I don't get it. I just don't. More government bailouts more good money after bad. Yet another bank goes insolvent because years ago they thought it was a good idea to try an fleece the general public. So yet another round of pre-packaged mortgages were sold to people who could not afford them at signing and shockingly somehow years later when the interest payments put their balls in a vise they couldn't pay!
I'm not gonna pick sides here because economics is Congress's job. And I think both sides have done their fair share (or not done in some cases) to help this. Things don't get screwed up this bad without lots and lots of help. I'm already sick of all the arguments about what is wrong and how to fix it. So far everything is as expected. Republicans say "Fundamentals are Strong" the economy will recover on its own. Uhhhh... Okay... The "Don't just do something stand there" argument. And of course on the left the dems want more oversight into lending and such. No no no! It's not that we need MORE oversight. We just need SOME oversight. These banks have pretty much been allowed to do as they please for the last decade. This housing bubble was allowed to get this bad because everyone was sure that housing prices would just keep going up. Everyone was content with the situation because everyone was hoping for a piece of the pie. Little did they suspect that the people feeding them the bullshit theories were the ones standing to benefit the most.
Housing prices in general tend to go higher, but it's a trick of the chartist that says "If you make the chart long enough in time period the housing market has gone up for the last X amount of years" Well yes, but you have to ignore those bottom periods where things just weren't much fun.
Investing lesson: If everyone is sure that it's a good buy, it's time to sell. I learned this one from Jim Cramer.
When my friend's wife (Not you Sue) happily extolled that real estate will just keep going up after she bought her first house, I kinda felt something was wrong. I didn't say anything though because it was a party and I didn't want to ruin the mood. My instincts were unfortunately right and I was fortunate that my credit was not good enough to buy a house. Fortunate because if mine were, I'm sure I would've bought a $500,000 Condo in hopes of getting a refi in 3 years and flipping it! ... Yeah...
Okay so now this mess is killing the banks. And the government is happily putting out loans to back up these large banks. All this money that they lost I will bet my left testicle that 90% of it or more was due to bad loans to poor schmucks. This is what makes me mad.
If we can shell out money we don't have and increase our national debt just to keep banks afloat, wouldn't it have been just as good to back up the people that were losing their homes? I mean sure they made a bad decision to buy something they couldn't afford, but if the mortgage lender keeps insisting that they somehow 'CAN' afford it and the bank buys it, isn't there equal blame on all sides? What about the little guy that is now homeless? If you backed the guy losing his home you would've done more good. First the guy wouldn't be losing his home, his credit would still be decent, he would have money to spend on the economy, AND the mortgage lender would still be solvent.
Maybe I AM stupid. This just makes too much sense so I'm obviously missing something.
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3 comments:
Yea, on the one hand this sort of thing makes me angry. All these people getting bailed out by the government. Meanwhile, I bought a house I could afford with a traditional (non-ARM) mortgage and now my tax dollars are going to have to bail some of these people out.
On the other hand, getting a ballon payment loan almost makes sense if your house is increaing in value 5% a year. The trick of course is to realize that the value has stopped going up and then get out as soon as you can. Its like everyone was playing a game of hot potato; they all knew someone was going to get stuck with the bill, but they all expected they were smarter than the next guy and would be able to get out in time.
In the last week I've come around to the "let them fail" mentality. If we don't, I fear that the moral hazard in the future is just going to be too great. Like you said, we let all these home owners take a hit because they made poor choices. Shouldn't the same rules apply to large banks?
Exactly, it's sickening that our own government doesn't care about its own populace. That money could've just as easily gone to you or me or anyone that got into a bad situation with their homes. Instead we suffer first and take the heat. Then later the idiots who ran those organizations into the ground get a nice retirement instead of going to jail. Whatever!
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