someone explain this economy shit

[Flipx99 5,000+ posts]

The bankers are in on it. They get to basically get free money from the bailouts. They aren't lending any money unless you **** near have perfect credit. All the banks have done with the bailout money is write down bad debt (which the people are paying for), buy up smaller banks and keep the rest for themselves. The banks are overleveraged and they know it. Stupid people are responsible for buying homes they couldnt afford but the banks are just as responsible because of their greed they made loans they know they shouldnt have made. We can thank Clinton for thinking everyone should own a house and then thank the rep for deregulating banks so they could make the crazy loans. Laws were put into place after the 1st depression so it wouldnt happen again and for some reason America thought it was smarter (Paulson and Bernake) and it couldn't happen again.
The banks are so overleveraged right now its not funny and more will start to fall if the gov doesnt just print more money. The housing market has started to decline but will fall another 10% to 30% guranteed. The banks have a lot of houses that are already in foreclosure right now but are not in mls or on the market for sale right now. The reason is to keep their books in order and looking better than they really are because they are getting billions of dollars from the latest bailout. Once they get the money, they will finish writing off the houses that are already in foreclosure. Once those houses finally hit the mls, there will be more than enough house on the market for sale which will push real estate prices down even more! I dont know why some people think that we are at the bottom, this is just the beginning!

1. Why should the banks lend to people with imperfect credit? Shouldn't banks get to choose what tier of clients they cater to? The ability to borrow money is not a right. I could get a loan to buy a new car tonight...My friend, who has a 6XX, credit score shouldn't have that same ability.

2. Banks who accepted TARP funds cannot acquire other banks or the arms of other financial companies. If they could, VALIC would have been sold by now.

3. They should be writing down bad debt. It's FAR/GAAP issue. They used the TARP money to fix the balance sheets instead of lending to jackasses. The govt wanted them to lend the money to any ole' person...they used the money to sure up their balance sheet and increase lending standards to reduce the risk of being overleveraged again.

4. Shouldn't a decline in housing prices be beneficial? First, it proves that one's house is not an investment. It is a shelter to protect one against the rain, cold, etc. The people who think a house should be an investment should be thrown in jail. A decline in the price of homes should allow those who made wise choices concerning their credit to take advantage of the low home prices.

5. They are printing more money to attempt to keep the economy from sinking further. The huge amount of money will eventually cause inflation, if not hyper-inflation. That is an easier problem to work through than deflation. Which continues until those who hoard cash feel that they can't get a better deal by waiting.

 

[momuzykent 10+ year member]

1. Why should the banks lend to people with imperfect credit? Shouldn't banks get to choose what tier of clients they cater to? The ability to borrow money is not a right. I could get a loan to buy a new car tonight...My friend, who has a 6XX, credit score shouldn't have that same ability.
Its not a point of whether they should lend to them. One of the reasons we are in the mess we are in is because they made bad loans they now couldnt be repaid and then sold those loans to other countries. i.e. china, japan, whoever else would buy them and thats the reason its not just America, its global because now they are all tied in to our credit mess.

2. Banks who accepted TARP funds cannot acquire other banks or the arms of other financial companies. If they could, VALIC would have been sold by now.

You need to do your research, banks arent suppose to acquire others but do your homework, they are.

3. They should be writing down bad debt. It's FAR/GAAP issue. They used the TARP money to fix the balance sheets instead of lending to jackasses. The govt wanted them to lend the money to any ole' person...they used the money to sure up their balance sheet and increase lending standards to reduce the risk of being overleveraged again.

This is one of the reasons the recession will last longer than it is suppose. America is suppose to be free trade. If the banks made bad loans and cant repay, then they should have to write it off and take the loss, not have the gov print money out of thin air to correct their mistakes. You dont understand they dont play by the same rules me and you do. For example, if you had a, hmmm lets say car audio business and you had a bad business model or you loaned out your stereo equipment hoping you would get paid in the future. I gurantee if your customers could not pay you, you would not be getting part of the stimulus check so you could write off your bad loans & shore up your balance sheets. If they wont do it for you, why should they be able to do it.

