One failed bank gets the housing fix right

****

As I know, FDIC sent out 15,000 letters, two months ago, to invite homeowners to pay and accept the Bair's program.   Well, now she claimed it a success in front of Congress, remind you she is under oaths, and the media starts crying it out a would-be role model of fixing the current mortgage mess.

Great! are we finally feeling a relief that our government finally have someone taken care of the shop to do something right.  Hallelujah! 

Ooh oo?  A success?  Really!  How many homeowners accept the Bair's kind offer?   Only about 23% of the letter recipients.   That's right, so far 3,500 homeowner did it.  

Well, below 30%?  It should be below "F" grade, per my kid's report card.  How come it can be treated as a glorified "A", your honorable Congressperson?

Gee,  Damn it!  Sorry, it shall be indeed a perfect "A" to a Zombie the Regulator.   

Sorry, please blame me for my eyes are so wide open, my nose is too keen. my blood is well circulated and my heart is dancing with our people.  

It is also indeed true all my fault to be a living human being.

10/24/2008 05:36 PM

by E T (*******)

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引用文章放心啦﹗天下沒有什麼天蹋下來的事

本文於 修改第 5 次

mom123 20 hours ago

Okay...loved reading ALL the posts here. I do believe that we can find immediate relief if we can "LOWER 30 YR MORTGAGE RATES to 4% FIXED for a period of time**** THIS SHOULD BE FOR EVERYONE....NOT JUST PEOPLE FACING FORECLOSURE. Hear me out....PEOPLE "MUST" I REPEAT "MUST" be ABLE TO AFFORD THEIR NEW PAYMENT or FORGET IT. If this is done....people will have more money in their pockets which = more revenue for the economy. Less stress for people = Less medical bills (another bonus!) Less stress=HAPPY PEOPLE able to afford things...like gas, groceries, and be able to afford to send their kids to college a little better. It will also help get many, many people back to work. This CANNOT be worse than any plan...and I say that with tongue in cheek....that they have come up with yet! I truly believe that this will IMMEDIATELY help our economy and MORE IMPORTANTLY...HELP US ON MAIN STREET! Come on Ben.....Give it a try....you'll like it:)

*** ET's Comment ***

4%? Great! I love it.

But, excuse me, what forces have such a mighty and arbitrary power to set the rate at that level for 30 years? That is beyond what FED can do.
That rate is basically set by the market, i.e. the private investors in such money markets as bond, am I right? Nobody can do that, except my God.

Okay, hope your wishful dream do come true as the TV program "Extreme Makeover."  If the GWB gang is able to do it, isn't it a government interference (allow me to say that is EXACTLY the main cause to drive Dow down to 8000 10 days ago) if not a socialism? How long it can last as the communism set the Berlin wall?

Private hot money flows freely to pursue its best profit. No dictator can stop it or change its direction successfully for a longer time.

The idea is against the nature cause or market principles, on which that capitalist mechanism is operated, that we've long believed. At least I am still stick to it?

JanPaul 11 hours ago 

You are correct they won't collect that debt. That isn't the problem. The problem is twofold. One, they stop lending and two, the dollar collapses and we can't buy goods made that we need or want.

Currency collapses are the way nations get out of debt. They simply hyper-inflate and pay back a dollar with a faction of a penny in value. In Zimbabwe, for example, A hamburger is a few million and people walk around with $500 billion dollar bills in their pockets.

Take one neighborhood and Zimbabwe and they could pay off the entire U.S. debt if their currency was ours. That is the fear, not that somebody will demand we pay back the money we borrowed. The fear is that if they keep lending to us, we will pay them back with collapsed dollars.

****

ET reply:

I appreciated you for your confirmation to say "they won't collect taht debt." But the rest bother me very much.

Your reasoning on a currency is so correct that I can't agree more, from MicroEconomic perspective. It is also true that can happen in Zimbabwe who has $1 billion bill in their currency and a magazine like "Time" will cost them $200 million Z dollar. However, using Z dollar to compare with US $ is like compare apple to orange. In theories, the two problems could be justified if we were in the position as Zimbabwe. In reality, unfortunately a pure fact that we are absolutely not Zimbabwe makes your conclusion false and wrong.

