HARM

Housing Solution: Crashing Home Prices or Cheaper Mortgages?

Peak-bubble housing prices must be protected at all costs! Remember, housing is unique, unlike any other commodity (where lower prices is generally viewed as a good thing for regular working people). And government is much better at setting the fair market value than Mr. Market, everyone knows that.

Sky-high housing costs at insane DTI levels --like we *still* have in CA-- encourages people to take on massive levels of debt they will never pay off, and to become captive to the banking and real estate industry. This "stimulates" the economy, when people must work 2-3 jobs apiece and spend every dime they have to service that hungry 'gator.

What do you people think would happen if people stopped getting mortgages at 10-11X HH incomes? Utter chaos, desolation... Max Max, that's what! Why... without monster mortgages people might begin... (*gasp*) SAVING again --the Horror! The absolute worst outcome for our economy is for housing along the bubble coasts to come down to a level truly affordable for working or middle-class family incomes. We must do *anything* to prevent this!

Please write your Congresscritter and demand that they man those ramparts!

MORE BAILOUT SCHEMES to protect high prices & executive bonuses!
MORE ARTIFICIALLY CHEAP MONEY from the Fed!
MORE COMPLICATED, DODGY LOANS to help prop up those prices!

Wall Street, 1792 - 2008?

User 270430 nailed it. There was no "we" in the so-called "prosperity" of the last 8 years, and frankly not much in the way of inflation-adjusted gains for the bottom 90% during the previous 20 either.

The only arguments the pro-bailout crowd has are the same tired lies and threats they've been using on the rest of us all along:

1. Financial blackmail: if you don't bail us out, we'll crash the whole economy

Reality: ha! Funny thing is, they've already been doing a good job of screwing the rest of us --even *without* the bailout. I think we can safely take our chances that the sun won't explode if we don't bail out rich a$$holes. If they're so damned sure they can *really* pull off a "Dr. Evil", I say let the f**kers SHOW us.

2. Bluff: if you don't bail us out, the system will grind to a halt. No one will be able to get a loan, access their bank accounts or use their ATM & credit cards.

Reality: Not bloody likely. Despite all the massive failures that have already taken place, I haven't heard of a single credible case of anyone *not* being able to access their FDIC or NCUA-insured money or use their ATM and credit cards. For that matter, plenty of people are still getting mortgages and loans --they're just requiring credit checks and reasonable down-payments now (*gasp* --the Horror!).

3. Conflating Wall Street with Main Street: We're all in this together ("Main Street may want to think twice. As Congress bickers, its country is burning")

Reality: Ummm... sorry pal, but the "country" isn't burning --YOUR hedge fund, IB and/or portfolio are what's "burning". The stock market is down and lots of underwater speculators are hurting, sure, but the rest of us worker-peon (who actually pay taxes) are hardly dying in the street. For that matter, I don't recall anyone ever asking ME if it was a good idea to start handing out NINJA loans to ever crook, liar and speculator on the planet.

There is no "WE" here --YOU gambled, and YOU lost. Tough shit --that's CAPITALISM (the system you *claim* to love so much)!

There is no "CRISIS" here -- reckless gamblers are losing money and want the rest of us to reimburse them. They made their bed, they should lie in it.

Senator Harry Reid: 'No One Knows What To Do'

"And there are plenty of libertarians calling for letting these companies fail. Try lewrockwell.com for starters and then add Ron Paul for good measure."

Amen to that --add me as well. The GSEs are a complete anathema to most Libertarians or objectivists. Perhaps Aalan is confusing "Libertarian" with "neo-con", or "big-government conservative" (aka, fascist).

That said, a number of libertarians and pro-free martketeers (myself included) do disagree with Libertarian "purists" who do not want *any* form of government regulation. I live in the real world and understand that some common-sense policing is necessary, given that men are not angels and that ideologically "pure" laissez-faire, anything-goes capitalism inevitably leads to the crap we're dealing with today.

Good regulation: anti-slavery, anti-child labor laws, anti-racketeering laws, trust-busting, patent law, FDIC insurance for retail depositors, unemployment insurance, anti-usury laws, anti-fraud laws.

Bad "regulation": socialism for the rich, too-big-to-fail bailouts, taxpayer backstops for quasi-private corporations (GSEs), lowering the FF rate to negative territory, tax subsidies for real estate speculators/flippers, price controls.

Roubini Attacks Bailout, But Misses Boat on Regulation

Mish,

Like many people, you seem to be confusing old-school "regulation" (trust-busting, policing fraud, coercion and market manipulation, setting reasonable limits to business practices, "level playing field" stuff) with corporate socialism, which is NO REGULATION on the way up, but massive BAILOUTS (for the rich) on the way down, as Roubini and others have correctly pointed out.

The current business model in the U.S. is not so much "regulated capitalism", or even Soviet-style socialism, it's naked corporate socialism, mixed in with kleptocracy. Some have argued it's really closer to national socialism (a.k.a. fascism), and many of those arguments are compelling.