4. Shouldn't a decline in housing prices be beneficial? First, it proves that one's house is not an investment. It is a shelter to protect one against the rain, cold, etc. The people who think a house should be an investment should be thrown in jail. A decline in the price of homes should allow those who made wise choices concerning their credit to take advantage of the low home prices.

This is incorrect as well. If the market has been inflated and loans good or bad given out on house and then your property prices decline, why should you be overleveraged or owe more on a house that isnt worth anything. Not sure how you see that as good but that doesnt make any sense to me at all. Even if you had good credit and put down 20%, if your property values decrease by 30%, something just doesnt sound right about that.

5. They are printing more money to attempt to keep the economy from sinking further. The huge amount of money will eventually cause inflation, if not hyper-inflation. That is an easier problem to work through than deflation. Which continues until those who hoard cash feel that they can't get a better deal by waiting.

You should look up superinflation and hyperinflation. Check your history and look at Weimer Germany or for current day situation look at Zimbawe. Printing more moeny out of think air does nothing but devaluate your currency. In Germany once it struck the price of food doubled every day. In Zimbawe they are rolling around wheel barrows full of money and cant buy anyting because the price of everything is so high and their money is worthless. Running the printing presses will do nothing positive at all. Well let me correct myself, with technology you dont even have to print money anyways, just go the computer and push a button!

 

[95ZJ 10+ year member]

You should look up superinflation and hyperinflation. Check your history and look at Weimer Germany or for current day situation look at Zimbawe. Printing more moeny out of think air does nothing but devaluate your currency. In Germany once it struck the price of food doubled every day. In Zimbawe they are rolling around wheel barrows full of money and cant buy anyting because the price of everything is so high and their money is worthless. Running the printing presses will do nothing positive at all. Well let me correct myself, with technology you dont even have to print money anyways, just go the computer and push a button!

Only way that printing more money would work is if we weren't in a recession and were in a boom. I didn't read the topic, but aren't most of our woes due to the FED and banks not increasing the APR on housing loans when too many people were buying houses they probably couldn't afford?

 

[Flipx99 5,000+ posts]

You should look up superinflation and hyperinflation. Check your history and look at Weimer Germany or for current day situation look at Zimbawe. Printing more moeny out of think air does nothing but devaluate your currency. In Germany once it struck the price of food doubled every day. In Zimbawe they are rolling around wheel barrows full of money and cant buy anyting because the price of everything is so high and their money is worthless. Running the printing presses will do nothing positive at all. Well let me correct myself, with technology you dont even have to print money anyways, just go the computer and push a button!

I know what hyper-inflation is...trust me. I also know that it is a problem that has a solution. Whereas continued economic decline does not have a "textbook" solution.

You need to make a tradeoff here.

Solution one is to let everything that fails, fail. The outcome is unknown as no one has ever done that before. Could everyone lose their jobs? Would it be anarchy? Without some anchor for confidence, know one knows what will happen.

Solution two is to do what they should have done to begin with...purchase the troubled assets so that they are now "priced" this fixes the balance sheet issue with the banks, so they are not forced to continue with the write downs and charges to equity, etc.

The 900B stimulus is a joke...that money would have been better served to fill potholes on the interstate.

If you look further into that period of Germany, you will see what happened. People quit using cash all together and instead used barter to transact business. Although barter is arachic and crude, it does create an anchor.

I lean toward solution one more than solution two. But there is a fear, and I feel it isn't that off, is that the banks could close and keep my money. The FDIC doesn't have enough funds to pay me back...then what? I suppose people would take to the streets.

 

[Flipx99 5,000+ posts]

Only way that printing more money would work is if we weren't in a recession and were in a boom. I didn't read the topic, but aren't most of our woes due to the FED and banks not increasing the APR on housing loans when too many people were buying houses they probably couldn't afford?

The FED doesn't increase APR, at least not directly. Most ARMs are Tied to the One-Year TCM.

Printing money will work if we create a revolutionary boom, like the internet. If something like that were to happen, inflation would be negible.

