OT: Elections/Politics thread, part 4

[RobVarak]

The only true solution to this financial crisis is to let the patient bleed out and then start anew, building an economy that isn't based on excessive credit.

Two problems. "Letting the patient bleed out" is not an option. Unless you are advocating passively allowing economic chaos, social unrest and worldwide disorder.

Secondly, every economy is based on credit. Excessive credit can obviously be a problem, but modern business is based on credit and there's absolutely nothing wrong with that. Without credit economics would have never progressed beyond the 17th century LOL

Home values need to plummet. They took off like a rocket towards the moon, and now it's time for re-entry. Trying to forceably stabilize home values will only lead to more bad side effects down the road.

They only "need" to plummet if the market is free and acting rationally. Artificial, irrational declines are even worse than irrational bubbles. And artificial declines, driven by systemic credit starvation and panic, are what we are facing right now.

The bailout and McCain's plan are not simply a case of helping out where there's been irresponsible borrowing!! And minimizing foreclosures is not simply a case of bailing out predatory lenders!!

There are an enormous number of mortgages out there which were made by responsible lenders to qualified buyers that are at risk of foreclosure because of the combination of plummeting home values, credit lock-up and economic slowdown.

McCain's plan is certainly objectionable on conservative/libertarian principls. But it's essentially an extension of the very same principle that underlies the Treasury bailout plan. Instead of buying bundled mortgages and MBS's, they would be buying individual loans. The current plan already allows the government to forebear on exercising foreclosure rights, something that smart lenders do all the time anyway. It's a legitimate way to stop the hemorhaging taking place in the economy.

As much as people want to make this the equivalent of the S&L problem, it's a far more complex and deeply-rooted animal taking place in a far more complicated and volatile worldwide economic environment.

I love small government, but the reality is that if we leave the markets to "work through" these issues without government involvement we are looking at worldwide economic chaos that makes the last week look like a walk in the park. And the last time that happened we ended up with 50 years of government growth and expansion that served to exacerbate the crisis. I'd prefer some governmental involvement now rather than enormous governmental intervention down the road. And let me be clear, the bailout is minimal compared to what we'd see if there were another global depression.

[Teal]

But Rob, the bailout isn't working. I know that the actual 'thing' is supposed to take some time, (which I think is a pretty convenient thing to throw out when the stock market fell on its' face Monday), but it didn't even move the market's confidence. Except south.

McCain's handlers this morning were saying that the 300 billion dollar mortgage buyout comes out of the existing 700 billion already in play. I don't know if that was true last night, or that internal polling about it scared them into backing off, but they're claiming it isn't new spending. Who knows.

[bdunn13]

"There are an enormous number of mortgages out there which were made by responsible lenders to qualified buyers that are at risk of foreclosure because of the combination of plummeting home values, credit lock-up and economic slowdown. "

They were risky mortgages if the payment terms are based on the home value. My home value could drop to $5 and I would be in NO danger of losing my house. It is bullshit any way you look at it. We are rewarding stupidity and failure.

From what I have read, there has been no credit lockup either. The smaller banks are picking up the slack.

Many homes are HIGHLY over priced right now and have been for years. It all started with Clinton saying everyone should own a home.. and got worse when interest rates dropped.... speculators stepped in and made the problem worse by buying up property and making demand seem higher than it was.

The buyout does nothing but delay the inevitable.

[pk500]

McCain's handlers this morning were saying that the 300 billion dollar mortgage buyout comes out of the existing 700 billion already in play. I don't know if that was true last night, or that internal polling about it scared them into backing off, but they're claiming it isn't new spending. Who knows.

That's a dump truck full of post-debate spin horsesh*t. McCain's handlers saw that his proposal didn't cause the expect jump in the polls, so they started to spin like a top.

If McCain's mortgage bailout originally was part of the $700 billion bailout, he would have specifically mentioned that last night.

Take care,
PK

[pk500]

From what I have read, there has been no credit lockup either. The smaller banks are picking up the slack.

