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Old 10-01-2008, 11:20 PM   #81
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Indeed. And, while I applaud the goals of the newly-enhanced GI Bill, this is going to accelerate this. Guaranteeing tuition payment at the most expensive public university in the student's state for a large number of students is an open invitation to higher costs.
Yes, I'm afraid I agree. It's pretty generous and hard to resist taking advantage of. Heck, I've been thinking of getting another degree in ER just because it's there. And there's nothing stopping me. And I could pull in that housing stipend as gravy.

Higher ed is a laudable thing and you could argue that anybody furthering their education is valuable to society. But when we're at a national debt of 10 trillion and rising, something's gotta give.
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Old 10-01-2008, 11:21 PM   #82
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Indeed. And, while I applaud the goals of the newly-enhanced GI Bill, this is going to accelerate this. Guaranteeing tuition payment at the most expensive public university in the student's state for a large number of students is an open invitation to higher costs.
The number of people who actually use the new GI Bill won't be significant enough to turn away the far greater number of people by raising costs sky high, would be my thought. The benefits are great now ($250 per credit hour for so many $1,000s a years), even while in service to get your education and so few people use them.

But hey, I'm sure colleges get a chunk of bailout fund somewhere too!
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Old 10-01-2008, 11:37 PM   #83
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The benefits are great now ($250 per credit hour for so many $1,000s a years), even while in service to get your education and so few people use them.
I don't know what the stats are but some people (lots? I don't know) didn't sign up for the Mont GI bill because they didn't want to give up 12K out of their measly first year pay. Now all those folks are back in the program with the new bill. That may be significant, I'm not sure.

(Oops, looks like the high jack is complete Sorry!)
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Old 10-01-2008, 11:44 PM   #84
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$1,200 not $12k. $100 a month for 12 months with an optional $600 kicker for something like $5,400 extra, possibly more.
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Old 10-02-2008, 12:44 AM   #85
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An exclusive conversation with Warren Buffett - Charlie Rose

just finished listening to warren buffett on charlie rose show. i like both those men a lot. warren is so easy to understand when he explains finance which is normally tough for me to wrap my non-financial brain around. he's not a snob, he doesn't talk down to people, he's matter of fact, he speaks simply and clearly and practically and with humor.

here are some of his points (apologies if i screw this up):

he considers recent activities in the economy to be an "economic pearl harbor", the likes of which he has never seen nor imagined. depression is still a possible outcome.

without the bailout this economy will fall off a cliff.

even with the bailout the economy will still get worse for a while. the most important aspects of the bailout are a sufficiently large amount of dollars and flexibility. all purchases (investing) should be done at current (time of purchase) market price. oversight is important to make sure investments are purchased at market prices, not so important as to where in the market the investment is purchased (which district, which bank, etc.)

only the federal treasury is large enough to leverage what is being deleveraged because of the low borrowing costs of the government and because it can hold onto these investments for long enough so that their lost value might regain.

the recession is going to get worse but the system will work over time. unemployment will go up but not to depression levels given the bailout works. given all the right-enough steps, he thinks we could come out of this in six months to two years optimistically with five years as a worse case scenerio, though there seemed a perceptable nod, i don't think it was my imagination, that such a worse case scenerio was simply the worse case he'd care to consider. he says in 10 years we'll be in much better shape than we are in today and in 20 years we'll be in much better shape than we'll be in 10 years. he has huge faith in this economy.

but even after coming out of this mess, "lousy earnings" are to be expected and higher inflation will be a consequence into the future. he says the burden for this fix should not have to come from middle class america but "from guys like me." "i am paying the lowest tax rate than i've ever paid in my life," he said.

he says the biggest &, if i understood it right, the only fix to this is confidence. without confidence, this economy does not work.

as far as i can gather, apparently, the bailout is a downpayment on that.
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Old 10-02-2008, 01:08 AM   #86
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.

So, the government is largely responsible for the excess in cheap money available to buy homes, and the resultant artificial run-up in home prices. Pumping yet more government money in will not solve the problem--it just kicks it down the road. What will solve the problem is government getting the h*ll out of the mortgage business and letting home prices and mortgage rates naturally reach the market-based rates. When interest rates are higher, more people will make money available to lend. This problem will fix itself without our 700 billion dollars. There may be a case for some legislation, but dumping a truckload of money on this cesspool is not going to make it smell better.

