and the Republicans are playing chess. It's that the Republicans are playing chess and the Democrats are in the nurse's office because once again they glued their balls to their thighs."
EESA requires the Treasury to modify troubled loans – many the result of predatory lending practices – wherever possible to help American families keep their homes. It also directs other federal agencies to modify loans that they own or control. Finally, it improves the HOPE for Homeowners program by expanding eligibility and increasing the tools available to the Department of Housing and Urban Development to help more families keep their homes.
Where is it NOT possible ? WTH does "increasing the tools" mean ?
I'm guessing Paulson at GS had his fingerprints all over these bad CDO's. I still believe this is more of a gun to the head move from our "friends" overseas holding the weak paper than a rescue plan.
Either way, I'd like to know how to trade it. I'm glad i'm not short anything tomorrow. The part of this that I don't like is that to participate companies must give warrants to the government. This is going to dilute shareholder value and any bank that participates is going to screw their shareholders, stock price, and valuation.
Back in 2007 the heads of the Central Banks of Europe did just that. They are the ones that really got Paulson and Bernanke's attention. Prior to that they were still saying this was a minor sag and that everything was OK.
I found this thread from August 2007 and thought it both interesting and relevant to the events of the week. It is ONLY four pages.
Where is it NOT possible ? WTH does "increasing the tools" mean ?
Providing legal ways for loans to be rewritten, reconfigured and addressed within the confines of the original loans. Effectively rules and regulations that provide court proof ability to modify contracts.
If you, as an example have a house you bought for $300K and had a mortgage that was $275K. If the current value of that home is now $250K, the banks now have the tools available to rewrite the loan at a lower amount, if that is necessary to insure that the loan is re-secured. If the tools were not in place, Banking Regulations would not allow a bank to just "rewrite" at a lower amount, considering the original loan might have been Fannied.
Banks, Uncle, Taxpayers would all rather you keep your house at the new fixed rate than you have to give it up and the bank/uncle/taxpayer gets to hold a depreciating asset until the market rights itself. With you back in your house with a new contract and new rates, everyone can budget better and they can make the business assumption that a much smaller percentage of loans will default than if they had not restructured.
The sooner people take responsibility for their own shit ,the better.
The "new loans" (cash out refinancing) people got were spent in most likelihood on goods and services they cannot afford. Who are you gonna blame for that ?
Depends on the circumstance whether or not there is blame, don't you think?
I hope that is not the case since the Democratic loan reduction proposal was dropped. I think only the interest rate and length of the loan can be rewritten. Otherwise, the bill turns housing back into risk free investments.
Quote:
Originally Posted by mcbear
Providing legal ways for loans to be rewritten, reconfigured and addressed within the confines of the original loans. Effectively rules and regulations that provide court proof ability to modify contracts.
If you, as an example have a house you bought for $300K and had a mortgage that was $275K. If the current value of that home is now $250K, the banks now have the tools available to rewrite the loan at a lower amount, if that is necessary to insure that the loan is re-secured. If the tools were not in place, Banking Regulations would not allow a bank to just "rewrite" at a lower amount, considering the original loan might have been Fannied.
Banks, Uncle, Taxpayers would all rather you keep your house at the new fixed rate than you have to give it up and the bank/uncle/taxpayer gets to hold a depreciating asset until the market rights itself. With you back in your house with a new contract and new rates, everyone can budget better and they can make the business assumption that a much smaller percentage of loans will default than if they had not restructured.
I would think the banks and their stockholders since this package does not, in any way suggest that Uncle will "make the whole" [insure that they will make the profits they expected or even maintain the asset value they assumed].
Now, that will write down to less revenues from less profits but that would have happened to a grander scale if the bailout had not occurred. And if the bailout had not occurred we might all be looking at 50% loss of asset value. If b.gates is on the board, he might not be bothered that his value is only $22B instead of $44B but most Americans can't afford the hit.
So as bad as this hit is, it is not nearly as bad as it could be.
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