Comments on: The Fed as lender of first and only resort

By: T.S. Reed

T.S. Reed — Sat, 15 Nov 2008 03:41:08 +0000

“Absolute Power Corrupts Absolutely” is the phrase that James Elasmar should of used. He’s absolutely correct. You can’t blame the little guys who took the loan thhe couldn’t afford. They needed to house his family in a market that was being price gouged by real estate agents fattening their wallets, supported by the mortgage originators who would add on extra points for themselves to get the sub-prime rates even lower(which most of these originators can’t even be found these days-chew n’screw). They were being offered amounts that were double, even triple of what they could actually afford.

Most level headed folks would recognize that the can’t swing a $300,000-400,000 note on $20/hr. wage, but they make it look so feasable on paper. Of course the real estate agents and the lenders are pushing you to go ahead and sign, but don’t explain that what you were signing, most likely a 3 yr. ARM, would double your interest rate in three years, probally doubling your monthly payment.

Most people who are defaulting on their mortgage are not folks who were intentionally trying to screw themselves out of a prized asset, their family on the street, and their credit in ruins. It was new Mother & Father who needed to provide shelter for their family and were chasing the American Dream of owning your own home. These people are victims of circumstance. In a time when land and homes were flying off the shelf and the market only showed signs of increasing, many couples were left whithout a choice but take what they could get. Many people couldn’t take what they had saved as a down payment for their home and put it aside and save it for when the market dropped and rent a property in the mean time. Who knew when that would that happen. How long would you have to pay someone elses’ mortgage for? Could you even get approved at another point in time?

If the people who had the most to lose, the banks, are telling you that you can afford the house no problem, why would you not believe them, especially if you are a first time home buyer. Anyone who has bought a home can recognize that buying your very first home is very confusing and often seems to happen in a whirlwind fashion and you are trusting those around you involved in the deal.

Of course, everyone should realize their financial limits, but these people should not be baring the burden of the current crisis. If anything, we should have sympathy and empathy for many of them. They were taken by the real estate companies and the mortgage originators. It is these people that should be held responsible, not Joey Homeowner who had grand dreams of providing for their family and working their tail off to make it all work out only to have their world come crashing down on them. Losing your job and your home at the same time? I am sure that is exactly what they intented when they invested in a roof over their head.

By: Tom Bosse

Tom Bosse — Sat, 15 Nov 2008 00:09:47 +0000

A 1921 Bailout eventually caused the crash of 1929.

Let the law of supply and demand work. Money is just
another commodity let it rise or fall without government
intervention. The markets need to find their own bottom
without intervention. Sure, things will get worse but
then will recover quicker.I am a small businessman and
I have no trouble getting money. Why, because I have a
track record of paying my debts. If big business has done things to get themselves in this shape, let them go broke. I have been broke twice in my life and did not
file bankruptcy. I worked until I paid my debts. Can you
imagine why I don’t feel like bailing someone else out.
I don’t care if it is Fannie Mae; Freddie Mac; brokerage
firms; banks; mortgage companies or insurance companies,
if they are broke, they are broke, let them fall and let
someone stronger take over. Yes, I agree that we are a
disgrace to other countries. But it is not me but the
greedy predators that got themselves in that shape and
I have no feelings of mercy to them or the stockholders
that let them do it.

This country became great because of private enterprise.
So, for God’s sake leave it to private enterprise.