Exactly. The reason banks aren't loaning money to consumers with bad credit is because THEY HAVE BAD CREDIT.

Banks haven't turned off the credit spigot. But they are being much more careful about to whom they lend money. About damn time.

It is a trickier situation for business credit since so many businesses rely on larger lines of credit than the typical consumer credit to meet payroll, expenses, etc. But if you're a consumer with good credit, you will get a loan for a car, home, etc.

From what I've read, banks now are requiring credit scores of approximately 40 to 50 points higher than the beginning of the year from potential borrowers before they grant consumer loans. What's the problem with that? If you have kept your financial house in order, you can get a loan today.

When I graduated from college in 1987, it was almost impossible for a college student to get a VISA card without a previous established line of credit or a co-signer. My parents refused to co-sign -- thank God for that! -- and my mother told me to get a Sears card, buy a few small items with it for the next two or three months and pay off the entire card at the end of the month to establish good credit. That's what I did, and a local bank issued me a VISA card within three months.

Can you imagine kids having to jump through those hoops today? Instead, college kids have been FLOODED in recent years with online and print ads offering them VISA cards with low APR for the first year (and huge APR afterward in the largely ignored fine print) with no verification of income or previously established lines of credit.

It's time for American consumers to realize one simple fact: Credit is a privilege and a responsibility, not a right.

Take care,
PK

[JRod]

Many homes are HIGHLY over priced right now and have been for years. It all started with Clinton saying everyone should own a home.. and got worse when interest rates dropped.... speculators stepped in and made the problem worse by buying up property and making demand seem higher than it was.

The buyout does nothing but delay the inevitable.

Add in Bush's push for his ownership society.


Well the experts said the bailout wasn't going to stop the plunge it was meant to so it didn't crash like 1929.

I blame the failure to sell this plan on Paulson, Bush and the Dem Leadership. They simply failed to tell American people what this did and why it was needed.

[JRod]

It's time for American consumers to realize one simple fact: Credit is a privilege and a responsibility, not a right.

Take care,
PK

I know what you are saying but the fact is that this isn't just on the American public.

It's more like an two-way street. Lenders want people to have credit as they make money. People want to buy things and there's available credit. The economy is desperate for people to spend money and many of the indexes need, like a drug, need the spending.

Perfect storm.

[Teal]

McCain's handlers this morning were saying that the 300 billion dollar mortgage buyout comes out of the existing 700 billion already in play. I don't know if that was true last night, or that internal polling about it scared them into backing off, but they're claiming it isn't new spending. Who knows.

That's a dump truck full of post-debate spin horsesh*t. McCain's handlers saw that his proposal didn't cause the expect jump in the polls, so they started to spin like a top.

If McCain's mortgage bailout originally was part of the $700 billion bailout, he would have specifically mentioned that last night.

Take care,
PK

Yeah, that's what I'm thinking. If you're going to roll out a 300 billion dollar program on top of what we've already had to swallow, you'd be wise, very wise, to ensure that it's not new spending, if, in fact, it's not. Doesn't smell right.

[pk500]

It's more like an two-way street. Lenders want people to have credit as they make money. People want to buy things and there's available credit. The economy is desperate for people to spend money and many of the indexes need, like a drug, need the spending.

Perfect storm.

Good point, John. Definitely takes two to do the credit tango.

Take care,
PK

[wco81]

First of all, the notion that the problems are caused by less-qualified borrowers is false:

http://www.slate.com/id/2201641/

Look: There was a culture of stupid, reckless lending, of which Fannie Mae and Freddie Mac and the subprime lenders were an integral part. But the dumb-lending virus originated in Greenwich, Conn., midtown Manhattan, and Southern California, not Eastchester, Brownsville, and Washington, D.C. Investment banks created a demand for subprime loans because they saw it as a new asset class that they could dominate. They made subprime loans for the same reason they made other loans: They could get paid for making the loans, for turning them into securities, and for trading them—frequently using borrowed capital.

