Bailout Roundup

There is no way the average Joe is responsible for this issue. Most mortgage holders had little idea of what they were getting into. They knew it was bad, but how could they know that what was going to happen, after all, financial institutions were okaying these issues. And one would expect that a bank wouldn't okay a loan that had no value...

This falls squarely on the back of the greed of those in the financial industry. And on the lack of oversight in the industry.

I have a friend who is a VP of a large regional bank's Mortgage Underwriting department. She said that the pressure on her department to let these mortgages pass was unbelievable!!

Sent by Neil Vigliotta | 2:16 PM ET | 09-23-2008

We weren't greedy.

After years of renting we'd saved up enough for 10% down on a small 3 bedroom house. Even figuring in modest inflation we thought we could do it. Once we moved in however we saw electricity go up 14% a year. Gas went from $1.75 to $4.00. Propane went from $1.35/gl to $2.99/gl and food went up about 25%. This was a hard hit for us. Throw in a few uncovered medical bills and we went from safe and secure to in trouble. We refinanced to take a small amount of money out. The appraisal told us the house went from $180,000 to $246,000 in one year. We found this hard to believe but we went and took $15,000 out anyway. We were being safe. We put every penny of that back in our house. A few more uncovered medical bills and suddenly we find ourselves $20,000 in debt! We went from 0 debt the day we bought the house to 20k in debt and no way to make ends meet in just 3 years. Now, we have the house on the market and will be lucky if we can just pay off the note.

I think many more people are like us than the "greedy" ones you are describing.

Sent by Jim O'Donnell | 2:20 PM ET | 09-23-2008

When I was shopping for my first house six years ago, I was encouraged to buy more house and take on a bigger mortgage than I thought I could afford. I declined and got a 30 year fixed at a reasonable rate while other people I knew were getting ridiculously large homes with equally ridiculously low variable rate. They knew the risks and took them anyway.
I've been responsible for myself and the loans I've taken out. I've refused offers for refinancing over the years that didn't seem to make financial sense. Meanwhile, the risk takers have new cars, expensive remodels and they expect a bail out. As I watch my IRAs drop daily, I wonder why I bothered to be responsible? I'm going to be paying for all these defaults and irresponsible behavior. In spite of all my best efforts, I'm struggling financially as well but because I pay my mortgage instead of buying crap from walmart, there's no help for me. Where's the incentive to be fiscally responsible on any level?

Sent by laura | 2:21 PM ET | 09-23-2008

Greed and competition are the roots of the housing problem. I currently work in the housing industry and see mostly defaulted mortgages. More often than not the borrower's are trying to "keep up with the Joneses" whether they can afford it or not, and the lenders are trying to increase or keep pace with their share of the market by utilizing shady financing such as, stated and no doc programs. Also, America appears to be for sale to foreigners. I can't count the number of defaulted loans I've seen in the last year that were issued to non US citizens. I guess in all America in general is to blame for the mess.

Sent by Gregg | 2:24 PM ET | 09-23-2008

I run a housing hotline and get regular calls from folks in foreclosure or facing eviction because their landlord is in foreclosure. Most involve subprime, interest-only, or no-doc loans. I've interviewed appraisers over the past seven years who point to rampant and routine appraisal fraud as contributing to hyperinflation. This was made possible by folks like Alan Greenspan who created an illusion of wealth by supressing interest rates and encouraging Americans to treat their homes like ATM machines. Mortgage brokers, lenders, realtors and greedy speculators like your first caller are largely to blame for this crisis.

I bought my house because I loved the neighborhood and location and planned to make it my home. I got a fixed-rate 15-year mortgage I could afford, put down a sizeable downpayment and made my house payment a priority. I resent any implication that I have somehow contributed to this disaster. I am tired of playing by the rules and then being forced to bail out investors and homeowners whose bad judgement and malfeasance are to blame for this.

see more at: 2big2fail.blogspot.com

Sent by Erik Kingston | 2:24 PM ET | 09-23-2008

If something seems too good to be true, it probably is. I think we are all learning that now. I'm very lucky to have a traditional mortgage...although my husband and I were also persuaded by our bank (which I should say - is also my employer) to get an exotic mortgage product, and we have (last I checked) a good bit of equity in the house.