Sam I mostly agree with your assessment of how we got to the problem. I disagree with your approach of how to get out of it. For the simple reason they government has been heavily involved in the mortgage business since 1932 in general and Fannie since 1938. From 1938 to 1968 Fannie was purely a Government institution form 1968 to 2008 it was a weird psuedo private corporation and now it is once again owned by the taxpayers.

Now before we wish for the good old we big government was out of the mortgage business lets go back to the 1930s. Back then if you want mortgage first of all you had to have at least 1/2 the money for house before a bank would loan you the rest. The bank charged a high real interest rate. The kicker was that mortgages were callable. In fact what happen when Joe's lumber yard laid shut down the bank would start calling mortgage for all of the laid of workers. Now if the bankers didn't do this they risked a bank run and insolvency. Listen to Jimmy Stewart's speech trying to stop the bank run in the Wonderful Life next Xmas. So when people wish for a pure market approach I think back to the great depression and say no thanks. For all of its many flaws, it is worth noting that mortgage securitization the Fannie Mae pioneered is largely responsible for 2/3 of American owning (a portion) of their homes.

Moving from the philosphical to the practical. The problem with letting housing price adjust to the true level with government money involved in the system if a financial one is this. We taxpayers are on the hook for 6 trillion worth of Fannie Mae and Freddie Mac issued mortgages. While you and all of the other good conservatives can scream loudly that there shouldn't have been a guarrantee that the Uncle Sam would pay back these mortgages, there has always been an implicit backing and now their is explicit backing of all of Fannie and Freddie's debt. If housing prices drop a further 10-30% what happens to the default levels of the millions of good loans? I think they skyrocket. I can easily see a case that not putting another 700 billion into the system causes us to have to pay another 500 billion to a $1 trillion in defaults on Fannie and Freddie issued MBS.
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Old 10-02-2008, 02:10 AM   #87
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Just to show that I'm not completely out to lunch on my view that this is a good deal..

Warren Buffett said today on CNBC that he'd take 1% of the deal, if he could get the same terms as the treasury. I.e. he would put $7 billion of his own cash into the $700 billion.

Now it is interested that he pointed out the same two things I observed first he'd want the same cost of capital that Treasury is getting 3.85% and second he'd want to be buying the assets and the current prices. If those two conditions were being met he said he it would be hard not to make money.
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Old 10-02-2008, 06:39 AM   #88
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....
Now before we wish for the good old we big government was out of the mortgage business lets go back to the 1930s. .....
While I respect your financial acumen, you are assuming that things would go back to just like the 30's should the govt get mostly out of the mortgage business. I don't think one can necessarily make that assumption - many other factors in play in the 30's & today. The picture you paint seems more scare tactic than anything.

It could just as well look differently after everything shakes out - not like the 1930's or the 1990's - perhaps 25% down (not unreasonable) to get a home loan, good credit, be employable, 8% interest, mostly 20 year fixed loans.

We might find many people would be unable to buy homes till they are 30 yrs old - & that might be a good thing for them.

I have relatives in Germany who tell me it takes quite a bit more personal financial resources to get a house there than here in the US. People generally rent longer in their youth. It doesn't look like the 1930's there either.

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... The problem with letting housing price adjust to the true level with government money involved in the system if a financial one is this. .....
So the answer is for the government to keep houses & their rate of appreciation artificially high? Might solve the immediate problem with the banks, but how's that good for the economy (& the country) in the long term?

Actually, I'm willing to take the hit on my house if we could switch to a rational housing market - but I wasn't crazy enough to spend $250+ a square foot when I bought it or to live in a place where that was going on.

It's those folks & their financial enablers who want the government to continue this artificial housing market (probably so they can bail as soon as prices recover enough to sell their houses now that they've learned their lesson & leave some other unsuspecting holding the bag.)
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Old 10-02-2008, 07:09 AM   #89
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Just to set the record a bit straight on Fannie. I believe the Federal National Mortgage Association was created in 1938 like clifp mentioned. And it has been in the secondary mortgage business since then. It split in 1968 into Ginnie Mae (which you don't hear much about), which is still completely governmental and its an agency within HUD, and Fannie Mae, which is the GSE -- until the "bailout" of Fannie, it was considered a private enterprise with a public purpose but holding the "implicit" backing of the United States.