At Monday's hearing, Rep. John Mica, R-Fla., gamely tried to pin Lehman's demise on Fannie and Freddie. After comparing Lehman's small political contributions with Fannie and Freddie's much larger ones, Mica asked Fuld what role Fannie and Freddie's failure played in Lehman's demise. Fuld's response: "De minimis."

Second, it seems some people are more interested in wallowing in their moral and ideological superiority and punish the "irresponsible" people, even if this punishment process hits everyone, not just with lower home values but lower retirement savings values.


You don't have to borrow against your home equity to not want your home value to fall. If all that happened was that home values return to what they were a few years ago, that might be tolerable. But they could keep going down and with it, take down the rest of the economy. Not just the stock market but lead to higher unemployment.

The more people lose their homes and their jobs, the more likely that contagion spreads to people who were more responsible. Credit scores won't help much then.

[RobVarak]

But Rob, the bailout isn't working.

That is just not true. If it weren't for the bailout and the fed backing of the commercial paper houses, you'd likely have seen a full lock-up of the credit markets. You may still see that if they don't extend the commercial paper guaranty to states and municipalities. One and three day commercial paper is still at historically high interest rates, and that has to come down. Otherwise we're going to see California and New York standing in line behind Iceland.

I sound like a broken record here, but the equities markets are not the sole barometer of the economy!! Anybody who makes an economic argument and then points just at the Dow as evidence for its efficacy is making a specious argument.

Again, and again, the equities markets are like the blood pressure of a patient. It may tell you something important about a patient, but relying on it as the sole metric will not tell you anything about the patient's health.

Double quote:

From what I have read, there has been no credit lockup either. The smaller banks are picking up the slack.


Exactly. The reason banks aren't loaning money to consumers with bad credit is because THEY HAVE BAD CREDIT.

Banks haven't turned off the credit spigot. But they are being much more careful about to whom they lend money. About damn time.

This is not about banks lending to consumers...yet. That would be the last domino to fall. I know personally that secured business lending in amounts over $500,000.00 is slowing greatly.

The problem is tha banks are not loaning to each other. The commercial paper market was drying as well, making it difficult for banks and other large institutions to balance their own books.

You really need to look beyond the "personal responsibility" issues. Those are a problem and they have been forever, but this problem is much, much bigger than that. There are a galaxy of causes that are far more important and in many cases totally out of the control of the consumer: Regulatory mistakes, accounting regulation problems, mistaken monetary policy, international investment etc.

Sometimes complicated problems really are complicated. At the bottom of the pyramid is the inefficient housing market. Reigning that in should be priority number one for the executive branch, as doing so will help ease banks' fears about lending and loosen up the system considerably.

Edit:

This complex nature of this crisis really does demand that one have some understanding about banking, the credit markets, commercial paper, foreclosure procedure, accounting rules etc., in addition to the equities markets. Wikipedia, CNBC etc. all have a lot of great material on these issues. Try to get away from the political material and look at the economists and financial minds.

[pk500]

Second, it seems some people are more interested in wallowing in their moral and ideological superiority and punish the "irresponsible" people, even if this punishment process hits everyone, not just with lower home values but lower retirement savings values.

What the f*ck do morals and ideals have to do with this? I pay my bills on time every month. I don't carry a credit card balance. I don't leave beyond my means. I read the fine print of every financial transaction and understand and plan for potential ramifications.

That's fiscal common sense, not morality or ideology.

And how is being held responsible for a dumb transaction or living beyond your means a form of punishment? Someone who didn't read the fine print, borrowed more than they could afford or was suckered by a predatory lender -- which also should be held accountable, too -- is now a victim? Caveat emptor.

Again, I ask everyone who favors government bailouts: How is America going to pay for this, considering our government has huge deficits, both candidates propose tax cuts and neither guy seems too inclined to cut government spending?

Or are we just going to spend now and worry about paying for it later? Isn't that what spurred a lot of this crisis in the first place, fueled by lending institutions seeing an easy buck?

