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Old 09-28-2008, 08:16 PM   #41
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the Treasury can always sell the warrants to a private firm

without the warrants and just the debt purchases and no mortgage modifications i'm guessing around 30% losses on the $700,000,000,000
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Old 09-28-2008, 08:33 PM   #42
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OK, we just bought a ton of crap from these guys (replaced their trash with cash), and now we get to exercise warrants (pay more money) to take an ownership stake in the company?
You'd only exercise the warrants when they were in the money. So yeah, if the government can buy equity at $10 that is currently trading at $20 why wouldn't they "spend the money" to do so?

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So, are we taxpayers really going to get our money back eventually, as the pro-bailout camp suggests? If it were my $700,000,000,000, I'd kiss it goodbye and be surprised if I ever see it again.
So your assumption is that the securities the treasury is buying are worth $0?
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Old 09-28-2008, 08:39 PM   #43
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So your assumption is that the securities the treasury is buying are worth $0?
If so, it is silly. The problem is that nobody really knows what they are worth in many cases. So it will be interesting to see how deals are struck. If I ran the program and wanted to help the banks, I would buy whole portfolios at a time so that nobody could pin me down on what an individual piece of paper was priced at.
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Old 09-28-2008, 09:01 PM   #44
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The government will have to reduce the principal amounts by a lot in order to placate homeowners in Calif who are seeing the values tank. As I stated above, it won't matter to homeowners if they get refinanced into a 40 year mortgage if their house is now worth 30% less and they see that they'll never be able to sell. Who'd want to be caught in a debt trap like that? Not me! I'd walk away. Wouldn't you?
My daughter and son-in-law bought a two-bedroom condo in San Diego three years ago at about the height of the boom using subprime financing. They refinanced about a year ago into a fixed rate 30 year mortgage.

The condos in this particular project are now worth approximately $80,000 less than what they were selling for in 2005. Many of their neighbors have been foreclosed upon or are near foreclosure as many of the mortgages are upside down.

My daughter and her husband have chosen to take the high road. They plan to meet their moral obligation to the lender and repay the loan. Both of them have said that they feel a sense of responsibility to pay back what they have borrowed even though it may be years before they have any equity in their home.

I am sure they are not the only honest people left in California. There must be others who are not looking for a free handout.
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Old 09-28-2008, 09:15 PM   #45
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I am completely against the bailout in any form.

Yes, I realize that doing nothing will make things worse...in the short term. If we let things get bad, maybe we will learn our lesson and in the long run we'll become better savers and live within our means.

I say let the market work.
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Old 09-28-2008, 09:18 PM   #46
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My daughter and her husband have chosen to take the high road. They plan to meet their moral obligation to the lender and repay the loan. Both of them have said that they feel a sense of responsibility to pay back what they have borrowed even though it may be years before they have any equity in their home.
Bully for them. No doubt Jeebus will welcome them into the Summerlands with open arms and fried chicken when they expire. But they apparently also have the ability to make the payments. Not everyone does, unfortunately, and in a worsening recession many more people lose the ability to keep up with the mortgage.
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Old 09-28-2008, 09:36 PM   #47
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I am completely against the bailout in any form.

Yes, I realize that doing nothing will make things worse...in the short term. If we let things get bad, maybe we will learn our lesson and in the long run we'll become better savers and live within our means.

I say let the market work.
Thanks so much Finance Dave for the light of reason here. This whole situation makes me so angry. More than I have been in quite a long time. To be honest.... I think a lot of the reason the bailout is happening at all is due to the corrosive effect that the media (i.e. the duming down of america) has had on the general population. I can clearly see that most people in almost every situation, want simple answers to complex questions. Why am I too fat? Don't bother working out... take this pill or get liposuction. Why is the Iraq war going on for so long? Easy.. the pres. is an idiot! Why did millions of americans take out a loan they could not afford? Easy... the govt will save me because I was short-sighted!
For some people.... only consequences to their actions will bring about change. Some must actually touch that metaphorical "hot stove" before they believe they can be burned by it. And this is not a creulty.... it is in fact a mercy.
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Old 09-28-2008, 09:39 PM   #48
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If my reading of the document is correct, almost all of the details are left up to Paulson, with oversight from a small committee made up of a few heads of current agencies.

He gets do decide who gets to sell assets. He gets to negotiate the prices, whether warrants are required, whether to buy assets directly or issue insurance, etc.

He has to create a report detailing the criteria he is going to use fairly quickly, but he seems to have free rein to determine those criteria.

Am I reading this correctly?

I think Paulson has just become the most powerful man in the world.

The outcome of this bill is going to depend almost entirely on the decisions Paulson makes in the future.


