Totally absurd? Think twice:
In the dark of night over the weekend when most people were snoozing, the Treasury dramatically expanded its bailout plan to include buying student loans, car loans, credit card debt and any other “troubled” assets held by banks.
The changes, which were included in draft language that also opened the bailout program to foreign banks with extensive loan operations in the United States, potentially added tens of billions of dollars to the cost of the program.
Although it was a major addition to what was already the nation’s largest-ever bailout, it did not become part of the debate between Democrats and the Treasury over details of the program. A Monday counterproposal by Senate Banking Committee Chairman Christopher J. Dodd included such consumer loans as well as mortgages, just as the Treasury’s draft did Saturday night.
“The costs of the bailout will be significantly higher than originally considered or acknowledged,” said Joshua Rosner, managing director of Graham Fisher & Co., who charged that the Treasury and Federal Reserve have not been “forthright” about the ultimate cost to the public. The plan gives Treasury the discretion to buy the non-mortgage loans and securities in consultation with the Fed.
Conservatives cited the move as a sign that the massive plan to take over bad mortgage debt already is opening the door to further government bailouts.
“Such a large takeover by the government will surely be accompanied by adverse, unintended consequences,” said Pat Toomey, president of the Club for Growth, a conservative advocacy group. “Already, other companies and industries are lining up at government’s door asking for their own bailout.”
In my column for this week’s Republic, I argue that buyers should not even consider bidding on short sales: Too much hassle to catch a falling knife. In the same respect, in this climate, I can’t see any reason for sellers to participate in the short sale process — except, arguably, to extend the amount of time they remain in the home without making any payments.
Capitalism rewards thrift, zeal, planning, self-reliance. Socialism in all its many flavors rewards theft — so long as there is anything left to be stolen…
Technorati Tags: investment, real estate, real estate marketing
Eric Blackwell says:
Yikes. While they are at it, why don’t they take care of all of our expenses in running a real estate firm. I mean, as long as they are bailing one industry out and absolving folks of risk, why not OURS??? (Sarcasm here)
Teaching quasi-government entities that get themselves into trouble that if they get big enough fast enough, the taxpayer will bail them out is going down the wrong road, with our foot in the carburetor in my opinion.
Once the banks start suckling up to the gov’t, they have a HUGE incentive to grab as much as the gov’t will give. And in an election year. Like I said: Yikes.
September 23, 2008 — 2:21 am
John Sabia says:
Incredible. Talk about rewarding irresponsibility. Unfortunately, it is like talking about paying for damage caused by a hurricane. The damage is done, it’s time to clean up. Let’s just hope there is real oversight this time.
September 23, 2008 — 5:28 am
Greg Swann says:
> they have a HUGE incentive to grab as much as the gov’t will give
Think about all the poor Realtors who listed at $300,000 and sold at $160,000. What kind of Christmas are their kids going to have?
> Yikes.
Indeed.
September 23, 2008 — 6:59 am
Tom Hall says:
How do I become a bank? – and quickly!
September 23, 2008 — 8:11 am
Jim Cosgrove says:
Let’s make this simple. Just declare ALL debt absolved and let’s all start over again.
I’d write more but I’ve got to run out and charge some stuff!
September 23, 2008 — 8:27 am
Greg Swann says:
> I’d write more but I’ve got to run out and charge some stuff!
In a wheelbarrow economy, debt is your friend and savings your enemy. Nice…
September 23, 2008 — 8:46 am
JDallas says:
It’s amazing how crazy people get when you talk about even minutely socializing anything , then as soon as banks get in trouble, they want to hand them a 700 billion dollar check with no oversight and a cornucopia of unintended unforseen consequences.
September 23, 2008 — 9:08 am
J Boyer Summit NJ says:
I would guess that the government will be printing lots more money soon, and inflation here we come. Time to stack up as much fixed rate debt as possible, after all we will be paying it off is dollars that are worth lots less.
The only thing that could make this plan a little less horrible would be a pledge that any CEO of a company who is getting bailed out, should be forced to give the gov’t 90% of their after tax earnings as a fine for sticking it to the tax payer. Also would be good to sick the justice department on the CEO’s of these firms who left with golden parachutes.
September 23, 2008 — 12:34 pm
Michael Cook says:
For the record, the government will be receiving assets, so the cost of “$700 billion+” plus is misleading. For $700 billion the government will be getting mortgages and promissary notes. Like any institution they will try to maximize the value of their assets and depending on how much they pay for these assets ($0.05 to $0.85 on the dollar) it does not have to be a total loss.
In my opinion, the government will probably make money on the AIG deal, which was quite harsh and far from a bailout. Just ask the shareholders who are trying to pay the government back ASAP.
Obviously we are talking about the government here, so I dont expect them to truly maximize value, but I think we should all hold our opinions until the facts become clear. If they buy the mortgages at $0.20 on the dollars, the taxpayers will have made quite a shrewd investment and probably come out ahead, but if they pay $0.90 on the dollar I would have to fall in the camp of the people above.
On a side note, imagine the joy of running a short sale through the Federal Government. I am sure that will be loads of fun.
September 23, 2008 — 1:18 pm