In the portfolio of the world foreign reserve, our American dollar occupied about 65% of the holdings of all the governments, per IMF statistics.  Even the largest of them, China with $2 trillion, loves to have our currency as their deposit when we have only $74 billion in foreign reserve. Only about 5 countries own the major or dominating currency in the world foreign reserve (two of them are Japan and Swiss who shares only 2% of that reserve, separately), the rest of countries have about 2%. Who wants Zimbabwe's currency while everyone so eagerly want our American dollar?

Okay, to the extreme, what could take place, if US economy is so incurable to the point our US dollar lose its value and anyone dump it? In theory, it could be interpreted as US government declares its bankruptcy as an individual or as the California state government.  However, we have to verify our reasoning conclusion to see if there is something we used for logical premise can be false, right?

So let's look around what did happen in the period of the past 20 days the Wall Street has gone through big turmoils in history.  Did our American dollar face a situation that nobody wants it as you concluded?  No, it is not like what you reasoned.  Conversely it get even much stronger against Euro (up to 0.77 from 0.64 as of today), even it is a little weaker in the past two days (down to 100 from 104.) Who wants Zimbabwe's currency while everyone so eagerly want our American dollar in the fear of recent world "recession"?

As to the problem of "everybody stop lending to us"? I agree with Von Mises that could be right, a very logical reasoning at some point of time down the road.   But, clearly it is not the case in the past as Greenspan said one or two years ago and it is also NOT true at the present.   There are several political, economic and social precedent conditions have to be met to make it happen (American declare her bankruptcy as an individual or was treated as an orphan by the world.)  At this moment, if US government files in its bankruptcy, I believe every other country will hand out to rescue as FED did to AIG.   Simply we are too big to fall.

Don't believe me? Look around, all the G7 has cooperated with us to take actions to do whatever US seek at their meeting 7 days ago.   More specifically, it was reported that those smaller or weaker powers, such as Taiwan and China promised to contribute billions of dollars to help.   Also it is so reported that China is so worry about America's decline and set up a new round table to study how to slow its process.   How come the best wish (Down USA) Mao's regime wanted most turns out to be the the last thing China wants and, at least for now, was abandoned by its successors?   How come it seems nobody dump us as we dump those street people in our society?

In my previous comment, did I mention that US government is in a unique position. What makes it so unique? It is safe for me to say US owns the printing power of the most favorite currency. Nobody can't print American dollar legally except us.

So please don't be so desparated by all the logical imagined fears to scare all of American people to death. 

ps:
For your refernce, here is a today's report:
CURRENCIES
Euro, British pound plunge
Global recession fears remain positive for dollar (Please tolerate me by saying a teasing joke to let us have a smile and break: "The more fear recession, the more stronger US dollar."  So, please take easy for nothing is so serious.

Just what the doctor ordered

 

Commentary: Bernanke stimulus prescription exactly what U.S. needs   

But a good dose of fiscal stimulus is also necessary to boost spending and create enough jobs to ameliorate the ongoing recession.
Yet more stimulus is needed.
For one thing, much of the funds mailed last summer went to reduce debt and/or replenish savings accounts.

****

The above points made by Irwin are good to certain degree, but not good enough to tell the whole truth.

Yes, you are right on the notion of "a good dose." How much is qualified as "a good dose"? I have to say it is a critical judgement.

Most media are concentrating on the quick fix: "spending" effects of so-called "stimulus" plan as they are eating a fast food or engaging in a instant "one night stand" to release their instinct drive; hardly will any elite talk about a long fix: a "investing" effects of it, to prolong our body health.

There is always two sides on a coin. Yes, some deadmeat spend or borrow recklessly as an insane person. However, as a rational person, nobody like to spend if he has no need to survive or have a good living. Nobody like to borrow if he has no need to make a better future or incentive to use leverage to make a better return of profit.