Why don't we hear much about Ginnie? It is actually in the subprime loan business, by insuring mortgage-backed securities that consist of pools of loans made under various federal housing programs to low-income borrowers. Welcome to Ginnie Mae.

People can blame the Government's policies on trying to expand homeownership to low-income people (and minorities get thrown into this mix) as the root cause for the current problem, but it's not this policy that got us into trouble. It's bad loan underwriting, poor consumer protection, and essentially a ponzi scheme of passing on risk up the food chain of housing finance.
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Old 10-02-2008, 08:47 AM   #90
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If you are running a failing business, a couple of possible options are:
(1) find someone willing to loan you money, pretend that nothing is wrong until you burn through your loan, then go back and ask for more money.
(2) make fundamental changes to how you do business, putting you on the path to future profitability. You might need a loan to keep you alive while you reorganize, but this is of secondary importance.

(1) is quick and easy, as long as you can find a wealthy sucker to loan you the money.
(2) is long and difficult. It takes thought, analysis, discussion, and debate.

Which option is Congress choosing?

(Damn...I just can't get this rescue/bailout/sellout disaster out of my mind...)
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Old 10-02-2008, 10:06 AM   #91
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I haven't kept up on everything on this, but this little excerpt really got me angry:

U.S. Senate moving toward alternative energy credits - MarketWatch

They are having trouble passing the bill. The bill should be about the financial situation. Yet, they try to cram these other things into it.
Alternate energy bills should be a separate issue (one that I have strong opinions on).
Congress - DO YOUR JOB!
-ERD50
Yep. If congresspeople think the bailout is a good deal, they should vote for it. If they don't, they should vote against it.

Instead, they've added 338 pages of miscellaneaous junk in order to pick up votes from people who don't care about the common good - just about satisfying some lobbyists.

I found the bill here: http://www2.nationalreview.com/dest/...naterescue.pdf

Here's my summary:

First 113 pages - the stuff you'd expect in the bailout bill.
Next 148 pages - 41 sections funding energy conservation/development ideas.
Next 49 pages -- 44 sections on "tax relief"
Next 34 pages -- Mental health equity mandate (maybe a big deal to health insurers?)
Next 50 pages -- Rural schools and abandoned mines
Next 48 pages -- Disaster Relief
Last 9 pages --- Deferred Compensation

If you want to get a feel for the garbage without reading all 338 pages, skip to the table of contents on pp. 114-115, and then on 261-263. You'll find, for example:

Quote:
Sec. 503. Exemption from excise tax for certain wooden arrows designed for use by children.
Sec. 504. Income averaging for amounts received in connection with the Exxon

Valdez litigation.

Sec. 505. Certain farming business machinery and equipment treated as 5-year
property.
Sec. 506. Modification of penalty on understatement of taxpayer’s liability by
tax return preparer.
Subtitle B—Paul Wellstone and Pete Domenici Mental Health Parity and...Addiction Equity Act of 2008






I am not making this up.
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Old 10-02-2008, 10:14 AM   #92
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An exclusive conversation with Warren Buffett - Charlie Rose

just finished listening to warren buffett on charlie rose show. i like both those men a lot. warren is so easy to understand when he explains finance which is normally tough for me to wrap my non-financial brain around. he's not a snob, he doesn't talk down to people, he's matter of fact, he speaks simply and clearly and practically and with humor.
I wish I had seen this. I may get a TIVO just to record this show, as it comes on late.

I had never seen Chrlie Rose until a few weeks back when he interviewed Ace Greenberg two nights running. What an excellent interviewer! Then I saw his interview with Bob Woodward on Woodward's new book about Bush. Rose asks good questions, he knows what he is talking about, he is relaxed, and he takes his time and takes a back seat to his guests.

A real champ!

Ha
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Old 10-02-2008, 11:38 AM   #93
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$1,200 not $12k. $100 a month for 12 months with an optional $600 kicker for something like $5,400 extra, possibly more.
Oops, sorry. Typo. Thanks for the correction!
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Old 10-02-2008, 11:45 AM   #94
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I wish I had seen this. I may get a TIVO just to record this show, as it comes on late.

