Posted on 09/25/2008 10:40:14 AM PDT by tenger
Can somebody help me to understand the whole picture here because we keep talking about this amount of money as though it exists. As far as I understand it the question is would it be alright if they add $700 billion or however much it ends up being to the national debt. Isn't the problem that our national debt is so high it is dubious whether people want to do business with us because we are so far in debt? They keep saying the tax payers are going to pay it...when are we going to pay it? How much are the installments going to be for me personally, how long do we have? Since that amount of money does not currently exist where will they get it before the tax payers have paid for it? Are they going to print money?
The US debt ceiling will be raised to pay for
the “Barney Frank Chris Dodd Rescue Bill”
Those two ought to get a room tonight and celebrate doing what Barney enjoys best, to the entire US treasury
It’s just a simple matter of having 1 billion of us cut a check for $700. No big deal.
Carolyn
If the economy doesn't grow, you cannot expanded the money supply without hyperinflation.
OTOH, you cannot have growth with no growth in money supply.
That's why this plan is tricky. If you don't calm markets and address liquidity, you won't have growth; if have too much money and fail to grow, you are going to have to raise rates to the mid 20s to avoid hyperinflation.
That's why this is above 0bama’s pay grade.
I'm still not understanding the part about why we should all pay for the unwise lending/borrowing of others.
The problem is that the “loss” is a paper loss due to an accounting rule, and probably is no where near $700M.
Most of these mortgages will be paid in full. A small percentage are bad paper. Because they are bundled together in these mortgaged backed securities, they are sold as a lot. Buyers, wary of getting stuck with the few bad loans in the bundle don’t want to buy so the price of the Mortgaged Backed Securities drop. What does this have to do with the crisis? EVERYTHING.
After the S&L bailout in the 80s the Congress changed the rules and required banks to value their securities by a method called “mark to market”. They have to list assetes on their books at the current market price, rather than the actual value. If they held mortgages totalling $10,000,000, but because the market is down, they could only list them on the books at $1,000,000, the bank will have lost $9M in assets and lost the ability to loan $90M (the can loan up to 10x the value of their assets), reducing their ability to operate, causing the bank to fall into a crisis. Get rid of the mark to market rule and the crisis we’re in now becomes much, much smaller.
That's Huge!
Unless you’re a high finance person it’s a little hard to understand. It involves issuing short term treasuries to banks in a reverse auction format, meaning the banks will have to bid to the Treasury for cash. It’s up to the Treasury then to decide whether the bank can repay the bond.
The question is: how much is the govt. going to give these bondholders? Will the govt. pay full face value? Why should the taxpayers buy this foreclosed real estate at greater than market value? If the govt. wants to buy the real estate at market rates to inject money back into the markets, then I have no problem. However, I'm almost sure that won't happen. We are obviously going to buy these foreclosed properties at greater than market prices, and IMO, everyone should have a problem with that.
Try to think of it as a business deal rather than a political thing. Suppose you had the opportunity to buy all your neighbors houses for say, 5 cents on the dollar. Your questions would be, #1, what are they really worth and #2, can I make money by eventually re-selling them. From what I’ve heard and read, the discounted loans which have NOT defaulted are worth several times what Paulson will pay for them, and once the economy is stabilized, the government will sell them back to the private sector, at a profit. So it’s a good deal even if it’s necessary to borrow the money to do the initial purchase. And the US Government is the only “investment banker” with enough cash to do this deal.
The bigger question is, how much of this eventual profit will ever come back to the taxpayers? I think we all know the answer to that...especially if BHO gets elected.
On the other hand, it might bail out social security.
$700 billion divided by $264,000(the average U.S. home price in 2004) equals over 2.65 million houses. Hmmm, funny the way these numbers are thrown about...wonder how much is supposed to stick to the 'right' fingers?
Only worker/taxpayers can.
So, no matter how the problem is resolved, even doing nothing, the taxpayer will pay.
The only thing missing is the details:
Higher taxes?
Inflation?
A longer working life?
A more equitable distribution of who pays taxes?
(40% of "wrokers" pay no income tax at all).
A combination of all four?
OK, if the mortgages are guaranteed in order to protect the subprime borrowers from losing their houses, what motivation do they have to pay? Or doesn’t that question make sense? I’m not an economist.
It’s easy, they’ll just print more money!
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