 

[momuzykent 10+ year member]

1. Why should the banks lend to people with imperfect credit? Shouldn't banks get to choose what tier of clients they cater to? The ability to borrow money is not a right. I could get a loan to buy a new car tonight...My friend, who has a 6XX, credit score shouldn't have that same ability.
2. Banks who accepted TARP funds cannot acquire other banks or the arms of other financial companies. If they could, VALIC would have been sold by now.

3. They should be writing down bad debt. It's FAR/GAAP issue. They used the TARP money to fix the balance sheets instead of lending to jackasses. The govt wanted them to lend the money to any ole' person...they used the money to sure up their balance sheet and increase lending standards to reduce the risk of being overleveraged again.

4. Shouldn't a decline in housing prices be beneficial? First, it proves that one's house is not an investment. It is a shelter to protect one against the rain, cold, etc. The people who think a house should be an investment should be thrown in jail. A decline in the price of homes should allow those who made wise choices concerning their credit to take advantage of the low home prices.

5. They are printing more money to attempt to keep the economy from sinking further. The huge amount of money will eventually cause inflation, if not hyper-inflation. That is an easier problem to work through than deflation. Which continues until those who hoard cash feel that they can't get a better deal by waiting.

Ok all of my answers didnt come thru so here goes again:

1. Its not a point of whether they should lend to them. One of the reasons we are in the mess we are in is because they made bad loans they now couldnt be repaid and then sold those loans to other countries. i.e. china, japan, whoever else would buy them and thats the reason its not just America, its global because now they are all tied in to our credit mess.

2. You need to do your research, banks arent suppose to acquire others but do your homework, they are.

3. This is one of the reasons the recession will last longer than it is suppose. America is suppose to be free trade. If the banks made bad loans and cant repay, then they should have to write it off and take the loss, not have the gov print money out of thin air to correct their mistakes. You dont understand they dont play by the same rules me and you do. For example, if you had a, hmmm lets say car audio business and you had a bad business model or you loaned out your stereo equipment hoping you would get paid in the future. I gurantee if your customers could not pay you, you would not be getting part of the stimulus check so you could write off your bad loans & shore up your balance sheets. If they wont do it for you, why should they be able to do it.

4. This is incorrect as well. If the market has been inflated and loans good or bad given out on house and then your property prices decline, why should you be overleveraged or owe more on a house that isnt worth anything. Not sure how you see that as good but that doesnt make any sense to me at all. Even if you had good credit and put down 20%, if your property values decrease by 30%, something just doesnt sound right about that.

5. You should look up superinflation and hyperinflation. Check your history and look at Weimer Germany or for current day situation look at Zimbawe. Printing more moeny out of think air does nothing but devaluate your currency. In Germany once it struck the price of food doubled every day. In Zimbawe they are rolling around wheel barrows full of money and cant buy anyting because the price of everything is so high and their money is worthless. Running the printing presses will do nothing positive at all. Well let me correct myself, with technology you dont even have to print money anyways, just go the computer and push a button!

...and no the gov shoudlnt rescue business that are failing in a free trade market. When & if they do then its not really free trade! The only thing that will get us out of this recession is if some new type of energy is found that hasnt been done yet. Other than that, we are in the recession (really depression) and going further into it. employment is going to get worse. the gov lies about those statistics as well. we are already up to 15% at least and I think it will get up to 20 to 25% before its over (not leaving out real numbers like gov does with what they called discouraged workers and u5 & u9). if you dont have a job you are unemployed, doesnt matter how long you havent had a job!

 

[Twistid 5,000+ posts]

supas mom

 

[Flipx99 5,000+ posts]

1. You complained that it now takes perfect credit to get a loan. I said, who shouldn't it. Your response doesn't make sense...or I am misunderstanding.

2. $5 paypal if you can find one acquistion made after TARP funds where released by a financial institution that recieved TARP funds.

3. There is a possibility (how remote I don't know) that people who worked 40 hours per week don't get a paycheck, not due to the fault of the employer, but due to the fault of the bank. I am willing to make that tradeoff.

4. I bought this TV and now it is worth less. I bought a house and it is also worth less. I bought them both on credit. I don't understand why there is a notion that houses must appreciate...or at least be worth the same amount that you paid. My house was $118k. If I pay the house off, it doesn't matter if the house is worth $50k when it's paid off. If you are paying on the house, what does it matter what the house is worth?

