Obama's Mortage Plan: People who do it right should pay for people who do it wrong.

[theanalogkid]

The economy should turn in the 4th quarter of this year...so get ready to buy sooner.

Based on what? If this government continues to spend money in these "stimulus" bills, it's only going to make things worse not better.

[Paydirt404]

People who cant afford to live in their houses shouldnt be there. I admit, I dont want to pay for the Jones's.
Its easy for me to say that now that I have found employment....if I was in a different position, my mind would probably change. We got our loan based on our income, not because we just walked in a bank and said give us this. There is a difference between the lenders.

[TheSphinx 2.0]

We have debated most of this before so I will just address the new issues and quesitons:

The analogy is nice if it were a true analogy TS but it isn't in the same line as the plan to help homeowners. The government isn't printing money to give to these people and saying "here, pay your mortgages".

Yes it is. Whenever you modify a bank's asset (a loan is an asset for the bank) without modifying the bank's corresponding liability against that loan you create a gap that has to be filled. The government will have to fill that gap by printing money. If they don't the bank will go under. Here is an example: (it is a tad bit convoluted).

I deposit $200k into a checking account with BofA. My checking account has an interest rate of 3%. So every year that I keep my money there BofA has to pay me $6,000. In order to be able to pay me BofA has to loan my money out to someone in hopes of getting more money in interest than they owe me. So they loan my money to John WeakCredit for him to buy a house. The loan is for $200k and the interest rate is 4%. So John WeakCredit pays the bank $8,000 a year in interest. This is how banks make money. John pays them $8,000/year they pay me $6,000/year and they keep $2,000 to pay the bills and hopefully make a profit. If the government comes and forces they bank to lower's John's interest rate to 2% then the bank is only getting $4,000 but they still owe me $6,000. Unless the government is going to let the bank go under then they have to fill that hole. The way that fill that hole is to (1) use the surplus...which we don't have or (2) borrow and print...which we are doing.

It can come in many forms but this is basically what is happening. The government is forcing banks to do uneconomic things and therefore they have to compensate them for that.

I fully understand that under normal circumstances people go broke and they need to swim their way out of it - but even then, there had been life preservers that could be thrown to them. But these aren't normal circumstances and more life preservers are needed. Jobs are being lost at a record clip. Banks, up until this point, have been refusing to work with these people to help them through a hard time.

The reasons the banks have not been willing to help is becuase they don't have the money too. Unlike the government they can't create money out of thin air. Without going into the muck of a bank's balance sheet I'll just say that every bank is insolvant right now and therefore cannot realistically do what you are asking. They are going to the government for capital to fill holes created when their assets (loans) become worth less than their liabilities. When they get money from the government they are using it to fill those holes. They can't use it to refi down loans...

America is still the land of opportunity. Part of that opportunity should always be the opportunity to right a wrong, fix a mistake, get a second chance.

Filing bankruptcy is your second chance. You messed up...you had to file and now you can start again. There is no rule that says that once you file for bankruptcy you can't come back. Filing erases most of your debts and gives you the breathing room to start again. It is going to be tough but it can be done...many people have done so. This belief that having to file and move back into your parents house or an apartment is tantamount to death is greatly exaggerated.

btw, the debt to China has been ongoing for years, this isn't something new because of this stimulus plan. And I agree with you that it is a dangerous situation for us to be in that predicament and maybe printing the money, devaluing the dollar for the short term until people get back to work is the thing to do (probably a combo plate of international laon and home print is best).

Agreed that the debt thing has been ongoing for way too long. However disagree that it is temporary. If it was true that the government could spend its way to prosperity then why doesn't every government just print trillions of dollars endlessly. The problem is that when you make liabilities (dollars) with no value-creating growth the damage isn't temporary. You just don't "snap out of it" one day. The burden gets bigger and at some point too big so the currency is permanatly devalued and the cost of capital permantaly goes up. It is anything but temporary. Just look at all these 3rd world countries that have been poor for decades on end and ask yourself why don't they ever eem to "snap out of it".

