Originally Posted by
Darthtang AW
http:///forum/post/2766083
No, the reason we are in this mess is people are stupid. Point blank. ... now they are crying.
I agree, stupidity on the part of the lenders and borrowers. But, banks are forced to do it to remain compliant with the Community Reinvestment Act.
Originally Posted by Nano Reefer
http:///forum/post/2766183
of course not! where are they going to get all this 1 trillion dollars? taxes, you say? they already spent all that! so we will borrow it from countries like CHINA, BRASIL, and MEXICO. and do you think we will ever pay off that 1 trillion? hell no! so just add another trillion to foreign debt and prolong our inevitable national bankruptcy.
Perhaps, but to be honest I see it as a possibly good investment over time, please see my first most in this thread. The Country will not be in the hole another trillion over this. That said, I don't like it either but it was necessary IMO.
If Reagan did'nt take down the orders of congress set forth by FDR that made banks behave in a certain way, we wouldn't have this problem. Put those plans back into action!
Please cite where Reagan did anything in this regard. The Gramm, Leach, & Bliley act was under Clinton in 1999, this act essentially repealed much of the Glass, Steagall Act, AKA the Banking Act of 1933. But to be fair the Congressional vote in '99 was so overwhelming as to be veto-proof.
The US is not absorbing all the debts, they are removing them from the market and "storing" them (while still receiving payments) until the housing market stabilizes. At that point they will become liquid again and can be resold back into the markets, probably at a higher price, thus making money from this.
As for the numbers, let's assume that a whopping 10% of all of them default tomorrow, that's $70 billion (10% of $700B.) Now lets assume the gov't has to sell all of that 50% short = net loss of $35B and the gov't can only sell the securities back to the market for what they paid. This is a worst case scenario. $35B equals $100 for every person in the country. If the gov't doesn't do this, it would cost everyone far more than this, far more. I still don't like it, it goes against everything I believe in but it serves everyone better than not doing it and keeps the economy from collapsing.
Philosophically speaking, I'd say let them all fold as well, we'll go into a depression that lasts a few years but we'll get out of it in time. Practically speaking though, this is not the world we live in. We need the world to have confidence in the dollar to some extent, else no trade, no imports, no exports, the world could pull it's bonds and we don't have the money to pay them. So we'd either have to default on them or print more currency which would be relatively worthless in such an event, and cause massive inflation. The other thing that could happen is a foreign entity buys the securities, then you have that foreign entity owning the paper on your home - not good. Again, philosophically speaking - I don't like it one bit, but does need to be done IMO.
