The $700 billion dollar bailout

[motivatedceo]

So what do you guys think of the $700 billion dollar bailout?

I think it's a bad idea in general. I don't believe the taxpayer should bare the burden. Washington Mutual collapsed in the largest bank collapse ever - but oh - the only thing that was really lost was ownership in the company. The entity itself and virtually ALL assets simply became property of JP Morgan Chase. That is free market capitalism working at it's finest in my opinion --- if you bankrupt a company, you lose your shares/ownership. But the company keeps moving on. And in this case the FDIC fixed it so no consumer lost a dime.

Continuing on re: the economy -- I really feel for the great American companies that are being strangled by the unions. American Airlines, Ford, General Motors and Chrysler to name a few. Do you guys know some assembly line workers (right here in Arlington, Texas at a GM plant that makes SUVs) can make $90k or more per year with some overtime simply doing something as easy as putting windows on cars, screws in doors, etc? Remember assembly line workers do the same mundane task, all day. It's not like they are doing something that takes creativity, risk, education or any real skills. It's manual labor. They should get paid $20k --- not $90k. I feel for everyone who owns the large unionized companies. I won't put money in any of them. I believe there is a good chance that they will all go bankrupt, the shareholders will lose out AND the unions will then have to take massive paycuts (which happens in bankruptcy) to make the post chapter 11 company thrive. Also those same guys that make $90k or more on the union assembly line in Arlington, TX are probably making more now --- union hourly wages are practically all tied to the minimum wage. So when the minimum wage goes up, so do the wages of most unionized employees. Ugh.
 
I think if the $700 bailout passes:
- We'll be stuck with even higher taxes in the future, especially if socialist Barak "Osama" gets in office, who plans on raising taxes by another $800 billion on top of that
- The real estate market will improve, some, since credit markets will loosen
- The average consumer who has an adjustable rate mortgage will still lose his house if he cannot afford the payments, or if he has already lost his house it's too late for him anyway
- The original problem of allowing BAD (non-fixed) mortgages will not go away. Did you guys know adjustable rate mortgages were illegal until 1981? I think that should be law again.
- The big beneficiaries will be the banks, not the consumers

[LakesideEstimating]

But wait a second! According to the debate last night, Obama said that he will CUT taxes for 95% of Americans. Where exactly is that money coming from. He also said that he would put troops in Pakistan and then when McCain pressed him on it, he changed his tune. This coming from a man that has opposed the Iraq war from the beginning. Is it me or is he a little hypocritical here   

[wallacehobbs]

OK so lets say we bail them out, whats to stop them from going back to the same
Greedy business ways that got us into this mess to begin with.

I mean really can we blame the banks? Who would have thought that poor people with min wage jobs, with bad credit, and no education could not pay back $200,000 + home loans? 

[fdjake]

Let's make this perfectly clear......

WE ARE GOING TO PAY EITHER WAY!!!!

NO BAIL OUT = A Massive, and I mean MASSIVE economic down turn the likes of which NO ONE here has ever seen.  I don;t care how GREAT your part of the country has done, is doing, or might do.  If this doesn't fly.........IT'S OVER!!!  We ALREADY have a near COMPLETE lockup of the credit markets.  They stop this bail out.  We'll have another VERSION of a bailout.....People will be BAILING OUT OF OUR ECONOMY in numbers so big you won;t even be able to get your mind around them.  Funny isn't it???  EXACTLY what I said would happen IS happening.  The next phase of this either gets better, or so much worse that people in this country will ALL KNOW EXACTLY how WALL STREET impacts their daily lives very soon!!

Here's your choices.....

BAIL OUT Gets done = BIG, BIG, IOU and tax payers will foot this bill for a GENERATION.  BUT......our economic system CONTINUES TO FUNCTION!!!!

Frankly.....I find it somewhat confusing that guy's writing in on a Real Estate investment forum can't see the potential this Bail out may hold.  Think about it......These markets DO NOT TRADE,  Let me repeat that.....these markets for distressed debt are LOCKED UP.  If the Goverment goes in and buys those assets at the fire sale prices and just WAITS.....it will be EXTREMELY hard for them NOT TO MAKE MONEY ON THIS.  It's the same as BUYING DURING A PANIC!!  The problem NOW is Banks CAN NOT WAIT.  They have to raise CAPITAL or they're GONE!!

Personally, I see this bail out as THE ONLY way we avert a catastrophic DEPRESSION in world markets.  Even if it flies...we're in for a MIND NUMBING recession.

So folks,  take your pick.....A DEPRESSION so bad that your kids will laugh at you 20 years from now because you'll STILL be talking about your LOST DECADE!!

Or......a BAIL OUT that's no ones knows the price tag on???