5. Already responded to #5.

 

[Flipx99 5,000+ posts]

By what metrics are you using to measure unemployment. If the govt stats are all lies, what is your model/mechanism do you use?

 

[momuzykent 10+ year member]

1. You complained that it now takes perfect credit to get a loan. I said, who shouldn't it. Your response doesn't make sense...or I am misunderstanding.
2. $5 paypal if you can find one acquistion made after TARP funds where released by a financial institution that recieved TARP funds.

3. There is a possibility (how remote I don't know) that people who worked 40 hours per week don't get a paycheck, not due to the fault of the employer, but due to the fault of the bank. I am willing to make that tradeoff.

4. I bought this TV and now it is worth less. I bought a house and it is also worth less. I bought them both on credit. I don't understand why there is a notion that houses must appreciate...or at least be worth the same amount that you paid. My house was $118k. If I pay the house off, it doesn't matter if the house is worth $50k when it's paid off. If you are paying on the house, what does it matter what the house is worth?

5. Already responded to #5.

1. my response to one was that the banks made bad loans so why should the gov step in and rescue them. they knew the people had bad credit and still loaned to them anyways so they should have to write it off. They dropped their lending standards because of greed so they should have to pay.

2. I will find that info for you

4. yes that is wrong and ripping people off bec if you inflate the bubble to represent or should i say misrepresent what something is worth then you should be held liable for it. they inflated the market and now people have alot of negative equity in their homes. So yes it does matter! Just as with the bailout and helping failing people or institutions again. So the gov is willing to help people who got into a house they couldnt afford but the smart person who got what they could afford doesnt get any help? that doesnt make sense either. I can afford my mortgage but what if all the people such as I just stop paying on my mortgage since the gov wants to help?

& hope you arent upset. I can agree to diagree since we have different views. Some are eternal optimist and wish things to get better and I just look at things for what they are, I have no ties to rep or dem

 

[Flipx99 5,000+ posts]

1. my response to one was that the banks made bad loans so why should the gov step in and rescue them. they knew the people had bad credit and still loaned to them anyways so they should have to write it off. They dropped their lending standards because of greed so they should have to pay.
2. I will find that info for you

4. yes that is wrong and ripping people off bec if you inflate the bubble to represent or should i say misrepresent what something is worth then you should be held liable for it. they inflated the market and now people have alot of negative equity in their homes. So yes it does matter! Just as with the bailout and helping failing people or institutions again. So the gov is willing to help people who got into a house they couldnt afford but the smart person who got what they could afford doesnt get any help? that doesnt make sense either. I can afford my mortgage but what if all the people such as I just stop paying on my mortgage since the gov wants to help?

& hope you arent upset. I can agree to diagree since we have different views. Some are eternal optimist and wish things to get better and I just look at things for what they are, I have no ties to rep or dem

1. Oh I agree with that. I thought you were implying that banks should again lower those standards and begin subprime lending again to stimulate the economy.

2. I would love to see how they skirted that one. Will be an interesting read and you found me a source for a paper I have to write.

4. I guess "home value" only matters if you intend to sell. I am trying to tease out just what your argument here is...it seems that you overpaid for your house, are now upside down even though you paid as you should and are upset that jackasses that didn't pay as they should are getting help. I certainly see that perspective. And I agree, I don't believe in supporting them either.

Not upset...I am loling about this "Do your research" about economics to a person that studies it every day.

 

[momuzykent 10+ year member]

1. Oh I agree with that. I thought you were implying that banks should again lower those standards and begin subprime lending again to stimulate the economy.
2. I would love to see how they skirted that one. Will be an interesting read and you found me a source for a paper I have to write.

4. I guess "home value" only matters if you intend to sell. I am trying to tease out just what your argument here is...it seems that you overpaid for your house, are now upside down even though you paid as you should and are upset that jackasses that didn't pay as they should are getting help. I certainly see that perspective. And I agree, I don't believe in supporting them either.

Not upset...I am loling about this "Do your research" about economics to a person that studies it every day.

