I inquired with the blogger on Mortgage Implode-o-meter the other day about directly helping the homeowners, along with the banks. Here's my proposal/inquiry:
Mr. M's response:
"Art Vandalay - you nailed it."
Some other dudes response:
"Art Vandalay is full of crap. There are 145 million people with jobs in this county. 45 million of those are ultimately parasite jobs for the government of the remaining, only 50% pay income taxes. Why should these people who pay all the freight for everything. be forced, at the point of a gun, to become mortgage lenders to a bunch of whiners, losers and deadbeats, like I suspect, Vanderlay himself"
And then a follow up by me:
"Bilejones, thanks for the feedback. I understand where you’re coming from, since I’ve also had Arm-Chair Republican tendencies before and have to remember that not everyone has had the financial independence and good fortune I’ve had so far in my life and career as a broker.
We can complain about lazy government workers, high taxes, and bailing out “whiners, losers, and deadbeats” all day long, but we’re dealing with individual lives, families, and millions of potential job losses if the CAUSE (foreclosures) isn’t halted immediately, which is triggering the EFFECT ($67+Trillion of Unregulated Derivative’s, CDO’s, and CDS’s) which is the real threat to the banks and other financial institutions.
Gretchen Morgensen’s article about AIG in this morning’s NY Times shares how a 377 employee unit in London brought down a stable, 116,000 employee company by diving deep into Derivatives, CDO’s, and CDS’s.
I believe the banks and investors could probably handle the wave of foreclosures, if that’s all that it was. But it’s not. Unfortunately, for every $1,000,000 in loans, there’s $3,000,000 in Derivative products attached (that we know about)that can potentially trigger a “credit event.”
Banks hold lots of Derivatives. Private Equity and Hedge Funds borrowed money from these same banks to buy and sell derivatives as well. Someone’s winning big and someones losing big in these credit events. Banks may never see that Hedge Fund or PE money ever again. More losses, more need to raise capital from somewhere. Undercapitalized banks don’t lend money. They hoard it.
All of this starts with homeowners and ends with homeowners. The more that intentionally default on their upside down mortgage cause more credit events and more losses for banks, who in turn shut off credit to each other, to small, medium, and big business. Jobs are lost and the cycle just spins further and further down the rabbit hole.
Let’s hope Paulson can both capitalize the banks and find a fast and effective solution for 11,000,000 potentially upside down homes. People are hoping for the best and are willing to do whatever it takes to keep their family in their homes and community in tact. Let’s hope the government finds a mutually beneficial program to make this happen."
Everyone has their own opinions and their own set of beliefs about this. Should we bail out morons or should we make them suffer? People aren't morons. Making a judgment about another person based on their present financial position in life isn't too smart either. I hope the leadership void left by President Bush is filled in by Henry Paulson.