Saving and spending have the same weight for the healthy life of economy; Same is true for both lending and borrowing. It is usual and common in our life, why we seem to think one is good while the other is bad? For our survival and prosperity, both are needed depend on a situation. It is not safe to say a saving is absolutely right all the time in all the circumstance.

I believe our people is not too crazy to make his own decision for good. It is not too late for our society to rescue itself.

All we need is just give it a "GOOD" enough dose. Last "tax rebate" of $600 is good for 3-4 months in terms of boosting consumer spending, but clearly not a good dose to economic recovery. A small amount of $600 of "stimulus" formula is good to boost "consumer spending" without real vitalization to our people or the economy.

Now, let's be cool to face the Bernanke "stimulus" pill as we compare Tylenol to Advil. How many tablets we really need for temporary relief or fundamentally work to cure the disease?

Well, my judgement is 30 tablets for a real cure, i.e. $20,000 in the current financial mess. What you think?

Okay, now I get a rough idea why you guys are suspicious about my cash distribution plan.

Before I give out more arguements, please let me know what your position is to these 2 simple questions as follows:

1. Since we have no choice, but to be asked to spend $700 billion taxpayer's money, which one you will prefer: 1) to use $700 billion to buy "bad asset" as Paulson originally planed; or 2) to directly send those money to you the American people (more precisely, the working class).

Please keep this rule in your mind: there are ONLY two choice as you guys said "either bailut or recession", you can pick just one of them.   Yes or No as you play the TV game "Deal or No Deal."

2. Do you want cold cash in your pocket to do your plans or buy whatever you want; or Do you prefer to fill in application form and to beg "credit" from a lender?



ps:

* As I know, nobody has a need of "credit" if he has enough cash at hand and there is no incentive for him to go for a "leverage" purchase.

* As I recalled, the GWB boys wanted the "$700 billion" deal so badly that they claimed it is the last and only tool they needed in urgency.  What had happened in the past 2 weeks after it passed and became law on October 3? The stock went down dramatically.  Now Bernanke says today they need a new "stimulus" program as that one offered last Spring.
Since when the $700 billion package (the October Revitalization Law) became the second last tool?  Did Paulson's approach work?  Did Paulson change his direction after facing the reality?  I would like to tell him: "Please don't play game with me. Forget talking about getting credit thru some kind of devices. Just hand me cold cash directly."
$20,000 is a big money that equals to one third of gross annual income to an average American family.  With that money, you can proudly tell a school planner: "forget about my kid's student loan."  You can talk to a car dealer for your dream car like this: "Here is my down payment of $10,000.  Is it much easier for you to give me $16,000 car loan than I had only $1,000 and needed $25,000 loan from you last week?"   Use your imagination, you can do a lot of things, not only do a pure consumption, but you can fulfill some dreams you want or invest for a long time.  Excuse me, Mr. Bernanke,  who cares about "credit"?  Am I right?
Now look at Bernanke and those politicians.  Why and what they are planning to offer you?  So-called "credit", not cash, am I right?  How much they intend to offer by taking out of IRS?   Very simple to understand that they want to give you a petty money to buy (to consume something that will depreciate like do shopping spree to give the coming Christmas sales a face lift), not give you an Enough capital to do investment (that is really making sense to create jobs and fundamentally benefit the economy.)

In an analogy, all they want is to give you a pain reliever for your heartburn problem while they hospitalize someone in the most luxury room for a tiny skin scratch.

J P 32 minutes ago

Why would you "give" anybody that didn't earn the money, a sum like that?

People would spend that money in a year and you would be back where you started. You have to have that kind of money, only more, coming in to the work force year after year and they have to earn it.

You wouldn't give people on welfare, $20,000 would you? They have their income as usual. You wouldn't give people who are earning a wage that is equal to their skill level would you? Who would you ask to pay for the checks to those people? If you take $20,000 away from tax payers to pay others, how is that ethical?

