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Old 09-12-2007, 01:02 AM   #21
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I don't think it is a libertarian, right or left thing. I think it is called freedom. Freedom really does not exist w/o responsibility. I think that place is called Never-Never-Land.
-ERD50
Quite so, and there should be no bailout. But for reasons of equity and expediency, there should be much more effective before-the-bubble regulation of financial institutions. There was in the past, so it is not an un-American idea.

It also isn't my crackpot idea. Hyman Minsky, JK Galbreath and lots of other heavyweights believe this also.

What we have now is the worst of all worlds- privatization of rewards (think hedge funds, private equity, connected politicians) and socialization of costs-think of us poor taxpayers.

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Old 09-12-2007, 07:23 AM   #22
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I don't think it is a libertarian, right or left thing. I think it is called freedom. Freedom really does not exist w/o responsibility. I think that place is called Never-Never-Land.

-ERD50
You do realize that 50% of the population has a below average IQ don't you? Do you really think that someone with an IQ of 95-100 when handed a stack of 50 pages of legal documents at a closing has the ability to read thru all of them and completely understand the implications of every bit of fine print? How hard would it be to slip something unfavorable buried in the fine print?

I guess that's how the right views freedoms in this country...the freedom to legally screw people out anything and everything by taking advantage of people that are sometimes easily confused or not fully understanding of what they are getting themselves into. I don't know how people like that can sleep at night or live with themselves.

It is the mantra of the Republican party these days..."I'm looking out for number one and screw everyone else." Funny how most of these wackos go to church on Sunday and believe themselves good Christians too....
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Old 09-12-2007, 09:09 AM   #23
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You do realize that 50% of the population has a below average IQ don't you? Do you really think that someone with an IQ of 95-100 when handed a stack of 50 pages of legal documents at a closing has the ability to read thru all of them and completely understand the implications of every bit of fine print? How hard would it be to slip something unfavorable buried in the fine print?
Um, how about the below-average IQ folks get a lawyer like everyone else does when they close on a house; every book, including "Homebuying for Dummies" will tell you that.

No bail-outs.
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Old 09-12-2007, 10:13 AM   #24
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Do you really think that someone with an IQ of 95-100 when handed a stack of 50 pages of legal documents at a closing has the ability to read thru all of them and completely understand the implications of every bit of fine print?

I'll add to Lusitan's lucid reply. I'm not so good at succinctness, though.

This is why I mentioned regulation/standardization of the terms and harsh penalties. A standardized one-page document could spell out payments, the max the payment could rise over time, etc.

An example is the reporting of fees and performance by Mutual Funds. The SEC has cleaned this up pretty well, IMO. Fairly easy to compare, w/o having to read all 100 pages of the prospectus and getting caught by fine print.

In my world, ideally this would not involve the govt at all. A lending institution association would come up with their own set of guidelines, and members would sign up and meet those guides. They could then advertise adherence to those rules. Every journalist, author, and consumer advocate would be advising, 'look for the 'Good Lender Seal' when shopping for a loan'.

Fox watching the hen-house? Do some reading on the history of UL (URL originally), to see how this works. UL is NOT a govt organization, yet people and insurers look to it to help assure safe electrical appliances.


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I guess that's how the right views freedoms in this country...the freedom to legally screw people out anything and everything by taking advantage of people that are sometimes easily confused or not fully understanding of what they are getting themselves into.
If anyone wants to turn this into left/right/libertarian thing I guess there is nothing I can do to stop them. I already addressed that no one should be given a free pass to 'screw' anyone. But let me ask you this:

How would the gov't 'protect' people from themselves? Do they need to be involved in every purchase decision I make? No thank you. Seriously, what is the practical ramification of this? Tell me how this would work.

IMO, and many others, a bail out is the wrong kind of govt intervention.


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I don't know how people like that can sleep at night or live with themselves.

It is the mantra of the Republican party these days..."I'm looking out for number one and screw everyone else." Funny how most of these wackos go to church on Sunday and believe themselves good Christians too....
I'm sleeping just fine thank you. Maybe that is because I don't really consider myself to be what passes for a Republican or a Christian these days.