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Another reason I'm glad I read the document: I get a more balanced view than the propaganda piece put out by Pelosi. I just don't see how the Treasury can possibly satisfy everyone who will qualify for assistance under the EESA. So, who gets to feed at the honey pot, and who gets excluded?

I found the warrant issuance part very interesting. Any company who receives bailout money has to issue stock warrants to the gov't if they are publicly traded. I scratched my head over this: OK, we just bought a ton of crap from these guys (replaced their trash with cash), and now we get to exercise warrants (pay more money) to take an ownership stake in the company? When would a Treasury official ever want to do this? This smacks too much of socialism, so I wonder if this option will ever really be used. It is great window dressing, though - you can claim that taxpayers can theoretically (if rarely actually) participate in the success of the companies we taxpayers bail out.

So, are we taxpayers really going to get our money back eventually, as the pro-bailout camp suggests? If it were my $700,000,000,000, I'd kiss it goodbye and be surprised if I ever see it again.
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Old 09-28-2008, 09:55 PM   #49
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Old 09-28-2008, 09:56 PM   #50
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OK, we just bought a ton of crap from these guys (replaced their trash with cash), and now we get to exercise warrants (pay more money) to take an ownership stake in the company? When would a Treasury official ever want to do this? This smacks too much of socialism, so I wonder if this option will ever really be used. It is great window dressing, though - you can claim that taxpayers can theoretically (if rarely actually) participate in the success of the companies we taxpayers bail out.

So, are we taxpayers really going to get our money back eventually, as the pro-bailout camp suggests? If it were my $700,000,000,000, I'd kiss it goodbye and be surprised if I ever see it again.
Hmmmm, let's examine these assertions. Every major "rescue" plan seems to have the Government taking an equity piece in the entities rescued. Way back in the Depression the Government took equity pieces in businesses it rescued with the old Reconstruction Finance Corporation. (Indeed, didn't the grand poobah of American governmental finance, the esteem Alexander Hamilton, launch the First Bank of the United States, the first central bank of the U.S. with an equity piece. Didn't we also have equity pieces in the Federal Reserve System, the Federal Reserve Banks and the Federal Home Loan Banks?) Maybe that's a bit too old. We took an equity piece with the first too big, too fail, bank, Continental Illinois National Bank in 1984 and later had warrants with Chrysler when we guaranteed loans for its reconstruction and recapitalization.

Socialism didn't start until two gentlemen wrote about an economic system and labor theory in the nineteenth century. Yale Economist Schiller in today's Washington Post writes that the word "capitalism" was coined in that century as well, as the antithesis to socialism and that American Government, beginning with George Washington, never embraced an "unfettered free market." The "American system" always called for major Government involvement. Schiller writes that "bailouts" for extraordinary financial events (i.e. a crisis) have been the American norm. Everybody Calm Down. A Government Hand In the Economy Is as Old as the Republic. - washingtonpost.com

I wrote in another thread that if you lay me 1.5 odds, I'd take the bet that the Government will make money. It made money in the Depression when similar equity pieces took place; made money with Chrysler; and the only blot is the RTC experience, when the Government liquidated assets as expeditiously as it got them and never held them for gain.

Wanna bet?
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Old 09-28-2008, 10:18 PM   #51
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Andrew Jackson in 1832 to a delegation of bankers discussing the Bank Renewal bill:

"Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves."
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Old 09-28-2008, 10:29 PM   #52
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Andrew Jackson in 1832 to a delegation of bankers discussing the Bank Renewal bill:

"Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves."
I don't blame Jackson for his populist sentiments back then. The Second Bank of the US was an unregulated institution that engaged in corrupt activities. Of course, Jackson knew little about regulation of banks. We would have all been better if he carried on Hamilton's legacy -- it would have avoided creating the Federal Reserve System in 1913 and might have avoided relying on JP Morgan to resolve the financial crisis of 1907.
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Old 09-28-2008, 10:39 PM   #53
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in the short term
Most people dont care about the long term. What happens for the next year or two is most crucial. They're trained by the media to tell them what bad things will happen in the next few years and how to avoid that.

