Half a bailout

what a disastorous mess this country is in. Thats all i have to say

Enough of the blame game. Of greater concern is what will happen if world governments do not gather together. The US is in a catch 22 position and the Fed is finally realizing that it cannot allow major institutions to fall without jeopardizing the world economy. Their health has immediate ramifications for all of us, the hoi polloi. What we need is for our President to take a lead and convene a major gathering of world leaders to discuss our interconnected monetary policies and the ramifications of a falling dollar. Home equity has dried up, and if our stock market continues to plunge, no-one will have money to to spend to buy homes or to restart our service based economy.

Mr Bush needs to acknowledge the seriousness of the situation and actively engage his administration or he will ultimately be known as "Herbert Hoover" Bush. He still has not admitted that we are in a recession. I am amazed that the media has not yet started to compare his style to Herbert Hoover's.

What is the root cause of this mortgage mess which continues to get worse? There are a lot of parties at fault here (borrowers, lenders, appraisers, investors, etc) but isn't the root cause of the problem begin with mortgages defaulting and foreclosures rising, which is causing problems for mortgage lenders, real estate markets dropping, banks with heavy positions on CDOs and so forth? If an average home buyer, lets call him John Smith had purchased a house a few years ago for say $500,000 at 6% interest rate but the value of the home has since dropped to $300,000, you think that by offering him even 1% interest rate would make him happy? He would not be satisfied because he has already lost $200,000 in equity! What's the purpose of paying for the house when he has no idea when the value will increase again for him to just break even at his purchase price. Instead, he could just skip out on his payments, maybe even rent a few rooms out, let the house go into foreclosure (say 3 months after missed payments), and continue to live there until the place is auctioned off or sold off to a new buyer, in which case the buyer is responsible for evicting John Smith out which can take a long process in the housing courts. So essentially, John Smith could be living for free for 12 months, possibly even earn some extra income by renting rooms out, and the only consequence he will face is a foreclosure and a ding on his credit score, which I'm sure in a few years people/lenders will overlook foreclosures because it's become such a common situation in America. Isn't the definition of a mortgage a promise to pay over the course of the loan, be it 15 years, 30 years, etc? I don't recall any contracts stating that a mortgage is a promise to pay ONLY if the house value continues to rise, but if it declines in value, you can just let it go into foreclosure even if you have a lot of cash / assets. My suggestion is to come up with a program so that anyone who defaults on their payments will have their assets looked in to, have their original loan application reviewed to see if they lied on their income/assets, in which case it would be fraud and they could face penalties. How is it fair that people who were flipping properties when times were good, but when times are bad they just let homes go into foreclosure and still keep all their profits from previous home purchases? Maybe first time home buyers can have more leniency, but I think ultimately, the focus is to prevent people from skipping out on their mortgage payments and lowering interest rates or adjusting interest rates is not the solution.

As a potential first-time homebuyer, I have some sympathy for the folks who got caught up in the rush to buy a house at all costs. There was a lot of fear that if you didn't buy now, you'd be permanently priced out of the market. It wasn't all greed-head flippers and people who blithely ignored basic mathematics. There were a lot of folks who felt like they had to buy low and if the time came, they could sell.

That all being said, it drove up prices like crazy. So, as much as I feel sorry for folks who now find themselves in situations where they can't sell, can't meet their note, or took out a second mortgage on these inflated values, I don't feel like footing the bill for the irrational exuberance.

In short, why would I want to pay twice - first my tax dollars to prop up the artificial value of a house, which I then have to spend more to buy? Let the prices fall or incomes rise. It may be painful, but we've just seen the hazard of basing an economy on artificially inflated prices and willful ignorance of reality

I've been waiting on this market for two years. I've watched people make purchases beyond their means with the expectation that real estate=easy money. I had a friend who made an easy 60k (each) contracting to build a few houses while the getting was good. Now I hear that a friend-of-a-friend who lives in Florida is considering foreclosing on her home because the mortgage is now underwater. She can afford the monthly mortgage, but now that she might not make any money off the home for some time, she's ready to call it quits.

There is one way to get out of this mess - PAIN. Housing prices MUST fall. Maybe instead of bailing out lenders, the government can create a stimulus package to create financial incentives for home purchases by first-time home buyers. That will at least partially level the playing field until thing even out. I'd rather see lenders get a shot in the arm from legitimate loan starts versus (my tax dollars being used as) a bailout.

We are in for either hyperinflation a-la Weimar Germany, or else rapid debt deflation a-la the Great Depression. What remains to be seen is whether the Fed makes the choice for us, or lollygags with band-aid measures that merely postpone the reaching of critical mass in either direction. I personally believe we are poised on the brink of a rapidly acceleraing debt deflation cycle.

We're seeing a new category of financial institution: Too Big A Campaign Contributor To Fail.

Look to see the government continue to bravely hold the line against homeowner bailouts while shoveling wheelbarrows full of money at Wall Street.