I had never seen Charlie Rose until a few weeks back when he interviewed Ace Greenberg two nights running. What an excellent interviewer! Then I saw his interview with Bob Woodward on Woodward's new book about Bush. Rose asks good questions, he knows what he is talking about, he is relaxed, and he takes his time and takes a back seat to his guests.

A real champ!

Ha
I don't know of a better interviewer on tv than Charlie Rose, and I don't always agree with him. He listens, he follows up, and I've never seen him scream at anyone. A civilized conversation whereby the guest gets to actually make his/her points. I record him each weekly evening, as he's on at 2 -3 a.m.
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Old 10-02-2008, 11:47 AM   #95
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Yep. If congresspeople think the bailout is a good deal, they should vote for it. If they don't, they should vote against it.

Instead, they've added 338 pages of miscellaneaous junk in order to pick up votes from people who don't care about the common good - just about satisfying some lobbyists.

I found the bill here: http://www2.nationalreview.com/dest/...naterescue.pdf

Here's my summary:

First 113 pages - the stuff you'd expect in the bailout bill.
Next 148 pages - 41 sections funding energy conservation/development ideas.
Next 49 pages -- 44 sections on "tax relief"
Next 34 pages -- Mental health equity mandate (maybe a big deal to health insurers?)
Next 50 pages -- Rural schools and abandoned mines
Next 48 pages -- Disaster Relief
Last 9 pages --- Deferred Compensation

If you want to get a feel for the garbage without reading all 338 pages, skip to the table of contents on pp. 114-115, and then on 261-263. You'll find, for example:



I am not making this up.
Yep, they were real busy tacking on all this stuff. I guess they pulled all the stuff off the shelf that they've been waiting to tack onto the next "must pass" bill. Wow.
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Old 10-02-2008, 11:53 AM   #96
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I wish I had seen this. I may get a TIVO just to record this show, as it comes on late.
i've been watching charlie for a long time. such a gentleman. i really really like him. anyway, he will most likely have the interview in full on his web site within a few days so check there again in a day or two for it.
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Old 10-02-2008, 12:43 PM   #97
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There was a small blurb in this morning's paper which made mention to a few of those earmarks which had been added to the Bailout Plan. Lotsa pork got added. I am appalled! I am ready to vote for any new Senator/House Rep incumbents wanting to enter office in the future...to flush the old ones out. Somehow the proposal went from around 700 billion to 810 billion. That's no way to be fiscally responsible.
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Old 10-02-2008, 03:22 PM   #98
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Here's my summary:

First 113 pages - the stuff you'd expect in the bailout bill.
Next 148 pages - 41 sections funding energy conservation/development ideas.
Next 49 pages -- 44 sections on "tax relief"
Next 34 pages -- Mental health equity mandate (maybe a big deal to health insurers?)
Next 50 pages -- Rural schools and abandoned mines
Next 48 pages -- Disaster Relief
Last 9 pages --- Deferred Compensation

If you want to get a feel for the garbage without reading all 338 pages, skip to the table of contents on pp. 114-115, and then on 261-263. You'll find, for example:

Not want to lose my breakfast, I haven't read the bill. I am almost positive Monday's bill was much better (certainly shorter.) Krauthamer (sp) said on Britt Hume's show that one of the provisions sponsored by the 2 Senators from Oregon was to extend a tax credit for makers of wooden arrows for children. Yes the system is melting down and toy arrow markers are getting pork.

The thing I was looking forward about the President McCain term is where he singles out Congressman who add pork to bills and makes the famous. I can see him signing the bill and then spending the next 1 hour at press conference reading the names of the Congressman and their pet programs.
Thank you Senators Gordon Smith (R-OR), and Ron Wyden (D-OR)
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Old 10-02-2008, 03:30 PM   #99
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Heres the good news in all of this.

The politicians arent scared enough about whats going on to forget to stuff their pork in the bailout bill. That tells me that things arent really that bad.

They expect to receive their pork, they expect things to continue on more or less as before, they expect to keep their jobs and pork production in the near to moderate future, etc.

So, nothing to worry about. Back on your heads.
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Old 10-02-2008, 03:41 PM   #100
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Heres the good news in all of this.

The politicians arent scared enough about whats going on to forget to stuff their pork in the bailout bill.
Alternate view: They are clueless as to what's going on and aren't smart enough to do anything other than business as usual - pork stuffing. (Note that I said nothing about piglets or sodomy, so don't go there.)
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