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fried chicken
If I stop making my mortgage payments, can I have some fried chicken?
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Old 09-28-2008, 11:22 PM   #54
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Does anyone really expect the government to pull this plan off successfully? Look at their track record. When was the last time that they accomplished anything that benefited the taxpayers? The economic stimulus package comes to mind. Just how much did it stimulate our economy?
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Old 09-28-2008, 11:30 PM   #55
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Hmmmm, let's examine these assertions. Every major "rescue" plan seems to have the Government taking an equity piece in the entities rescued. Way back in the Depression the Government took equity pieces in businesses it rescued with the old Reconstruction Finance Corporation. (Indeed, didn't the grand poobah of American governmental finance, the esteem Alexander Hamilton, launch the First Bank of the United States, the first central bank of the U.S. with an equity piece. Didn't we also have equity pieces in the Federal Reserve System, the Federal Reserve Banks and the Federal Home Loan Banks?) Maybe that's a bit too old. We took an equity piece with the first too big, too fail, bank, Continental Illinois National Bank in 1984 and later had warrants with Chrysler when we guaranteed loans for its reconstruction and recapitalization.

Socialism didn't start until two gentlemen wrote about an economic system and labor theory in the nineteenth century. Yale Economist Schiller in today's Washington Post writes that the word "capitalism" was coined in that century as well, as the antithesis to socialism and that American Government, beginning with George Washington, never embraced an "unfettered free market." The "American system" always called for major Government involvement. Schiller writes that "bailouts" for extraordinary financial events (i.e. a crisis) have been the American norm. Everybody Calm Down. A Government Hand In the Economy Is as Old as the Republic. - washingtonpost.com

I wrote in another thread that if you lay me 1.5 odds, I'd take the bet that the Government will make money. It made money in the Depression when similar equity pieces took place; made money with Chrysler; and the only blot is the RTC experience, when the Government liquidated assets as expeditiously as it got them and never held them for gain.

Wanna bet?
Interesting. It's always good to get some historical perspective on things. It can be very instructive. Thanks Chris
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Old 09-28-2008, 11:31 PM   #56
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Bully for them. No doubt Jeebus will welcome them into the Summerlands with open arms and fried chicken when they expire. But they apparently also have the ability to make the payments. Not everyone does, unfortunately, and in a worsening recession many more people lose the ability to keep up with the mortgage.
There are a lot of people in their condo project who have the ability to pay, but are just "walking away."
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Old 09-29-2008, 06:46 AM   #57
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My daughter and son-in-law bought a two-bedroom condo in San Diego three years ago at about the height of the boom using subprime financing. They refinanced about a year ago into a fixed rate 30 year mortgage.

The condos in this particular project are now worth approximately $80,000 less than what they were selling for in 2005. Many of their neighbors have been foreclosed upon or are near foreclosure as many of the mortgages are upside down.

My daughter and her husband have chosen to take the high road. They plan to meet their moral obligation to the lender and repay the loan. Both of them have said that they feel a sense of responsibility to pay back what they have borrowed even though it may be years before they have any equity in their home.

I am sure they are not the only honest people left in California. There must be others who are not looking for a free handout.
Unfortunately, I suspect there are more of them than are healthy. Hope. your DD and SIL do not get taken advantage of especially on the Condo Fees to cover all of the vacant and defalulted units.
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Old 09-29-2008, 07:34 AM   #58
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My daughter and son-in-law bought a two-bedroom condo in San Diego three years ago at about the height of the boom using subprime financing. They refinanced about a year ago into a fixed rate 30 year mortgage.

The condos in this particular project are now worth approximately $80,000 less than what they were selling for in 2005. Many of their neighbors have been foreclosed upon or are near foreclosure as many of the mortgages are upside down.

My daughter and her husband have chosen to take the high road. They plan to meet their moral obligation to the lender and repay the loan. Both of them have said that they feel a sense of responsibility to pay back what they have borrowed even though it may be years before they have any equity in their home.

I am sure they are not the only honest people left in California. There must be others who are not looking for a free handout.
if it was a house i'd probably stay. a condo i'd give back to the bank like i had bought it from wal mart
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Old 09-29-2008, 07:36 AM   #59
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Interesting. It's always good to get some historical perspective on things. It can be very instructive. Thanks Chris

those crazy founding fathers got the idea from England where the government came in to stop the panic of 1720 and the South China Sea Company
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Old 09-29-2008, 07:37 AM   #60
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If my reading of the document is correct, almost all of the details are left up to Paulson, with oversight from a small committee made up of a few heads of current agencies.

He gets do decide who gets to sell assets. He gets to negotiate the prices, whether warrants are required, whether to buy assets directly or issue insurance, etc.

He has to create a report detailing the criteria he is going to use fairly quickly, but he seems to have free rein to determine those criteria.

Am I reading this correctly?

I think Paulson has just become the most powerful man in the world.

The outcome of this bill is going to depend almost entirely on the decisions Paulson makes in the future.

most laws are written this way. Department head gets the power and Congress calls them to testify a few times a year. pretty dumb to have the law specify exactly what is to be bought and sold and when and how
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