OK, I try to be informed and maybe I just missed it in the news, but here's what I'm wondering. Can someone put this in simple terms? Who will be helped by the bailout? (A.) A bank had to foreclose on Mr. Jones and now owns his house which is sitting empty. (B.) The bank ("Last National Bank") has a $100,000 loss on their books and will need a cash infusion to firm up their balance sheet. (C.) Mr. Smith has fallen behind on his payments and it getting warning letters. He could use a refinance on longer terms at lower payments to make his cash flow work out. (D.) Mr. Clark bought his home with a subprime loan and has always made his payment. He'd like to refinance to longer terms at lower payments too but the banks aren't lending anything right now without a big downpayment which he doesn't have. Which of these categories will the bailout help? I think the answer is "B". But are "C" and "D" being considered? SM
i don't know either, i am just guessing. if, as in "B", the bank has less pressure, so it has all the interest that the guys stay in and continue paying. at least i would guess so. that would mean that everybody in the change is supported.
I believe there's new legislation right now being pushed through Congress that will allow the banks to renegotiate more terms from what I've been reading. Seems like that would have been the logical step to take first, no? Oh well. Theoretically, with the gov buying all these loans that really aren't worthless, there's still homes backing it, there's potential to make money off the deal, but our government can over-bureaucratize anything, I'm sure we'll lose extra money hiring too many people to do it.
Should have included this option too: (E.) The Last National Bank sells its loans to another company, "Bear Sachs" and after Bear Sachs overpays for the bundled loans, they realize they overpaid and have a big debit on their books. I'm confident that "E." is a target of the bailout, but my question is more about "A" through "D". SM
It will help out all of them to various degrees. The banks now have more buyers for their distressed assets. For example that loss of 100k is now maybe only 50k because they can sell the problem to Bailout, inc. More liquidity means there is more flexibility all around.
i bet some smart trader at one of these banks that "changed their business model" is right now making a fortune. just imagine the insider talk going on. if you just know who is desperate enough ... it is such a weird situation. for example, AIG crashed from a AAA or AA to default and back to AAA within two days. there is no paper more secure than AIG. all of a sudden the market realises that and the stock triples. but AIG was AAA for two days and trading as if defaulted. now, for AIG we see it, but consider all the paper out there, which is related and still trading at default prices. whatever, not my game. what do i know.
Here's a website that gives some details of some of the bills: http://www.sourcewatch.org/index.php?title=Federal_housing_and_mortgage_legislation_(U.S.) I'm not finding anything on there that's already been passed that requires banks to renegotiate, but there have been some things proposed. I was also reading an article where they interviewed a credit counselor, and she was saying about 20% of her clients are successful renegotiating terms, compared to about 2% last year.
mortgage losses aren't limited to the fall in house prices -see http://www.google.ca/search?hl=en&q=subprime+houses+demolished&meta= the 'true' costs are yet to be calculated and isn't the greater problem the cds/cdo markets ? - the 'packaged mortgages'