By: Edward F. Dijeau

Edward F. Dijeau — Thu, 13 Nov 2008 04:38:36 +0000

In responce to Benjamin Burkley coments on Union workers…
Did you know that the UAW builds the Toyota Corolla and the Pontiac Vibe in California at the NUMMI plant, a joint venture between General Motors and Toyota, is one of the most profitable. The UAW does not design and market the cars they build, yet why does one plant prosper and another fail? It is the product the plant makes and the consumers willingness to purchase that product.
GM was the leader in developing Fuel Cell cars. But how do you fuel them? They make alternate fuel cars and trucks for the Federal and State governments who have their own filling stations in their corporation yards. The problem is, the GASOLINE ONLY infrastructure our country has and our Republican Government officials, under pressure from BIG OIL, are unwilling to make the Changes needed to give us a muli-fuel infrastructure. A Car company can not make cars that the customers can not fuel!!!
Boon Pickens, the oil billionaire, wants to have “liquefied Natural Gas” cars and filling stations across the country but that requires a large investment that OIL companies will not make and car companies can’t afford. So now it will be up to our political leaders to make the change.
Obama was the only one who promised to make sweeping changes that could make this happen, not just drill, drill, drill. Unions backed Obama because he made the best argument to keep America’s Industry moving and hiring and not go off shore. He also promised to reverse the BUSH executive order, anti-labor, enacted policy’s that has hurt American Labor’s ability to make a living wage. Who do you think shops for American Goods? It’s Joe Plumber, UAW Fred, IBEW John and Teamster Bill. Not the CEOs, they buy Mercedes or Lexus and Imported Italian Suits.
Blaming the Unions is the LIE of big business CEOs That want it all for themselves and to shift the blame for bad business decisions, they have made. Any school child can see this through the “smoke and mirrors” show yet biased Adults are the talking Blind.

By: Ronomundo

Ronomundo — Wed, 12 Nov 2008 04:15:04 +0000

The strongest possible form of business regulation is bankruptcy. Let the reform begin. What the treasury is doing is trying to put a feeding tube into a dead man on life support. Pull the tubes out. By the way, roll back the bankruptcy law the Bush Administration and the Congress passed to save the banks from bankruptcy so we can clear out the poison debt and start over.

“Democracy must be something more than two wolves and a sheep voting on what to have for dinner.”
– James Bovard, Source: Lost Rights. The Destruction of American Liberty (St. Martin’s Press: New York, 1994), p. 333

If you had a bag of potatoes with a couple of bad potatoes in it, would you leave the bad potatoes in the bag to infect the rest of them or would you pull them out to save the rest of the good potatoes?

The politicians are busy blaming deregulation for the current financial crisis. This is partly self-serving, but it’s also due to a defect in the way politicians think. Often, the repeal of a government regulation will result in the restoration of free market regulations that are far stronger.

Free market regulation comes in several forms. One involves customers taking their business elsewhere when a company fails to provide a good product at a good price. Businesses are regulated by their customers.

Please notice that the government operates under different rules . . .

If the government charges you too much to do too little, then too bad. The government continues to extract money from you, even when it performs poorly.

* You can’t fire the government!
* You can’t take your business elsewhere.

In this sense government is almost completely deregulated.

But the free market also regulates businesses in other ways. Indeed, the free market imposes the strongest possible form of regulation . . . bankruptcy.

By: Ken Fanning

Ken Fanning — Tue, 11 Nov 2008 20:57:32 +0000

Am I the only person in the world that thinks the narrow columns and small print here make this tedious reading? I set the text size to largest. Give us a break, please.

By: Benjamin Burkley

Benjamin Burkley — Tue, 11 Nov 2008 20:49:04 +0000

There is nothing we can do to save the auto industry in the USA. Nothing short of disbanding the UAW. The UAW has a deathgrip on the auto industry, something that Honda, Hundayi, and Nissian do not have to deal with. It is insame to think that a company can compete against another with the same technology with much higher labor and operating costs. It just wont work. GM will continue to have to sacrifice quality to pay their workers. then people will do what I have done. Buy a Honda. Its a better car, better reliabilty better price. Why??? because Honda can invest their money correctly, investing it in makeing their product better as opposed to compensating overpaid union workers. I think they should through all of those union labors out and make them renegoiate their contracts. oh well. maybe I am just a fool, and dont reallize that the government can fix everything. But has that ever worked before????/

By: James Elasmar

James Elasmar — Tue, 11 Nov 2008 15:49:15 +0000

Our ‘world financial system’ would appear to be a bad idea.
If continents each had their own system and attempted to be self-contained, there would be less connection and fewer problems when ‘leaders’ of one area decided to throw sensible rules [such as creating 'moral hazard'] in the basket and create a ‘financial crisis’.

It appears people who opt for power can never get enough.

The people who grow the food, build the houses, and pave the roads just want to keep on working to better themselves and their families. It’s the people at the top who keep on screwing things up.

By: Dave Bail

Dave Bail — Sat, 08 Nov 2008 13:59:40 +0000

Saving Detroit/Stimulating the Economy

It’s been all over the news, putting money into Detroit for the auto industry, trying to save it and help it convert to more hybrid production. Probably preferred stock or warrants.