But you know what's worse? Letting 9 million Americans end up living in our streets, filing for medicaid & welfare bennies after their unemployment runs out and just idly sit by watching the country slip into third world status.

This is not a situation where we can say "oh well, tough luck homie". Not doing anything will effect you more than doing something in the long run. How much has your paycheck changed since the stim and homeowner's help have gone into place? Are you bringing home less money right now?

In general the themes in most of your arguments around this topic are (1) the numbers are so big that if we let the normal measures take their course they won't work and it will impact all of us negatively and (2) what we are doing will only have a temporary impact.

On the first part I just flat out know that you (or any of our lawmakers that use the same argument) have no proof to back that up because there is nothing out there like this. I don't know if you are right...I don't know if you are wrong and therefore using it to justify spending my hard earned money is horribly negligent. What I do know is that no country has every borrowed their way anywhere but to the poor house. I also know that not to long ago a country called Japan tried the same thing and guess what they got from it...a decade + of no growth, a stock market at a 25 year low. What Japan had that we don't is savings and that could make the impact of we are doing here much worse that what happened there. So in my opinion using strategies that we know have failed in the past to stop something we don't even know if it will happen in the future just isn't a smart way to go about it.

On the 2nd part I would just offer up Japan and Argentina and the former Soviet Union and Mexico as evidence that "temporary" is far from the truth.

-TS

[Nevada_Ballin]

We have debated most of this before so I will just address the new issues and quesitons:



Yes it is. Whenever you modify a bank's asset (a loan is an asset for the bank) without modifying the bank's corresponding liability against that loan you create a gap that has to be filled. The government will have to fill that gap by printing money. If they don't the bank will go under. Here is an example: (it is a tad bit convoluted).

I deposit $200k into a checking account with BofA. My checking account has an interest rate of 3%. So every year that I keep my money there BofA has to pay me $6,000. In order to be able to pay me BofA has to loan my money out to someone in hopes of getting more money in interest than they owe me. So they loan my money to John WeakCredit for him to buy a house. The loan is for $200k and the interest rate is 4%. So John WeakCredit pays the bank $8,000 a year in interest. This is how banks make money. John pays them $8,000/year they pay me $6,000/year and they keep $2,000 to pay the bills and hopefully make a profit. If the government comes and forces they bank to lower's John's interest rate to 2% then the bank is only getting $4,000 but they still owe me $6,000. Unless the government is going to let the bank go under then they have to fill that hole. The way that fill that hole is to (1) use the surplus...which we don't have or (2) borrow and print...which we are doing.

It can come in many forms but this is basically what is happening. The government is forcing banks to do uneconomic things and therefore they have to compensate them for that.



The reasons the banks have not been willing to help is becuase they don't have the money too. Unlike the government they can't create money out of thin air. Without going into the muck of a bank's balance sheet I'll just say that every bank is insolvant right now and therefore cannot realistically do what you are asking. They are going to the government for capital to fill holes created when their assets (loans) become worth less than their liabilities. When they get money from the government they are using it to fill those holes. They can't use it to refi down loans...



Filing bankruptcy is your second chance. You messed up...you had to file and now you can start again. There is no rule that says that once you file for bankruptcy you can't come back. Filing erases most of your debts and gives you the breathing room to start again. It is going to be tough but it can be done...many people have done so. This belief that having to file and move back into your parents house or an apartment is tantamount to death is greatly exaggerated.



Agreed that the debt thing has been ongoing for way too long. However disagree that it is temporary. If it was true that the government could spend its way to prosperity then why doesn't every government just print trillions of dollars endlessly. The problem is that when you make liabilities (dollars) with no value-creating growth the damage isn't temporary. You just don't "snap out of it" one day. The burden gets bigger and at some point too big so the currency is permanatly devalued and the cost of capital permantaly goes up. It is anything but temporary. Just look at all these 3rd world countries that have been poor for decades on end and ask yourself why don't they ever eem to "snap out of it".





