I don't think many people understand how this securitised mortgages work, and this lack of understanding is going to cost people a lot of money. Right now the new line we are hearing from washington is that, well if we buy these distressed mortgages the government can work with the homeowner, reduce the interest rate, make the terms of the loan longer and more favorable in other ways. BS, they can not. That's not how mortgages get securitised, they are split up into multiple packages. If you buy one package, it might have 10,000 people's morgtages in it, but, Wall Street thought they could lower risk by only putting a small bit of each mortgage into the package...so you have 10,000 mortgages, but only 5%, 10%, 2%, of that mortgage. You get the idea. If the gov't is the owner of 5% of the mortgage, they are not going to be able to do a whole lot. It's not just Wall Street that owns these, foreign governments, banks, individuals, pension funds...all kinds of people are involved in the ownership of each bit of debt. I do think that the people on Wall Street have been able to genuinely dupe a lot of members of congress who support this package, those who think they are going to "help the people". They wont be in a position to help anyone, no matter how good the intent is.
Wrong! The bailout will help several groups in no particular order 1) Banks who have the most toxic of crap on their books and have not stepped forward. 2) iBanks who will get to handle the transactions and will be contracted by the government to assist in this process. 3) Lobbyists: There is going to be a strong push from other industries to expand the asset list, or benefits of this plan, plus this plan is the start. Once its passed look for hundreds of side bills for now comparably tiny amounts. Now that the standard for a large amount is 700 billion whats another 100 - 200 billion in spending on pet causes. 4) Government regulators and technocrats. The power has shifted and they are now the masters of the universe. 5) The Socialists Party of America AKA Democratic Party, Once thought dead are now roaring back. Imagine the power and influence when Wall Street the pinnacle of American Capitalism has come crawling to them for assistance. Of Course this whole debacle has been masterfully engineered by them. But in the end they will control, the Presidency, and both houses. A massive accomplishment. Perfectly timed with a severe financial crisis so that there power grab will be complete. Barney Frank I salute you. Think the Carter years on Human Growth Hormones. 6) The American Taxpayer, all 50% of you. We get to assist in the rebuilding of our glorious motherland. As we toil, our hard won earnings will be distributed from each according to his gain to each according to his loss. We will sleep in peace at night knowing that our fearless leaders will steady us in troubled times and deliver us to the great utopia.
interesting observation. They were pressing to reformat the mortgages to take pressure off homeowners. But in this view, it was all smoke and mirrors or incredible naivete.