OK - here’s the benefit for the whole economy now.

How old are the fleet vehicles in the federal government? Why not place an order to buy all new hybrids from Detroit now - and let the states buy off that contract too through GSA - even give them the money as a stimulus to do it too, letting them save local tax dollars to avoid budget cuts.

So, invest in Detroit to convert it, buy all new vehicles and give Detroit some profit, all the vehicles are green, the public’s investment gets paid back, and states get stimulated too.

David S, Bail, Ed.D, MBA
Corinth, KY

By: BH

BH — Mon, 03 Nov 2008 19:51:44 +0000

Fannie and Freddie aren’t the solution, they are a part of the problem. They are the mechanism, purposely and explicitly set up by congress, to allow and encourage making loans to people who cannot get them from banks who expect to get paid back. Local banks were strong-armed to make such loans. Freddie and Fannie buys those loans that the bank, when the loans were made, expects to eventually go bad. The bank gets a cut for making the loan but is relieved of responsibility. Fannie and Freddie were able to raise money to buy loans because of the implicit guarantee from the US Government. Initially, this guarantee was used to encourage folks to buy their stock. This wasn’t enough, so they involved Wall Street investment banks in creating securities which consist of mortgages. The rating services were paid to give AAA ratings to these securities so that they could be sold to pensions and similar organizations that are supposed to only buy solid investments.

So Fannie and Freddie, as well as the investment banks, need to be shut down, using a bankruptcy model. We don’t need them, unless the idea is to create yet another bubble….

Mortgages should ideally be made by local banks that know the local situation. The current situation makes it difficult for home owners who want to negotiate with their mortgagee to even talk to the right person, and the person they are talking to has no way to know if an offer is reasonable.

By: TH

TH — Sun, 02 Nov 2008 14:59:50 +0000

I think it is ironic that:

- Congress didn’t regulate these government-sponsored enterprises
- Fannie and Freddie were exempt from Sarbanes-Oxley
- The Government then seizes the company – takes the shareholders stocks away
- Allows people to buy more stocks as if they (Congress) want to rebuild these two government-sponsored enterprises to prove to the world that capitalism really does work

Now I understand what Federal Reserve Chairman Ben Bernanke is leaning towards when he spoke to an economic symposium in Berkeley, Calif., Bernanke yesterday. It was written that he said there are many alternatives that need to be considered but that all will involve a role for the federal government and federal guarantees for securities backed by mortgage loans”.

\”Government likely has a role to play in supporting mortgage securitization, at least during periods of high financial stress,\” he said.

This I get. What I don’t understand is how he plans to let the free market concept drive the housing market. It appears that he wants Fannie and Freddie to be another misfit likened to the post office – which over the years continues to lose money. Basically, kill the stock again, robbing the stockholders AGAIN and putting these businesses on a shelf , next to the post office.

I can understand that Congress trying to destroy any trace of their misgivings – this will be more apparent November 20 when the hearings begin. Finger pointing, cover-ups and probably amnesty here and there for the good of the people. Make note of who made the most millions in the last ten years off of Fannie and Freddie – Republicans or Democrats. Oh and don’ t forget to find out what political affiliation these previous Fannie and Freddie execs had during their tenure at these two these two government-sponsored enterprises.

Sorry to deviate so much – I must have a passion for the soapbox.

Can the be the solution:
- don\’t take the stocks away
- rebuild Fannie & Freddie and let America help fix this situation
- Again, keep the stocks alive
- REGULATE these two government-sponsored enterprises the way that they were suppose to be regulated.
- Oh, as long as you want to regulate –send the auditors to banks. Before sending the auditors, train them what to look for!

You can help.

Please don’t let the Government control us by taking Fannie and Freddie in as their business. We are the Boss – we oversee what Congress can and cannot do. It started this way in England some time ago – and ended with “no taxation without representation”. After that, we built one of the greatest societies the world has come to know. It was based on capitalism and only ran into trouble (repeatedly) when the same people who are elected to protect us sanction greed.

I remember when dereliction of duty got the guilty party in some serious trouble – now it appears that we have embarked on a new value system of manipulation and cover-ups. Ask for the Almighty’s help and contact your Congressperson to help save Freddie and Fannie – BY MAKING THEM PUBLIC without destroying the stock again! Stock means confidence that the enterprise is worth something.

Thanks - TH