However, it was tempting over the last few years to join others in buying too much house, flip a house, become a landlord, etc. My husband feels like we missed our window to make a lot of money - granted we got out in time. I disagree. We were lucky to keep cool heads and even luckier that we didn't lose money on speculating in real estate. I feel sorry for those who did take a chance, and lost.

Sent by BankerChic | 2:27 PM ET | 09-23-2008

Home ownership - good or bad? What do your panelists feel about the research that shows that home ownership actually reduces economic well-being because it increases labor inflexibility? So did we cause this crisis in the pursuit of poor policy in the first place?

Sent by PR Ganapathy | 2:31 PM ET | 09-23-2008

Today there has been discussion about a salary cap for CEOs whose companies participate in the government's bail-out of their bad debt.

One idea mentioned (I believe by Senator McCain) is that we cap CEO salaries as being no greater than the highest salary in the Federal Government: the president's salary.
This has led to discussion about what life might be like for CEOs who get a pay cut from $30 million to $400,000, and how it could cramp their lifestyle.

Well, I'm assuming that the CEOs of investment firms have been investing their paychecks for the past few years, and assuming they have made good decisions, I'd think that those funds should help them get by during these lean years. If not, well isn't that capitalism at work. You invest, make a poor decision, and now suffer a loss. If the CEOs made poor investment decisions with their own money (as well as with money from honest middle-class Americans who invested in their firms), then isn't it somehow appropriate that they should experience some sort of loss.

I am all for fixing the economy and making it work for the broad range of Americans, but I'd rather see $30 million invested in science or technology than handed over to a corporate executive who couldn't manage his own money, let alone the billions of dollars in capital owned by the firm he oversees.

Sent by Jessica | 10:03 PM ET | 09-23-2008

This is really very eerie. Deja v?? whenever Bush wants anything. Hurry, hurry 'cause there's no time. Remember the social security crisis and the weapons of mass destruction?
Bush and his cronies always have the same line - give me/us more unfettered authority/power.

Sent by Ron L??pez | 10:35 PM ET | 09-23-2008

Student loans are usually classified as "good" debt. Like a mortgage or a business loan, entering higher levels of education and borrowing money could be even considered taking a risk financialy (See the parallel. I wish the goverment would develop a bail out plan for us college grads swimming in debt from student loans. I know friends who are $30,000, $40,000 or more in debt from student loans and who can't find work in their fields. Even if you graduate with the average level of education debt -- about $21,000, according to The Project on Student Debt. Unknowingly may of us were jeopardizing our finances. Many newly minted graduates find their loan payments are so big that they can't save for other goals, such as a house or retirement
Wouldn't it be nice if the goverment would consider bailing out the average college student trying to get by? Loans and credit card debt fuel my generation's debt and surley the generation behind me will encounter the same.So here Iam an "average joe" is not only paying the goverment for my student loans, but now face the possibility to help pay for the mistakes of others. Who knows maybe some of the people who qualified for loans were people like me in debt and bad credit due to the sacrifices we made to go to school. When will the cycle end?

Sent by Krystelle Van Buren | 11:43 PM ET | 09-23-2008

There is a positive side to this 'financial crisis'. For years, Americans have lived outside of their means by buying huge homes, expensive cars, and a plethora of 'wants'. This current economic downturn will force Americans to save money and only buy what is necessary and what is affordable. I am not worried. I don't own a home, I avidly save for my future and for emergencies, and I live within my means. That is why I think it is unfair for the government to bailout corporations and regular citizens. These people put themselves in this mess and they have get out and suffer the consequences.

Americans have put themselves in this situation. It was only a matter of time before reality sets in. We need to take responsibility for our financial irresponsibility.

Sent by Kristine | 11:53 AM ET | 09-24-2008

Is there anything worse than a rerun, especially a rerun of the S&L crises of the 80s. Then rates were high. High rate mortgages were collateralized into CMOs. Bank paid big premiums for these high interest CMOs. Rates dropped, people refinanced, and walla, the prepayments made the premiums the banks paid worthless.
Flash forward. Rates are low, banks do not want to get stuck with low interest mortgages in a rising interest environment, so they write variable rate mortgages. Rates rise, variable mortgage payments go up, people can't pay, and walla, the banks are stuck with foreclosed properties.

