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Paulson Blows The Bubble

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December 03, 2007 – Comments (10)

or, he's at least trying his best to keep those home prices inflated... err, to save those poor, undeserving homebuyers from the consequences of their own behavior.

Rejoice. Everyone who didn't take out a stupid loan will now get to fund this bailout through higher fees, lousier customer service, and whatever other cost-shifting the banks can come up with to pay for their pseudo largesse. Oh, and all y'all can pay higher prices for homes, too.

Sj

10 Comments – Post Your Own

#1) On December 03, 2007 at 12:07 PM, Imperial1964 (97.51) wrote:

Yeah, but from what I understand, the banks cannot modify loans they've originated and then sold--only mortgages they still own.  So I don't know what portion of loans this actually applies to.

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#2) On December 03, 2007 at 2:43 PM, dwot (97.29) wrote:

I think that is superficial in how it will be paid for.  Investors will not get the rate of interest they thought they would get and their money will be tied up for years paying back the loan.

But where it will really cost the economy is that people will be debt slaves for life and they will never stimulate the economy.  Business will not do as well as all the money goes to debt servicing rather than stimulating the economy.  The more people "saved" the more sluggish the economy will be.

There will be a lot less jobs, and less good paying jobs

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#3) On December 03, 2007 at 2:58 PM, GS751 (27.49) wrote:

very true, people need to face the consequences of thier own stupid decisions.

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#4) On December 03, 2007 at 3:56 PM, mtsafe (98.24) wrote:

Together, individuals and bankers made poor agreements. Both need to be held accountable.

Some people can be efficiently helped--others cannot.  The age old challenge is in offering the right help to the right people. However, I agree that the majority of financially troubled people will better off failing sooner rather than later.

Meanwhile, the greedy bankers who wrote crappy loans deserve punishment. They knew very well that ARM rates would go beyond people's ability to pay. They said, "Oh joy! It's the big money nineties! We can up-sell mortgages now. By the time rates go up, we will be long gone." Internet executives had their 3-year plans to make money and bail.  Bankers had similar plans.

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#5) On December 03, 2007 at 3:57 PM, StKitt (30.31) wrote:

It's way too late for any sort of bailout to restore confidence in the credit markets. Hayride is over for a good long while... time to walk and earn money the old-fashioned way. Fine by me!

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#6) On December 03, 2007 at 9:29 PM, abitare (40.75) wrote:

For morale Congressmen Paul grilling Helicopter Ben and Paulson:

http://www.youtube.com/watch?v=138LMjiBQ4g 

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#7) On December 03, 2007 at 10:53 PM, MHutch2007 (< 20) wrote:

This move is a fig leaf.  Only people who are both current on their payments, and owe less than their house is worth can qualify for the plan.  It does nothing for the people who are delinquent or upside down.

The plan is also intended to help the big banks in trouble - Countrywide, WaMu, Wells Fargo, Citibank, etc.  That's why they're at the table.

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#8) On December 04, 2007 at 9:06 AM, TMFBent (99.83) wrote:

The plan is also intended to help the big banks in trouble - Countrywide, WaMu, Wells Fargo, Citibank, etc.  That's why they're at the table.

Agree 100%. Also, interesting article in WSJ today discusses the reset-red herring. The trouble with these lousy mortgages is people are overleveraged and can't afford them even before they reset.

But don't worry, Old Hanky P. has a taxpayer-funded bailout plan he likes. He wants Congress to let local governments raise bond money to bail out debtors. I guess they figure it's not a taxpayer bailout so long as the tax isn't federal.

Nice that Hanky figured out a way that the rest of us could continue to support the excess of his Wall Street cohort.

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#9) On December 04, 2007 at 10:35 AM, bricks79 (49.88) wrote:

Wall Street has the perfect game rules. Privatize profits and socialize losses, all in the name of "stabilizing the markets". It's a perfect, no lose game because small businesses desperately need access to credit, so the federal government has no choice but to let a new round of tax exempt bonds be created to bail out the big, bad boys.This is a perfectly free market (gamed) system! You just need to know which side of the trade to play at the right time. Caveat emptor and good hunting.

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#10) On December 04, 2007 at 3:05 PM, abitare (40.75) wrote:

Great posts.

"Privatize profits and socialize losses, all in the name of "stabilizing the markets".

That is a money quote!

I really do not like Paulson. He reminds me of the departed former CEO Kenneth Lay from Enron.  

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