We've really entered a Bizarro World of American politics when both major parties want to increase the size of the Federal government, increase government oversight and spend a TRILLION on various bailouts, all while proposing tax cuts. An Obama-McCain ticket would have been unstoppable, eh?

Take care,
PK

[XXXIV]

Again, I ask everyone who favors government bailouts: How is America going to pay for this?

Take care,
PK

More taxes and a worse economy than in the late 70's. An economy approaching depression.

EDIT: Yes, I was for some kind of action.

[bdunn13]

We could always cut down the redwood forest and use the wood to print 1 million bucks for every American. There is plenty of wood, so we could include illegals in the payout too. Then, if there is any extra paper to go around to make some more cash, we could all vacation with the execs from AIG, we all deserve a $400K vacation. It is a simple solution, I don't know why McCain and Obama have not suggested this yet.

[Jackdog]

Second, it seems some people are more interested in wallowing in their moral and ideological superiority and punish the "irresponsible" people, even if this punishment process hits everyone, not just with lower home values but lower retirement savings values.

What the f*ck do morals and ideals have to do with this? I pay my bills on time every month. I don't carry a credit card balance. I don't leave beyond my means. I read the fine print of every financial transaction and understand and plan for potential ramifications.

That's fiscal common sense, not morality or ideology.

Again, I ask everyone who favors government bailouts: How is America going to pay for this?

Take care,
PK

How dare you Paul? Fiscal common sense?? Get the f*ck out here man.

Carol and I got rid of our last credit card in 00. We have keep our monthly knott at around 3,300. That includes everything. Rent,utilities,car note,food,cable,ect,ect. Combined our monthly income is around 6,500 net. We bank 3 grand a month. No investments. Just liquid.

Keeping our cost of living at a resonable rate has provided us with the chance to save cash every month. As our income grew so did the amont of savings every month. It's our brand of SS. We figured that out with Detroit public educations.

We live in a great neighborhood and eat out every weekend. We also donate 500.00 a month to chairty. Living within our means has paid off. Now we have to bail idiots and criminals out? Bullshit. Carol and I have practiced finacial discipline and our goverment is now taking us to a fiscal "Twilight Zone". Unreal.

No matter who get's elected I feel that our savings every month are going to take a hit.

[JRod]

Second, it seems some people are more interested in wallowing in their moral and ideological superiority and punish the "irresponsible" people, even if this punishment process hits everyone, not just with lower home values but lower retirement savings values.

What the f*ck do morals and ideals have to do with this? I pay my bills on time every month. I don't carry a credit card balance. I don't leave beyond my means. I read the fine print of every financial transaction and understand and plan for potential ramifications.

That's fiscal common sense, not morality or ideology.

And how is being held responsible for a dumb transaction or living beyond your means a form of punishment? Someone who didn't read the fine print, borrowed more than they could afford or was suckered by a predatory lender -- which also should be held accountable, too -- is now a victim? Caveat emptor.

Again, I ask everyone who favors government bailouts: How is America going to pay for this, considering our government has huge deficits, both candidates propose tax cuts and neither guy seems too inclined to cut government spending?Take care,
PK

Re-read Rob's post.

Let's say Rob there are 10 houses in your neighborhood right next to you. If 4 of those homes are foreclosed, that affects your home value. Should you sell or need to sell you would a huge financial hit.

And it's not just about the home market. Too many people are solely focused on that.

It's about the flow of money from institutions to other institutions and then to businesses.

This isn't about buying up homes where people took bad loans. That's a sector of it but not why the bailout was needed. Many fail to remember, that homes have been foreclosing for 3-4 years now. The banks could withstand those loses. It got so bad that it affected the entire banking sector. Not all of that is becuase of bad loans.

[matthewk]

Even your own?

If that's what the market dictates, then yes. But I'm not worried about that.

I'm not moving anytime soon. I have well over 50% equity in it. I have never used any equity to loan money to myself. And the less my home is worth, the lower the property taxes.

Long-term our house will be worth way more than it is right now. If home values never come back up, we'll have a whole lot more to worry about than just the value of a house. In that scenario you would probably be happy to even be in a house.

