I was watching one of the "pretty lady" financial pundits on CNN howling that the American people don’t get it. She exclaimed that if something isn’t done, the market is going down. I was thinking she’s confused by her proximity to the market. The American people aren’t so worried about that. They’re in shock that the "Market" is so vulnerable. They don’t trust it. And I think most people see the "Bailout" as giving money to the Banks to keep them going. Sort of like this:
That not how I understand the plan. What I think they’re proposing is that the U.S. Government is going on the market and buying these mortgages by negotiating a price – so much on the dollar. At that point, the U.S. Government owns the property at a reduced value, and renegotiates the loan to see if terms can be adjusted to allow the home-owner to pay off the loan at some renegotiated value/rate. If not, foreclosure is only used a last ditch effort to retrieve some revenue from the property. While there are losses at each step, it’s not a "wash."
If my understanding is correct, I think it’s the best plan, given the circumstances, because it puts the government into the regulatory business again. And it says to Banks, "No more bad loans!" It would also be important to shut down the commodity trading of loans and loan insurance on whatever market exists for them. Credit needs to be returned to the status of a way of paying for things over time – not a way to never pay for them or make money gambling. So we’re not trying to fix the market directly. We’re trying to fix the piece of the market that has gone off the deep end. There’s going to be a loss, but with the Bailout, it’s a controlled loss. The truth is that the loss has already happened in that the value wasn’t really there in the first place. If we let nature take it’s course, the loss is going to be dictated by investor panic, businessmen’s greed, and these pundits currently screaming at each other on CNN. We’ve had more than enough of all of that already. Not a pretty scenario…
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