No my home value is fine, I actually still have equit in the house. I'm in Tenn and we havent been hit as hard with the fall in home prices since our house prices didnt go with the crazy bubble like NY, AZ, etc. I just dont thik that is right that they inflated the housing market and people paid these crazy prices and now are upside down. If i was in that situation and especially with the gov helping the people who got in over their heads, why wouldnt alot of people just walk away from their mortgages. Hell, the gov can just print more money to cover those bad loans as well! lol Ok so you are economics major, so that explains some of your responses. I didnt major in economics at all but I do keep up with whats going on. Mainstream media lies so much and doesnt tell the whole truth that you personally have to dig deeper and your own research if you really want to konw the truth and I will look for that info for you on the banks tomorrow.

 

[newusername 10+ year member]

4. yes that is wrong and ripping people off bec if you inflate the bubble to represent or should i say misrepresent what something is worth then you should be held liable for it. they inflated the market and now people have alot of negative equity in their homes. So yes it does matter! Just as with the bailout and helping failing people or institutions again. So the gov is willing to help people who got into a house they couldnt afford but the smart person who got what they could afford doesnt get any help? that doesnt make sense either. I can afford my mortgage but what if all the people such as I just stop paying on my mortgage since the gov wants to help?

The people who can't afford their mortgage or their debt load are paying the price for the bubble they helped create. If you accepted any credit on this imagined value (even if it was your first purchase), then you are responsible for it. Personally, I would like everyone who took the risk to accept the risk, and deal with the consequences, but they are interfering now to let the country slowly bleed out instead of a quick hemorrhage.....not necessarily a good move.

 

[kh971 10+ year member]

Jimmy Carter enacted the Community Reinvestment Act in 1977 (I think it was 77). This was so everyone could afford housing, even if you couldnt afford it. It made it so banks HAD to loan money to people who couldnt pay it back. Bill Clinton, Chris Didd, and Barney Frank messed it up some more, and banks loaned people money who they knew couldnt afford to pay it back because they figured that with rising housing prices, they could use the equity of their home to pay their mortgage. This only works on the idea that housing prices always rise... Note* Another factor was how Clinton messed with the Federal Reserve rates when he was President. He made it so just about anyone could get a mortgage, whether they could pay it or not. Everyone was buying houses, spending money, the economy was booming. Then the bubble popped, and everyone blamed the Republicans, even though they had nothing to do with it.

...So investment companies packaged parts of these loans together into Collateralized Debt Obligations, or CDOs. They rated and sold these CDOs according to the rating they got, with AAA being the safest. The rating companies got more money for giving a AAA rating, so they basically just rated every single investment as AAA since there was no oversight. I mean why, not? Housing prices ALWAYS go up, right? That sounds like a safe investment to me.

Well... No. The housing prices fell. The CDOs basically became even more worthless than they were in the first place. The housing market bubble burst, people started losing their homes, energy costs began to raise, Wall Street had all their investments backfire, etc. Just not good stuff.

Now Obama spending all this money arbitrarily is going to put us even further in the hole. Even if it was quick spending, it wouldnt work. The fact is, that only a small percentage will be spend this year, and a small percentage next year. This bill wouldnt work even if it WAS supposed to happen any time soon. Its just him scaring the American people into supporting his personal interests and side projects.

We're pretty much screwed, bottom line. I think this powerpoint explains it quite well, and is pretty funny also.

Download and watch the Powerpoint.

How did it happen?

Galactic you hit the nail on the head!!

I hate it when all the Democrats say it is because of George Bushs failed economics. I will admit there were some things that GB could have done to help us out a little more, but he could have not stopped it.

 

[Flipx99 5,000+ posts]

The people who can't afford their mortgage or their debt load are paying the price for the bubble they helped create. If you accepted any credit on this imagined value (even if it was your first purchase), then you are responsible for it. Personally, I would like everyone who took the risk to accept the risk, and deal with the consequences, but they are interfering now to let the country slowly bleed out instead of a quick hemorrhage.....not necessarily a good move.

I am no fan out the housing bailout. I did support Paulson's initial plan for TARP.