I have no idea if it would work. I haven't done the research that you have. But I agree that 'bottom-up' plan would work better. Like the 'stimulus', but applied to mortgages. A simple plan - grant three months payments to any primary homeowner who owes a certain amount. (More than 80% left on the mortgage, or it takes more than 25% of their income to make a payment - some simple calculation.) The homeowner files for the program, and the fed makes the payment directly to the note-holder. This gives the banks a big boost, and the money never passes through the taxpayers hands. Those people would then be free to spend their next three months paychecks as they please, thus stimulating the rest of the economy
( ... )
Sorry - but I don't like the three months of free living approach. It doesn't really solve the problem.
Maybe if we could persuade folks to save the three months of payments so that they could afford to cover the shortfall in the next 36 payments (or whatever) then this might work.
However, as you pointed out (and want to encourage it) folks would spend it. This may stimulate the economy. But then, in 3 months time we'd be back to having folks defaulting on the mortgages they can't afford to pay. The mortgages would still be risky - the banks who over extended themselves would still fail.
Is it just the type of loan that's the issue? (I don't think so)
anonymous
October 3 2008, 12:41:07 UTC
What's your basis for this statement: "But I think that's a very small number compared to what Wall Street expects the default rate to be on the adjustable rate mortgages
( ... )
Re: Is it just the type of loan that's the issue? (I don't think so)hotwire7October 3 2008, 14:03:48 UTC
There is a universe of home-owners who got these bad mortgages for a variety of reasons. Some of them are indeed very over-extended. No doubt there are a few who are beyond helping. But as long as we keep that number down to the "ordinary" expected number of defaults all is well
( ... )
Re: Is it just the type of loan that's the issue? (I don't think so)elizillaOctober 3 2008, 14:52:36 UTC
"I'm not talking about McMansions either. However, I am talking about folks who are in $200K or $300K houses that should be in houses costing half as much. Now that the real estate market is cooling (or is stone cold) there are houses that those folks can afford - but they can't get out of their upside down loans. Perhaps an alternative plan for these folks would be government backed bridging loans to allow folks to downscale their houses? Or for the government to buy out that mortgage and sell the house on the open market
( ... )
The larger and very depressing issuehotwire7October 3 2008, 14:10:58 UTC
On the other hand, the banks and Wall Street have lots of different kinds of bad paper. The mortgage backed securities are only the tip of the iceberg.
My modest proposal only addresses the mortgage issue. But then, the $700B bailout is only big enough to cover the mortgage issue anyway.
Wall Street will be back soon asking for another bailout, and another. And they are going to get most of them, I bet. We'll socialize the downside of the excesses of the last 10+ years, without participating in the upside profits.
Don't worry, we'll have plenty of chances to give billions to the bankers. Let's give some to the homeowners first, while we can.
I don't think I want the job. I was discussing with friends all the jobs I don't want -- CEO of a large company, President of USA, etc. But actually after the above discussion I almost think it would be fun to get Paulson's job. But that just shows that I don't know enough to be properly apprehensive.
I'm just listening to my friends and reading and thinking. Paulson is doing the same, except too many of his friends are crooks and/or delusional. If I'd been in the middle of the forest for as long as he has, I'd probably be lost too.
Comments 16
Reply
Maybe if we could persuade folks to save the three months of payments so that they could afford to cover the shortfall in the next 36 payments (or whatever) then this might work.
However, as you pointed out (and want to encourage it) folks would spend it. This may stimulate the economy. But then, in 3 months time we'd be back to having folks defaulting on the mortgages they can't afford to pay. The mortgages would still be risky - the banks who over extended themselves would still fail.
John H.
Reply
Reply
Reply
Reply
Reply
My modest proposal only addresses the mortgage issue. But then, the $700B bailout is only big enough to cover the mortgage issue anyway.
Wall Street will be back soon asking for another bailout, and another. And they are going to get most of them, I bet. We'll socialize the downside of the excesses of the last 10+ years, without participating in the upside profits.
Don't worry, we'll have plenty of chances to give billions to the bankers. Let's give some to the homeowners first, while we can.
Reply
Reply
This one is far better: http://hotwire7.livejournal.com/17846.html?thread=100022#t100022
John H.
Reply
Reply
I'm just listening to my friends and reading and thinking. Paulson is doing the same, except too many of his friends are crooks and/or delusional. If I'd been in the middle of the forest for as long as he has, I'd probably be lost too.
Reply
Leave a comment