[quote]rainjack wrote:
Zeppelin795 wrote:
rainjack wrote:
Zeppelin795 wrote:
Zap Branigan wrote:
This will bounce back and the Federal government stands to make a massive profit from the takeover if they are smart about it. The sky isn’t falling.
Yes but will the taxpayer ever see this massive profit?
Do you even pay taxes?
And your point is?
Think about it. I am sure you will figure it out. [/quote]
I’d rather you spell it out for me just to be sure. Thanks!
[quote]Aragorn wrote:
Zeppelin795 wrote:
Aragorn wrote:
Well Mage, you have a lot of good points. The problem started in the secondary market. On the other hand, the reason they are failing is that people who had no business qualifying for a mortgage were getting them because there were people in congress telling FRE an FNM that they HAD to give mortgage opportunities to “underserved demographics” ie- low income high risk. Now, in a perfectly privatized environment, they have no right to do this… but FRE and FNM are quasi-governmental. Private but not private, and hence vulnerable to gov’t “instruction” or whathaveyou.
SO FRE and FNM started buying up junk paper. This is a huge problem because what this said is that there is an implicit governmental guarantee of a bail out for bad business practice. Furthermore, the primary people pushing this lending still do not want to reform anything. They want to bail out the companies, then do it again whenever it hits again.
Privatizing gains while publicizing losses is a bad way to go.
Socializing the costs and privatizing the gains is exactly what is going on!
That is precisely my point, my friend.[/quote]
Yes we agree. What do you think about the Bear-Stearns bailout?
[quote]ajcook99 wrote:
Headhunter wrote:
“Let’s say I’m a foreign investor and I own U.S. Treasury bonds. This implies that I trust the U.S. government; that I loaned you my money for the purpose of running your government. Now you take my money and pass it on to a third party, a private company. So I say to you, ‘What did you go and do that for? If I wanted to loan the money to that company, I would have done so myself �?? directly �?? in the first place. But I didn’t. I didn’t do it because I don’t trust the company. I trusted you. But now I can’t trust you anymore either. Now you’re just one of them.’ So the investor stops buying our bonds or, worse, dumps the government bonds he’s holding, and then we are in trouble. Then we can’t sell our government bonds anymore to pay off the old ones coming due. Then we, the United States government, default.”
http://www.marketoracle.co.uk/Article6184.html
First of all, I am assuming you didn’t write this. But this paragraph makes absolutely positively no sense. Most of the purchasing of US Debt is done by foreign governments today as a way of exporting their currency and keeping it low ie the chinese. They don’t do it because they trust the government, they do it so that their labor is relatively cheap in the marketplace. We are 10 times more likely to see China stop buying treasuries because of our stance on Taiwan than we are because of these bailouts. These buyers know of the deficit projections for us because of social security and medicare and they still buy our 30 year issues because it gives them the net effect that they want in the currency market. They couldn’t give a damn about Fannie and Freddie and if we bail them out.
[/quote]
No. its a quote. The point the author is making (I think) is that the Federal government is diluting its own creditworthiness with all these bailouts; esp if the bailout is not perceived as resolving the problem. If we see yields rising to the level of junk, like F and F bonds, it means that the USA has lost the faith of investors.
If we keep rescuing these outfits, we risk our Fed credit rating (a disaster). If we don’t bail these bums, like Lehman, they drag down the whole edifice (disaster). Either way, the situation is very dire indeed.
Read the link and share your thoughts.
I’m no expert whatsoever in the finance/economy department. I need to work on that. But in my opinion most of these bail-outs are caused by the same set of underlying problems–an implicit governmental guarantee that they’ll bail you out if something horrible happens.
That being said, I don’t have the expertise to actively hypothesize about how to specifically fix our situation. I think that in order to prevent investment bank collapse, a bailout is ok, but I want to insure it doesn’t happen again. As pointed out above, investment banks are a cornerstone of the economy. We can’t just leave the status quo where it is, however.
I’m not entirely sure what to do about it.
[quote]Zeppelin795 wrote:
rainjack wrote:
Zeppelin795 wrote:
rainjack wrote:
Zeppelin795 wrote:
Zap Branigan wrote:
This will bounce back and the Federal government stands to make a massive profit from the takeover if they are smart about it. The sky isn’t falling.
Yes but will the taxpayer ever see this massive profit?
Do you even pay taxes?
And your point is?
Think about it. I am sure you will figure it out.
I’d rather you spell it out for me just to be sure. Thanks![/quote]
How about you answer my question first?
I don’t claim to know much about Fannie/Freddie, but aren’t they both government sponsored enterprises? So, isn’t this a case of the government covering what they already sponsor? I know that they are privately owned and publicly chartered, but if the government is sponsoring them anyway, how is it truly government intervention? Again, I make no claims to understand any of this, so I am truly asking out of ignorance.
[quote]rainjack wrote:
From what I have read, the Fannie/Freddie bailout is not backed by the full faith and credit of the US.
But really, purchasing 10 trillion worth of stuff for 100 billion isn’t that bad of a deal. They got in for a penny on the dollar.
Hopefully, they will straighten this shit out, and then do away with yet another Clinton economic clusterfuck. [/quote]
What does the Clinton admin. have to do with this?
I’m asking because I was too young to care about the economy when he was in office
[quote]ALDurr wrote:
I don’t claim to know much about Fannie/Freddie, but aren’t they both government sponsored enterprises? So, isn’t this a case of the government covering what they already sponsor? I know that they are privately owned and publicly chartered, but if the government is sponsoring them anyway, how is it truly government intervention? Again, I make no claims to understand any of this, so I am truly asking out of ignorance.[/quote]
It is the difference between explicit and implicit. These agencies always had an implicit guarantee from the US gov meaning that it was assumed that us gov backed the mortgages guaranteed by them. Now with the gov actually owning the equity, it is more of an explicit guarantee. Kind of the like the difference between having a pact with your best friend that you won’t sleep with his sister and actually signing a legal document stating that if you do sleep with her that he has the right to kick your ass. Either way, your probably getting your ass kicked, just like either way the us gov is probably actually guaranteeing their debt.
The goal was to give mortgages to poor people who otherwise couldn’t afford mortgages. F and F got stuck then with a big pile of mortgages that were deadbeats, and now we, the taxpayers, get stuck with the tab.
Altruism at its finest…
[quote]ajcook99 wrote:
ALDurr wrote:
I don’t claim to know much about Fannie/Freddie, but aren’t they both government sponsored enterprises? So, isn’t this a case of the government covering what they already sponsor? I know that they are privately owned and publicly chartered, but if the government is sponsoring them anyway, how is it truly government intervention? Again, I make no claims to understand any of this, so I am truly asking out of ignorance.
It is the difference between explicit and implicit. These agencies always had an implicit guarantee from the US gov meaning that it was assumed that us gov backed the mortgages guaranteed by them. Now with the gov actually owning the equity, it is more of an explicit guarantee. Kind of the like the difference between having a pact with your best friend that you won’t sleep with his sister and actually signing a legal document stating that if you do sleep with her that he has the right to kick your ass. Either way, your probably getting your ass kicked, just like either way the us gov is probably actually guaranteeing their debt.
[/quote]
Oh, ok. Thanks for the explanation. I appreciate it. That makes it a little clearer.