If you borrow the money to give them, who will pay the interest on that additional debt? I am sure you don't want people getting money they didn't earn. It is one thing for a small stimulus check as we could easily say the wages haven't kept up with inflation but, $20,000?

You are asking the people who contribute the most to the economy to fund those who contribute the least. Middle class workers work hard for their money and our government is destroying the middle class in an effort to redistribute their wealth both up and down.

 ****

ET

0 second ago
(your comment)

Why?  Good question?

May I ask why GWB would like to spnd $700 billion on those cats who mess up our financial system?

May I ask why the taxpayer's money is given to some broken genius?

Will you give a street people a seed money of $10,000 to re-start his old day's business and feel comfortable as a good profitable investment?

I agree that I would have more problems for myself than you do, from regular economic perspective. Based on that angel, I have more questions as you can ask. But it is irrelevant to the core issue we face and try to find a solution.

From the Marco-Economic viewpoint, your questions above can be solved and the answers do make sense to the issue.

50 years ago, we have problems in deciding which the best route
would be for a underdeveloped country to take to modernize its country: let some people getting rich; or pursue poetic wealth equality for all the people. Also, most economists believed that all the 3rd world countries could equally attract foreign investment from advanced countries since they own abundant natural commodities.

You may know the results: some countries developed into a more modern society, such as Taiwan, Singapore, Korea who took the capitalism to let some people acquiring wealth and prosperous and some countries keep themselves poor and further behind by taking socialism to spread the national wealth evenly, such as Mao's China.

A country can be rich and strong only if their people is rich. The affluent people as a whole can contribute more tax revenue to the government. You can't collect good tax from the poor as it is so simple as that you can't squeeze blood from a turnip.

By giving money to the people as a whole, to stimulate their independence and creativity is by no means like your giving money to an individual such as a loan to your friends or out of you charity to a drug additive street people. In 40 years after WWII, all the Euro-USA capitalist made 85% of their investment in Europe and the above newly-developed countries. Why they don't take those natural resources the 3rd world has into their fund placement consideration?

Yes, I agree some of the people will use that $20,000 for consumption purpose. But look the other way, if the worst happen as you say, it also has the upside benefit to the whole economy when the retailers have rosy sales. They will not only create investors' "confidence" on them, but also bring in more tax dollars to stop the would-be bankruptcy train waiting for local governments. At least it is not like you giving money to those fat cats (the broken street people who hands out) and cheating yourself that it is a good investment. That could be a total possible lose.

Do you understand what a "chit fund" is? To me, it is not like you say "take away from taxpayers to pay others." It is a social solidarity so created to cooperately to reach a higher lever of social affluence and equailty for everybody without a communist style of revolution.

Did you read my article? If you do, please rebut me to the major points in it after your deep and clear thoughts, please.


ps. BTW, I mentioned "other things being equal" in my article and believe that there is no more financial risk for giving $20,000 to Mr. Joe than a bailout of those cats. Why I say so? It is clear a situation that there is already a plan ready to spend those money to create those possibilties you believed, say, higher inflation. The big difference between my approach and Paulson's plan is how to spend the huge fiat money, that is not a real CASH in terms of money.
So, you can't just point at me, pretending there is no such Paulson plan exists. You compare apples to oranges if you ignore the fact and unable to explain why my plan is more risky. 
 

10/20/2008 04:03 PM

by E T (*******)

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Bretton Woods, The Sequel?
The last thing this crisis needs is an international conference to tell us what went wrong.

It is no surprise to me. 

After all, AIG's CEO had their luxury weekend vocation in California immediately after their receipt of $86 billion from Paulson.  Don't you think GWB believe himself also derseve something: a world first class picnics on the Earth "Summit"?

**** ****

Fed chief Bernanke endorses further U.S. fiscal stimulus

Gee, it is not too big a problem is for Bernanke. The real problem is his eyes (frame of reference) are too small to see the forest.

Is Bernanke serious this time? Finally he saw the other side of the coin to give out "social bankruptcy" to Joe the plumber? Or, ouch! another lip service? 
 

10/20/2008 11:38 AM

by E T (*******)

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