Sent by Clifford | 12:57 PM ET | 09-24-2008

Everyone keeps complaining about how this is a government bailout of Wall Street, yet are afraid that not doing this will hurt the "common man." This plan is coming from the same group whose trickle-down philosophy got us in this mess in the first place, and surprise, surprise, they want to inject more money into the top tier yet again. How about this: There have been general calculations that this 700 billion would amount to about 2500 per person or 10,000 per family. If Republicans are truly interested in "putting more money in the pockets of taxpayers," why don't they do just that. Give the money to American citizens. The upper echelon won't be bailed out, and we will be allowed to decide what to do with the money. Banks may fail, CEOs will lose their jobs, but the money in the pockets of everyone will stimulate the economy. A family might decide to use 10000 to put a downpayment on a home, thereby stimulating the economy. They may decide to pay down credit card debt, putting money back into the bank's pockets, or they may be one of those on the verge of losing their home, in which case, they will be able to avoid becoming another statistic. Or they may decide they now have enough money to start that enterpreneurial venture, also helping stimulate the economy.
After so many have feigned worry about the average American, why has no real help been offered directly to them?

Sent by Chris Butler | 2:10 PM ET | 09-24-2008

I would like to know how much of this $700 million will be bailing out foriegn investment. I know that these banks and investment firms do not deal exclusively with US residents. But it is the US taxpayers that are going to foot the bill. Also, why should I pay to save a company that outsources half of its jobs -IT, HR,- to other countries. I can deal with paying 40% of my income in various taxes to help out the guy next door. I can even deal with some of that going as aid to countries were people are suffering. But I do not want to have to pay more taxes to increase the wealth of foriegn investors and I do not want to pay more taxes to save jobs that my children cannot get anymore because they do not live in Asia.

Sent by JOE | 5:53 PM ET | 09-24-2008

Today we face the following: over-saturation of property, high adjustable mortgage rates, foreclosures, unavailable loans, high gas and energy prices, a looming global warming crisis, declining wages, and unemployment issues. Instead of looking for a solution that will cover all of these, we focus on helping the people who least deserve it. We should buy housing in all our major cities with the specific plan of building a quality mass transit rail system. The land is as cheap as we'll ever get it, it would eliminate excess housing from the market, provide needed jobs, address high gas prices, and combat global warming. It is something we will eventually need anyway. Freddie and Fannie should be nationalized with the following purposes: provide loans to the displaced, supply refinancing for loans that are unaffordable, and offer further loans to keep the economy going if the market refuses to, This would infuse money into Wall Street, directly aid the people, and take the handling of this problem directly into our hands, rather than trusting a bunch of skittish cronies. Granted, I've not looked into the finances of this, but I have heard nothing even similar to this. Let's make sure we get something out of this mess.

Sent by Andrew Wieber (Chicago) | 9:31 PM ET | 09-24-2008

Unreal, our country is literally being stuck up by the IMF, which absolutely engineered this collapse from the very start. If our "elected officials" had any backbone or guts the first thing they would be doing is freezing all this funny money, speculative paper, and conducting a criminial investigation. Don't people understand that this bailout will result in a complete subversion of our government? Do people really think that there is no intent here? Do you really want your lives to be run by a small group of finicial elite? What happened to this nation? In the history of this nation this kind of thing has occurred over and over again. The very reason this nation was created in the first place was to get away from the slime in England who felt that the world should be a slave world, and that a very small group of elite should rule over their serfs on a global scale. Our country destroyed that idea and exported the idea that free individuals and free nation states should together use peoples creative abilities to make the world around them better for all people. What you are seeing right now is a continuation of that war against free peoples, and if this goes forward make no mistake that this great nation will die. The crash in 1929, and global depression was the previous version of this. Joe Kennedy understood this at the time, as did many people in our government. FDR fully understood this, and set out to stop the world banking elite from looting economies and crashing markets in order to radicalize(Germany) nations and offer solutions that would return the world to a feudal kingdom. The new deal regulatory measures put forth by FDR stopped the speculative practices that are always manipulated to steal peoples wealth. Why else would you not regulate these activities? We need to do something very similiar now. A new deal needs to be implemented now, and these corrupt and funny money institutions have to die. Please people don't give your power away by asking what are they going to do about this. Inform yourself and then get involved and demand that the right thing be done. You will start to see a campaingn in the media to blame regular people for this collapse, and that couldn't be more of a lie. Our nation is in trouble, but it doesn't have to be, if we all know what is really happening and take our power back to correct it we can stop this. REJECT THIS BAILOUT, regardless of the threats,and demand a new deal.

