Crammer: It's no bailout...
This guy sounds dumber every time I read him.
It's absolutely a bailout. They're talking major taxpayer dollars behind this plan, including legislation to give people tax havens on forgiven debt (which is income, plain and simple. If it's not, tell you what, loan me a few hundred grand then forget about it...)
They're pushing to let local governments issue bonds on the backs of taxpayers, then use the proceeds to bail out local debtors who can't pay their bills. They're looking to put taxpayers on the hook guaranteeing bigger loans at Fannie and Freddie. They're doling out cheaper money from taxpayer-supported banks in return for lousy collateral from the likes of Countrywide.
And then there's the Paulson plan, which is part bailout, part ripoff, 100% ineffective. It bails out the banks by trying to support their lousy MBSs before they crater in price even more. It rips off the naive by only "helping" those who have nothing to lose. Got 3% equity (something to lose?) then you're out of luck. Got NO equity, no reason to stay (so you'd be better off just walking away?) then let this plan string you along a few years until you can't afford your home and lose it then...
These plans all reward rotten lending, stupid risk-taking, and support a bubble asset that needs to come down in price. But they can't stop the tsunami that's rolling in anyway.
How does Crammer think the government can fix 2008-2010's giant waves of Alt-A and Prime ARMs (which are going to default in droves for the same reason subprimes did -- because people spent too much and can no longer refi their way out)?
Crammer's just spreading the message of his whiny Wall Street pals, the bankers and hedgies who screwed up royal because they couldn't contain their greed in creating these CDOs, leveraging up to buy more of them until the entire system was at risk from a small number of defaults.
They whizzed in their own punchbowl, and now no one wants a sip. THAT's the real problem in the credit markets. Rates are nothing. No one trusts anyone else, and as long as the government continues to refuse the obvious remedy (toss out the punch, even if a few people go thirsty for a while), the trust won't come back.