My vote is for the bail out....Stats say that not EVERY mortgage in these instruments will default.  My guess is THE MAJORITY will get PAID.  Think about this...........If the Goverment simply resets the majority of those mortgages to low FIXED INTEREST RATES, the MAJORITY of people would STAY in those homes!!!  Sure, some are going to lose these properties no matter what is done.  BUT.....if works outs can cut that number in half, that's a HOME RUN for this plan.  TIME HEALS A WHOLE LOT OF WOUNDS....We DO NOT want to see market forces at work on this problem.  If we do??????  There won't be many people writting in here asking for advice on buying ANYTHING.

The countries financial system is in cardiac arrest.  Defibrillating the patient is GOING TO HURT,  no doubt about that...But NOT SHOCKING that patient means there is NO PATIENT!!

[motivatedceo]

You know I think you are a genius FDJake. However I just recently applied for FIVE mortgages from one of the top 3 US banks and they approved me for every one of them. These were preapprovals, with 20% cash down. I have good credit, and lots of cash, and that bank basically said "hey man, we would love to do business with you". Guess what - I am not going to do business with them as I'm still paying cash for rentals (I have 2 so far) and I'm gonna get more.  Note: I purchased 2 in a month or so, and I am going to sit on these for another couple months (since I am new to the game) before buying a lot more. Anyway - you can't believe how dirt cheap some deals are out there. The first unit rented fast, and the 2nd one will be rented shortly (my A/C guy is still messing with a strange short circuit issue).

My point is --- for folks with 20% down and good credit --- the credit markets are still wide open. I actually was really surprised to get 5 pre-approvals!

Let's make this perfectly clear......

WE ARE GOING TO PAY EITHER WAY!!!!

NO BAIL OUT = A Massive, and I mean MASSIVE economic down turn the likes of which NO ONE here has ever seen.  I don;t care how GREAT your part of the country has done, is doing, or might do.  If this doesn't fly.........IT'S OVER!!!  We ALREADY have a near COMPLETE lockup of the credit markets.  They stop this bail out.  We'll have another VERSION of a bailout.....People will be BAILING OUT OF OUR ECONOMY in numbers so big you won;t even be able to get your mind around them.  Funny isn't it???  EXACTLY what I said would happen IS happening.  The next phase of this either gets better, or so much worse that people in this country will ALL KNOW EXACTLY how WALL STREET impacts their daily lives very soon!!

Here's your choices.....

BAIL OUT Gets done = BIG, BIG, IOU and tax payers will foot this bill for a GENERATION.  BUT......our economic system CONTINUES TO FUNCTION!!!!

Frankly.....I find it somewhat confusing that guy's writing in on a Real Estate investment forum can't see the potential this Bail out may hold.  Think about it......These markets DO NOT TRADE,  Let me repeat that.....these markets for distressed debt are LOCKED UP.  If the Goverment goes in and buys those assets at the fire sale prices and just WAITS.....it will be EXTREMELY hard for them NOT TO MAKE MONEY ON THIS.  It's the same as BUYING DURING A PANIC!!  The problem NOW is Banks CAN NOT WAIT.  They have to raise CAPITAL or they're GONE!!

Personally, I see this bail out as THE ONLY way we avert a catastrophic DEPRESSION in world markets.  Even if it flies...we're in for a MIND NUMBING recession.

So folks,  take your pick.....A DEPRESSION so bad that your kids will laugh at you 20 years from now because you'll STILL be talking about your LOST DECADE!!

Or......a BAIL OUT that's no ones knows the price tag on???

My vote is for the bail out....Stats say that not EVERY mortgage in these instruments will default.  My guess is THE MAJORITY will get PAID.  Think about this...........If the Goverment simply resets the majority of those mortgages to low FIXED INTEREST RATES, the MAJORITY of people would STAY in those homes!!!  Sure, some are going to lose these properties no matter what is done.  BUT.....if works outs can cut that number in half, that's a HOME RUN for this plan.  TIME HEALS A WHOLE LOT OF WOUNDS....We DO NOT want to see market forces at work on this problem.  If we do??????  There won't be many people writting in here asking for advice on buying ANYTHING.

The countries financial system is in cardiac arrest.  Defibrillating the patient is GOING TO HURT,  no doubt about that...But NOT SHOCKING that patient means there is NO PATIENT!!

[fdjake]

That doesn't surprise me.  I will tell you though...... A  pre-approval is about as valuable as a Freddie Mac stock certificate these days.  The "push through" on pre-approvals is now running at an all time low about 50%.  The term push through refers to the percentage of pre-approvals that actualy get turned into REAL LOANS.  I know you have a very sucessful business and you are a VERY smart guy.  You should have no problem getting ANY type of financing.

As far as the Paulson plan.....I think Warren Buffet said it better than I ever could........

"Last week, we were at the brink of something that would have made ANYTHING that's happened in financial history pale.  I'm not saying the Paulson Plan will eliminate the problems, but it's ABSOLUTELY NECESSARY to avoid going OFF THE PRECIPICE."

I think that CLEARLY staes how untenable our current situation is...I can only hope that the alternative is not alowed to play out.  We would be looking into the abyss.  And I can ASURE you......NONE of us would prosper in that type of economic event.

