This letter from John Allison, BB&T’s CEO helps explain my inherent, gut opposition to the bailout (read the whole letter) – PDF here
9. It is extremely unclear how the government will price the problem real estate assets. Priced too low, the real estate markets will be worse off than if the bail ot did not exist. Priced too high, the taxpayers will take huge losses. Without a market price, how can you rationally determine value?
10. The proposed bankruptcy “cram down” will severely negatively impact mortgage markets and will damage well run institutions. This will provide an incentive for homeowners who are able to pay their mortgages, but have a loss in their house, to take bankruptcy and force losses on banks. (Banks would not have received the gains had the house appreciated.) This will substantially increase the risk in mortgage lending and make mortgage pricing much higher in the future.
Of course, I received this in an email from a friend yesterday –
… if a form of this bill doesn’t fly it won’t matter what happens to real estate prices….nobody will able to get a mortgage anyway.
Read the bill here tell Congress to read the bill first, and see a nifty cartoon here.
We’re all amateur economists now – as a Realtor, I need to figure out how my clients will be/may be affected.
And finally, perhaps my favorite Tweet of the week –
I’m at a loss that Congress can have a congressional hearing about steroids in baseball, but not for planning and determining the most cost effective and beneficial approach to recapitalize banks. We need to hear from a panel of independent economists who do not have any conflicts of interest. It is clear a rescue is essential for the US economy and other global economies. Respected economists are saying that there are much better ways to recapitalize banks besides buying their bad assets such as the government buying preferred shares of stock.
I can’t support a bill that started as a 4 page blank check and just got a bunch of ornaments hung on it. Whether this bill get passed or not, it is clear that we are going into a recession if we aren’t already there.
Andy –
Does this make you feel any better? 🙂
I can’t support a bill that not everyone voting for it has actually read.
I have read several of Waldo’s recent and quality posts and many (too many) other economic sites. I feel like the media and Paulson et al have done an extremely poor job describing what this bill actually does and what it will or will not accomplish. I’ve come to realize that that was their plan. This is grand theft.
It looks like the Senate just passed the bill.
If you have a minute, check out the added bonuses:
Extension of economic development credit to American Samoa (p. 279)
Rum excise tax to Puerto Rico and the Virgin Islands (p. 279)
Motorsports racing track facility (p. 290)
Wool modifications (p. 295)
Children and wooden arrows (p. 300)
I’m with you, Andy—despite being (I think) a pretty well-informed citizen, and spending a good bit of time reading up on what’s going on here, I really just don’t understand what this bill does specifically and what its overall goal is.
Right now, I think it’s fair to say that I oppose this bailout (and I’m hoping to close on a mortgage in the next few weeks!) I guess eight years of a Bush presidency has made me into something of an economic conservative.
I’m having trouble figuring out what wooden arrows, the Exxon Valdez, Mental health parity, etc. have to do with freeing up the credit markets.
All I know is this – our representatives clearly are not doing the jobs they were hired to do – adding $100 Billion + in pork to a bill ostensibly designed to rescue our already flagging and burdened financial system is not responsible behavior. Add to that the impossibility that any of them actually read the bill first, and you have gross negligence worthy of immediate termination if they held “real” jobs.
Relating this to my world, if I advised my clients to sign a new contract from another state that I’d never read but to which they would be bound, I’d be sued for misrepresentation, negligence, damages, etc. Congress just play by different rules.
All I can do is keep doing what I’m doing here in Charlottesville – represent clients as best I can – because clearly those in Washington don’t care.
I’m still trying to find out how Webb and Warner voted.
I’m not necessarily opposed to an attempt to address the issues – bad mortgages and assets and the credit freeze – but this bill is not about those issues.
Yup – Webb and Warner are no better than the rest of ’em. I wish we could do a recall vote. When’s the revolution?
Here is a short article with quotes from our elected representatives when told about this problem a few years ago. They deliberately ignored it and disparaged those who brought them what we all know now was true.
http://online.wsj.com/article/SB122290574391296381.html
The biggest problem with this bailout is those who borrowed and lent responsibly are the ones who have to pay for it.
Has anybody checked this proposed alternative to the bailout? It’s very interesting:
http://www.daveramsey.com/etc/fed_bailout/
Click on the PDF of “Common Sense Plan”
I think it’s fair to say that I oppose this bailout (and I’m hoping to close on a mortgage in the next few weeks!) I guess eight years of a Bush presidency has made me into something of an economic conservative.