Sent by Yosh | 4:33 AM ET | 09-25-2008

Push the rest button, lets start over with an alternative energy economy.

We are just postponing the unenviable.
The plan they are proposing will assure that we (the american people) have no resources with which to start over again.
I say to the American People, NO DEAL: unless and until they find a way to cut $1,000,000,000,000.00 in government spending. Do you really want to take a trillion dollars from the American people and give it the Wall Street?

No bailout!

Sent by Keith Howell | 2:26 PM ET | 09-25-2008

I'm against the $85,000,000,000.00 bailout of AIG.Instead, I'm in favor of giving $85,000,000,000 to America in a We Deserve It Dividend.To make the math simple, let's assume there are 200,000,000 bona fide U.S. Citizens 18+.Our population is about 301,000,000 +/- counting every man, woman and child. So 200,000,000 might be a fair stab at adults 18 and up..
So divide 200 million adults 18+ into $85 billion that equals $425,000.00.
My plan is to give $425,000 to every person 18+ as a We Deserve It Dividend.
Of course, it would NOT be tax free.
So let's assume a tax rate of 30%.Every individual 18+ has to pay $127,500.00 in taxes.That sends $25,500,000,000 right back to Uncle Sam.But it means that every adult 18+ has $297,500.00 in their pocket.A husband and wife has $595,000.00.What would you do with $297,500.00 to $595,000.00 in your family?Pay off your mortgage - housing crisis solved.
Repay college loans - what a great boost to new grads Put away money for college - it'll be there Save in a bank - create money to loan to entrepreneurs.Buy a new car - create jobs Invest in the market - capital drives growth Pay for your parent's medical insurance - health care improves Enable Deadbeat Dads to come clean - or else Remember this is for every adult U S Citizen 18+ including the folks who lost their jobs at Lehman Brothers and every other company that is cutting back. And of course, for those serving in our Armed Forces.If we're going to re-distribute wealth let's really do it...instead of trickling out a puny $1000.00 ( 'vote buy' ) economic incentive that is being proposed by one of our candidates for President.If we're going to do an $85 billion bailout, let's bail out every adult U S Citizen 18+! As for AIG - liquidate it.Sell off its parts.Let American General go back to being American General.Sell off the real estate.Let the private sector bargain hunters cut it up and clean it up.Here's my rationale. We deserve it and AIG doesn't.Sure it's a crazy idea that can 'never work.'But can you imagine the Coast-To-Coast Block Party!How do you spell Economic Boom?I trust my fellow adult Americans to know how to use the $85 BillionWe Deserve It Dividend more than I do the geniuses at AIG or in Washington DC and remember, The Birk plan only really costs $59.5 Billion because $25.5 Billion is returned instantly in taxes to Uncle Sam. This is Birks plan and I like it.

Sent by Michael Boring | 2:49 PM ET | 09-25-2008

I would like to suggest that the government spend the 700 billion to guarantee all current mortgages (but not future mortgages). If a homeowner's adjustable mortgage increases to $3000/month but he can only pay $2000, the government would pay the difference: $1000/month. The government payments would become a priority lien against the property with interest. If the total government payments exceeds a threshhold, the government would have the option to force the property to be sold. The amount of money that the government will have to spend during the first year will be much less than with the Paulson plan and it will keep people in their homes which will stabilize house prices. By officially guaranteeing mortgage payments, this will immediately make the mortgage backed securities non-toxic. To simplify administration of this program, it would be the lender who notifies the government about a late or partial payment, not the home owner. The government would pay the lender directly and place a lien on the property without ever having to deal directly with the home owner. Thus the government would only deal directly with a small number of lenders instead of a huge number of home owners.

Sent by Steven Moritsugu | 6:38 PM ET | 09-29-2008