Examples of real "regulation": Trust-busting, outlawing fraud, coercion, insider trading, bribery, pump-and-dump. Preventing companies from dumping toxic waste in waterways (tradegy of the commons), prohibiting slave/child labor, requiring employers to carry worker's comp/injury insurance, whistleblower protection laws, requiring full documentation of borrowers, setting reserve requirements for banks, FDIC insurance for ordinary depositors.

Examples of corporate socialism and kleptocracy: Bailouts for the rich and well connected, losses for everyone else. Fed Funds rate set below the prevailing rate of inflation, cash-for-trash programs ("free" money for banksters). Extreme laisseze-faire approach to asset/credit bubbles on the way up, tacit --or even explicit-- approval of large-scale fraud, deliberate non-enforcement of existing regulations, no limits to margin trading, taxpayer underwriting of losses, generous tax credits/deductions for speculators, quasi-"private" entities (GSEs) that use their monopoly powers to squeeze out the truly private market players.

Let's not throw the baby out with the bath water just yet.

Six Situations to Monitor for the Remainder of 2008

"Let's not forget that Bush didn't have a choice. Nothing is worse for our economy than letting terrorists mow us down on our own soil. Sounds like you'd rather take your chances with that. Typical leftist Dem philosophy."

That's tellin 'em, SCC! Those were out only two choices: (a) "letting terrorists mow us down on our own soil", or (b) invade Iraq and give massive tax cuts to the richest 2%.

No false dichotomy there... no, sir... Yup, all 19 of those 9-11 hijackers were *definitely* Iraqis, you betcha! Well... er, they were "trained" in Iraq. Or, trained in a country that sounds something like "Iraq". And the Iraqis had, y'know, "terrorism-related program activities" n'stuff...

Yeah, that's the ticket!

Fannie, Freddie Default Swaps Big Non-Event

American system of "free-enterprise" capitalism:

"All investors are equal, but some investors are more equal than others".

The Fannie/Freddie Nationalization: Conservatives Acting Like Socialists

"In America, the only respectable form of socialism is socialism for the rich."
--John Kenneth Galbraith

Rescuing Frannie

Still shilling for the pro-Bailout crowd, eh, Felix? Got lots of GSE preffered stock, or are you holding PIMCO paper?

"In times like these, bailouts are often, sadly, necessary."

Says who? In a *real* capitalist econoomy, badly run companies would be allowed to fail, shareholders would be allowed lose money, and the rest of the world could move on. It's called "creative destruction" --you know, the section they don't teach at B-school anymore (along with that quaint relic of yesteryear, "risk").

If Phony & Fraudie were to cease to exist tomorrow (in my dreams!), private-sector mortgage lending would continue to occur --just at a much more cautious and sane level. NINJAs, option-ARMs and $0-dows would probably cease to exist, prices would come down to levels in line with actual incomes (*gasp* --the horror!), and mortgage rates would reflect actual risk --all a damned GOOD thing from my perspective.

"...and the credit crisis will continue: this is no panacea. But at least the last vestige of a possibility of a trillion-dollar agency debt implosion will have been taken off the table."

God forbid Phony & Fraudie implode! Without them --and their now *explicit* taxpayer backstop-- lending would cease to exist (even though it amazingly existed *before* GSEs were invented), the world would cease to revolve around the sun, and we'd all die poor, unloved and lonely!

Why not just come right out and admit the truth, Felix?:

"I, Felix Salmon, am all in favor of making other people pay for the reckless financial decisions of myself and my well connected Wall Street buddies. I love the idea of privatized profits and socialized losses."

A little blunt honesty would be a lot more refreshing than the usual "the world will end if reckless lenders & derivative peddlers go out of business" FUD crap.

Freddie, Fannie: Debt-Ridden, But Their Bonds Are Worth Holding

Links didn't go thru for some reason --here ya' go:

www.housingwire.com/wp...
www.housingwire.com/20...

Freddie, Fannie: Debt-Ridden, But Their Bonds Are Worth Holding

Uh-huh... Yup, those GSE bonds are a *sure bet*. What with all the bad news "priced in" and all. Yup... no need to mention that massive option-ARM reset tsunami that's about to hit shore from 2009-2012. No sirree...

Credit-Suisse reset chart 2007-2015

Fitch Warns on Option-ARM defaults

Troubling Aspects to the GSE Bailout Bill

"Troubling Aspects"

Are you trying to use gross-understatement-a... here? The very concept of bailing out these supposedly "private" institutions (ha!), which have a proven track record of systemic dishonesty and fraud, is nuts. Of course Con-gress wants to give the Treasury and Fed a blank check to bail them out. The GSEs, Wall Street and other assorted banksters OWN Con-gress. Why is this the least bit surprising to amyone paying attention?

Perhaps our great-grandkids can look forward to the day when reckless institutions that commit wholesale fraud and encourage insane levels of speculation with O.P.M. actually have to reap the consequences of their *own* actions. Y'know, after the revolution comes 'n all. That's what they used to call "free market capitalism". For those who are unfamiliar with such a thing (it hasn't existed in this country to any degree for a good 50+ years), "free market capitalism" is an economic system where people risk their *own money* on productive enterprises that have some realistic chance of paying off. But here in Uh-merika, we have a different economic system: It's called "Privatize profits, Socialize losses". A.k.a., "socialism for the rich".