[GTHobbes]

What the f*ck do morals and ideals have to do with this? I pay my bills on time every month. I don't carry a credit card balance. I don't leave beyond my means. I read the fine print of every financial transaction and understand and plan for potential ramifications.

That's fiscal common sense, not morality or ideology.

And how is being held responsible for a dumb transaction or living beyond your means a form of punishment? Someone who didn't read the fine print, borrowed more than they could afford or was suckered by a predatory lender -- which also should be held accountable, too -- is now a victim? Caveat emptor.

Take care,
PK

No offense, PK, but how easy would you find "living within your means" if you were actually paying for your music and games? I know you take a lot of pride in being a penny pincher, but that life's not for everyone. And when you flout not paying for music, etc., it comes across a bit hypocritical, to me anyways.

[Jackdog]

No offense, PK, but how easy would you find "living within your means" if you were actually paying for your music and games? I know you take a lot of pride in being a penny pincher, but that life's not for everyone. And when you flout not paying for music, etc., it comes across a bit hypocritical, to me anyways.

That's out of line man. WTF?

[RobVarak]

Overnight ratings are out:
http://blog.nielsen.com/nielsenwire/med ... nd-debate/

That bucks the trend, which usually sees ratings drop off from debate to debate.

[GTHobbes]

No offense, PK, but how easy would you find "living within your means" if you were actually paying for your music and games? I know you take a lot of pride in being a penny pincher, but that life's not for everyone. And when you flout not paying for music, etc., it comes across a bit hypocritical, to me anyways.

That's out of line man. WTF?

I agree...I had a bad morning and shouldn't have vented here. Sorry, PK.

[RobVarak]

No offense, PK, but how easy would you find "living within your means" if you were actually paying for your music and games? I know you take a lot of pride in being a penny pincher, but that life's not for everyone. And when you flout not paying for music, etc., it comes across a bit hypocritical, to me anyways.

That's out of line man. WTF?

I agree...I had a bad morning and shouldn't have vented here. Sorry, PK.

Flip-flopper!!!

Nice to see that the last shred of decency hasn't left the room...yet.

Return to your seats, no DEFCON change to see here...

[Jackdog]

No offense, PK, but how easy would you find "living within your means" if you were actually paying for your music and games? I know you take a lot of pride in being a penny pincher, but that life's not for everyone. And when you flout not paying for music, etc., it comes across a bit hypocritical, to me anyways.

That's out of line man. WTF?

I agree...I had a bad morning and shouldn't have vented here. Sorry, PK.

I hope your day get's better man. I got some free time,who do you need me to f*ck up??

[GTHobbes]

That's out of line man. WTF?

I agree...I had a bad morning and shouldn't have vented here. Sorry, PK.

I hope your day get's better man. I got some free time,who do you need me to f*ck up??

LoL...thanks, Jack and Rob. And again, sorry PK...I was out of line.

[pk500]

No offense, PK, but how easy would you find "living within your means" if you were actually paying for your music and games?

How easy would I find it? Absolutely simple, that's what.

First, gaming and music never were huge sources of expense for me. Second, if I was paying for them, I would find alternative sources of income, like eBay, to fund them just as I did when I was a console gamer.

Or I would stop gaming completely and rely more on online radio instead of purchasing records. I only play one game regularly right now, rFactor on the PC, and I paid full retail price for it 15 months ago.

Do you think I enjoy scrimping on everything? If so, you're sorely mistaken. But it's necessary to ensure the fiscal future of my family, especially my children and preserving my wife's ability to be a stay-at-home mom for the benefit of our kids. You learn to live with a thrifty lifestyle and realize that not lusting for or having the latest and greatest of everything isn't such a bad life.

EDIT: I saw your apology after I wrote this. So I deleted some of the more caustic comments I made initially. But I kept the basics of my response, for the record. No worries, by the way, and I appreciate your apology. Not necessary, but very appreciated.

Take care,
PK