Taking On 700 Billion Debt
In the CNN article detailing the proposal by the federal goverment to buy the mortgage debt has some ‘expert’ make this howler of a claim:
“The government could make a profit, a substantial profit,” said Jaret Seiberg, a financial services analyst at the Stanford Group, a policy research firm. “The pricing mechanism is going to be central.”
Can this guy be serious? Seven hundred billion dollars in bad loans is so unprofitable that the only entity willing to purchase it is an entity that finance it through other people’s money which was acquired through force. He can’t seriously be suggesting that the market price of these loans is wrong and that the state will eventually down the road make profit from assuming the debt of millions of people who have a proven track record of not paying their debts. Just one day they will wake up and magically be responsible for their actions.
While I don’t buy the reason to assume this much debt is to protect the economy, at least its a reason. To actually suggest that taking on all this bad debt will be profitable requires buying into a level of spin that is outright insulting. The Federal government is not amusing this debt to turn a profit. They are doing this to ’save’ the economy.
Quick question: Is there anyone who reads my blogs that supports the federal government’s proposal to purchase 700 billion dollars of defaulted loans? I know my right leaning friends dislike this greatly. But I’m wondering where my left leaning friends land on this issue. From what I can tell, nobody likes it, which makes me wonder where the political support for this action is coming from.
September 20th, 2008 at 6:51 pm
The left is angry because this is money that’s not going to be used to nationalize health care, and there’s the standing leftist assumption that this is being done at “the rich’s” behest.
September 20th, 2008 at 8:19 pm
I have voted Dem for the last several major elections, so I’m left leaning. I can say truthfully that I don’t like it one bit.
I do wonder however, why you picked one quote out of the article to criticize. Where is your criticism of GW Bush on this? It strikes me as hypocritical that you often point out when lawmakers and politicians make moves against your ideals, but you never criticize Bush…. Isn’t he the one asking for this?
September 21st, 2008 at 8:17 pm
From everything I have been reading today, it seems most Americans are against the buy-out of bad home deals. Again, when will we criticize your hero? He asked for a stupid plan and he should receive some bad press because of it.
September 21st, 2008 at 9:30 pm
I am left leaning and I agree with you on this. I’m also curious where the political impetus for this sort of action comes from.
If the loans are so worthless that no one else will buy them, why should we believe that the federal government will make a profit? If that guy you quoted thinks they are going to be profitable, why isn’t he buying them?
September 22nd, 2008 at 10:39 am
AS for the making a profit thing, I don’t know enough of the details to understand it, but let me tell you what’s happening with me. Because of the variable-rate interest loans that were being offered years ago, housing prices in poorer parts of Orange County exploded, because people with almost no income could buy a $400,000 house and pay under $1000 of mortgage (for the first 5 years until the rates changed). Now, literally every house we’ve seen on the market (and there are LOTS of them) is beause the owners can’t pay their mortgage and are being evicted, and the houses are seeling for 1/2 to 1/3 of their previous price. We’re looking at buying houses that sold for $400K-$500K 5 years ago for $100K-$150K . And while we don’t expect the value to go back to what it was 5 years ago, it is likely that the price will increase at least 25%-50% from what it is now, if we sell in 5 years, so we will be making a profit. Now, if the government buying out bad mortgages essentially amounts to the government investing heavily in the real estate market, then yes, the market is doing so poorly right now that they’re likely to make a profit when it recovers. But, I don’t know if this is actually what they’re doing, and even if they are it’s liekly they’ll screw it up.
As for where support is coming from: I hate this too, but I think support comes 1. from the millions of people who are getting evicted from their homes because their bank assured them they could afford a variable-rate mortgage and 2. From the millions more people who keep their money in these banks and could lose it all if they went bankrupt (though there are certainly easier ways to deal with that). I think we should all just take the hit so we learn our lesson, but I can understand that the administration wouild want to save itself the embarassment of a total economic crash.
September 24th, 2008 at 9:53 am
It is not my responsibility to bail out home owners and investment banks who made poor decisions. We should “all just take the hit,” because we didn’t all screw up. Those who did should take the hit so THEY learn the lesson that some of us already knew.
The housing market and all the markets dependent on it are experiencing a major correction and no amount of government overspending is going to stop that.
Not to mention the fact that we don’t know if this $700 billion plan will actually work to save the largest economy in the world.
So instead of spending money we don’t have saving people who don’t deserve it in a plan that has no guarantee of working, why don’t we spend it on repairing our aging infrastructure and get tangible results while stimulating the economy and creating jobs?
September 24th, 2008 at 9:54 am
In my 2nd sentence should = shouldn’t
October 2nd, 2008 at 12:26 pm
Now that the Senate has passed the 700 billon bailout has McCains destiny been sealed?