[fdshomes]

   there goes $700 billion dollars

[rookieNYC]

Talking heads are worried this deal wont pass...Crash like scenario may be setting up...Propertymanager (Mike) may be right on this one...Interesting article..If this bailout doesnt go through by Monday morning people are saying 4000 point drop for the markets...

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3094318/Bailout-failure-will-cause-US-crash.html

[msq7163]

fdjake:

You could not be more right about those pre-approvals.  I was "pre-approved" for a deal 2 weeks ago.  Then I decided to go ahead with it with 40% down and I have a credit score of 780 they said they would go ahead with it, but at 7.8 percent I told them thanks but no thanks and paid cash for the property.

As you have said many times on this board we are in real trouble and something needs to be done.  I am just lucky I have the cash right now to make deals happen.  Others??? I'm not sure what yall are doing. 

[realnew]

This is by no means an "american" problem. I read earlier this week that the world's Oldest bank, the Bank of Scotland - think Christopher Columbus here - went under.

[Roger J]

Jake, I'm right with you, man.  I am simply amazed at the amount of normally smart people on this site that does not, or does not want to, see the impact of this potential bail out plan OR the fact that we ARE going to pay for this one way or the other.

The "free market" theory is already blown completely out of the water, yet we still see people saying, it'll work it's self out if we just leave it alone.  Yeah, right!  Personally, I like the idea that our Gov't is at least TRYING to prevent a global market collapse.  BTW, when WaMu failed, it WAS the Gov't that stepped in and bought it, THEN resold the mortgage portion of the company to Chase.  Just FYI, there.

As to the "people with good credit and cash can get loans" theory.
First, yes that's true.  However, if that's the ONLY people that can borrow, be prepared for a major economic meltdown.  Not only is putting 20% down on a house rare now, it's simply NOT feasible for most people to be able to put down $40-50K on a property ($225K is still the average purchase price).  Not a great way to stablize the markets.

I won't get into the whole Union bit, as that is an entirely different topic, BUT saying that people working on a line should be making $20K or so because their job is "easy" or "simple" is absurd.  First, I'd have to ask, have you EVER done something like their job?  I'd wager not, or you'd have a different perspective.  Second, while the Union does have a part in the wages, blue collar workers make what they do BECAUSE nobody else will do what they do.  Heck, THEY wouldn't even do it IF they weren't getting paid what they do.

Here's what every CEO knows at some point but as they gain power, the height apparently sucks out the oxygen from their brain and they forget.  A company CAN run without a CEO.  A company CANNOT run without the workers.

Geesh!

Raj

[dr_white]

There is another solution. There are almost 304,000,000  people in the U.S. It would be a safe bet that 200,000,000 of those are over 18 years of age, i.e. tax payers. $700,000,000,000 divided by 200,000,000 is $3500 per person. How about another economic stimulus check for Christmas!! I would really like a 60" plasma flat screen under the tree.

[motivatedceo]

The stock market went from 11000 down to 7000, after the dot-com crash in the early 2000's. But a couple years later everything went back to normal. Don't you think that'd happen again?
 

Talking heads are worried this deal wont pass...Crash like scenario may be setting up...Propertymanager (Mike) may be right on this one...Interesting article..If this bailout doesnt go through by Monday morning people are saying 4000 point drop for the markets...

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3094318/Bailout-failure-will-cause-US-crash.html

[motivatedceo]

If a person buys a Glock, and commits murder with it, is the gun manufacturer to blame? No.

If a person buys a Chevy and runs over a child with it, is General Motors to blame? No.

If a person signs a contract to takeout a payday loan, and pays 1000% interest per the terms of the contract, is the payday loan company to blame because the person cannot pay their bills later on? No.

What a lot of America lacks is personal responsibility. If an adult signed a sheet a paper and *did not read it*, stating they are taking an "adjustable rate mortgage" loan on a house, and they are dumb enough to whine & blame the government and their bank later when they cannot afford the payments --- they need to go back to renting a low income apartment and working at Kentucky Fried Chicken with their other highly intellectual peers.

I had a family member lose a house to an adjustable rate mortgage. He & his wife never lost their jobs - they just could not afford the payments - and they admitted to the family they made a mistake taking out an adjustable rate mortgage. It wasn't a big evil greedy bank that put a gun to their heads forcing them to sign on the doted line. The problem was caused by my family member & his wife.

And that's life...people make mistakes. They just need to admit it to themselves and keep moving on.

OK so lets say we bail them out, whats to stop them from going back to the same
Greedy business ways that got us into this mess to begin with.

I mean really can we blame the banks? Who would have thought that poor people with min wage jobs, with bad credit, and no education could not pay back $200,000 + home loans? 

[fdjake]

Bail out looks like a done deal.

Congress is scheduled to post the document on it's site around noon time.

Now.............we'll  see.