In general the themes in most of your arguments around this topic are (1) the numbers are so big that if we let the normal measures take their course they won't work and it will impact all of us negatively and (2) what we are doing will only have a temporary impact.

On the first part I just flat out know that you (or any of our lawmakers that use the same argument) have no proof to back that up because there is nothing out there like this. I don't know if you are right...I don't know if you are wrong and therefore using it to justify spending my hard earned money is horribly negligent. What I do know is that no country has every borrowed their way anywhere but to the poor house. I also know that not to long ago a country called Japan tried the same thing and guess what they got from it...a decade + of no growth, a stock market at a 25 year low. What Japan had that we don't is savings and that could make the impact of we are doing here much worse that what happened there. So in my opinion using strategies that we know have failed in the past to stop something we don't even know if it will happen in the future just isn't a smart way to go about it.

On the 2nd part I would just offer up Japan and Argentina and the former Soviet Union and Mexico as evidence that "temporary" is far from the truth.

-TS

I love your posts man, it's always good stuff.... but I want you to check this out and then feel free to re-comment > http://www.treas.gov/initiatives/eesa/homeowner-affordability-plan/FactSheet.pdf

.

[SUPDOG]

I could care less about the few who did it wrong vs the many who did it right. So what if there are some who slip through the cracks. The more you post, the more I think you want to see the USA become a third-world nation with a strict division between the have's and the have not's.

9 million families living in shelters or in the streets is the America you want, correct? Screw your brother and kick him when he's down - right in the balls, yes? Drive by the people at the unemployment office who just lost their jobs and give them a big middle finger as you go to your job, for sure eh? Let the few who gamed the system determine the fate of the many who played it right, absolutely?

Heartless.


.


Heartless is stealing money from those, and giving it to others, in order to reward the other people for living foolishly. Not one person will win in the long run. Not one.

Your bleeding heart is a result of watching too many videos where the GOP is painted as cold and heartless and the Dems are the "saviours" of the poor. This is a fallacy.

YAWN.

What you NEVER want to recognize are the FACTS that those who are on welfare and take government handouts work the system, and become dependent upon it. You seem to be all about the handouts. It makes me wonder if you are not a recipeint of them yourself. Are you?

I remember you being so taken by the free cup of coffee you got for going out and voting for your Messiah. Free coffee for doing your public duty. Sad to me.

I threw out the card for my "free cup" away. Keep it. I will go out and work and earn my own cup of coffee.

That is the difference between you and me....between liberals and conservatives.

I am not entitled to handouts. Get off your backside and do something with your life.

How high do you think the percentage is, of those who "miraculously" find employment the week after their unemployment benefits run out? Never mind, you would rather "be happy" for them as they "get theirs" on MY DIME! THEY ARE ENTITLED!!!!!!!!!!!!!:eek:

You want the government to take care of those who refuse to take care of themselves. It is a disgusting mindset to have IMO.

America is being systematically destroyed by bigger and bigger government, and this excites people like you. "Let's fix" everyone's mistakes by taking other peoples HARD EARNED dollars and giving it to others. Yeah Nevada, you are the "caring one", i am sure, as long as you don't have to pay for it. Were gonna get you rich man, we're gonna get you"....

If you went out and bought a house you couldn't afford, then you should loose it. Plain and simple. Obama and his big government are simply prolonging the ineviteble, and wasting my money, and those who work hard in the process.

Your 9 million homeless nonsense sounds like it came straight out of Obama's mouth. I am sure they could rent an apartment for half of the price they are paying for their 4 bedroom 2.5 bath, and two car garage house. Please stop with the drama. It hurts your argument and makes you look silly. 9 million homeless? Yeah okay.

Give a man a fish, you feed him for a day. Teach him to fish, you feed him for his lifetime. Very simple.

Go take fishing lessons.