-ERD50
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Old 09-12-2007, 10:40 AM   #25
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This has been a really interesting read so far. I never would have thought there would have been that many divergant opinions. But I am learning how others see the world and that is always a good thing. I think I would have to completely agree with ERD50.
The most important part of being a US citizen is our right to choose. If the govt starts curtailing my right to choose then I have in fact lost some of my freedom, and not gained more. Even if the mantra of the govt becomes, "We are taking away your right to choose, because WE feel we know better than you, or you might make a bad decision and wreck your life". Does my life not belong to me? Am I not allowed to make bad decisions? Some of the wealthiest people in this country got that way because they were willing to make some large risks to get there. Sure... some lost it all... but others became very wealthy by taking the risk.
I also have to question FarmerEd's premise about people getting "screwed over". If you want to make the claim that most folks are just not intelligent enough to make their own decisions in life, then why not commit them all to an institution and be done with it? I believe that most people are fully able to take control of their lives, and that even the man with the most basic knowledge and skills should know enough to ask questions when they do not understand something. I condsider myself fairly inteligent, but I still ask questions all the time and find no shame in it at all. The only way that anyone in america can get "screwed over" by anyone else, is if their was some form of fraud involved, or if they did not pay attention to what was happening. To my undertanding the Banking system got just as "screwed" as the people themselves.
Then again... there are those who believe that theft of $5 from a weathy man is not the same as theft from a poor person. Because the weathy person can "afford" it. New wealth is created in the US all the time where there was none before. For me to make $100 does not mean that I had to "steal" $1 from 100 people to do it.
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Old 09-12-2007, 12:29 PM   #26
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Originally Posted by ERD50 View Post

This is why I mentioned regulation/standardization of the terms and harsh penalties. A standardized one-page document could spell out payments, the max the payment could rise over time, etc.

In my world, ideally this would not involve the govt at all.

-ERD50
You must have been reading my mind. I was going to post the same response, then I saw yours.

While a multi-page document may be needed to cover the finer details, there should be a short summarization that contains all the critical requirements in terms a layman can understand. It seems everywhere we go there is a multi-page document we must sign if we want the service. While people should read and understand everything in the document, they don't because of the volume. The creaters of the documents know this and the less than honest merchants bury the critical information within the volume of paperwork.

While I am normally against big government involvement, there is a place for government intervention and this is one of those times.
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Old 09-12-2007, 02:13 PM   #27
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The most important part of being a US citizen is our right to choose. If the govt starts curtailing my right to choose then I have in fact lost some of my freedom, and not gained more. Even if the mantra of the govt becomes, "We are taking away your right to choose, because WE feel we know better than you, or you might make a bad decision and wreck your life". Does my life not belong to me? Am I not allowed to make bad decisions? Some of the wealthiest people in this country got that way because they were willing to make some large risks to get there. Sure... some lost it all... but others became very wealthy by taking the risk..
So... let's get rid of that FDIC insurance for all deposits... because you can make a great decision on which bank to bank at...

And let's get rid of the rules on plane safety because you can choose which plane is safe and which is not (and oh by the way, you also know which company keeps up with their maintenance)

And let's get rid of that clean water bill, because you know if it is good water coming out of the tap no matter where you are

And let's get rid of that clean air bill, because I want to pollute more and I don't give a crap what I do to your lungs

And let's get rid of all speed limits because I want to choose to drive fast even in a school zone... those little tykes can run fast when I am coming...

Your right to choose many things have been curtailed by government and more will come...

when was the last time you went to Cuba? or smoked a Cuban cigar (sure you can, but you are breaking a law)..

Now, since I have slapped down your all or nothing rant... I do not think there should be a bail out... if the firms were following the truth in lending law, then it has enough information for them to make a decision... they DID gamble on the rates and lost...

However, what I remember the prez suggesting was that is someone QUALIFIED then they could get a fixed rate loan from one of the agencies when now they can not... this would not affect the people who can not pay.. they still lose it all.

BTW, I did read where there were some state/local gvmts that were talking about doing cash payment so people can keep their homes.. now that is scary to me..
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Old 09-12-2007, 04:47 PM   #28
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I am not sure that I see your point Texas Proud. I am certainly not for anarchy in this country. As you rightly point out, there should be laws to protect the quality of water, speeds for safety in school zones etc. What I am saying is that there will never be a time in my life EVER, when somehow the govt will know what is "best" for me. Only I can know what is best for myself. If I choose to eat too much fast food, or buy a fast sports car, or even go bungee jumping for that matter, I should have the right to do so. All of those choices have risk associated with them, and that risk only affects myself. I do not believe there is ever a point where the govt should be able to tell me, "Well... you MIGHT screw this up yourself, so we are not going to allow you to do it". Contrary to popular belief, you do have the right to "fail" in this country because of bad choices that you make. I would hardly call any of what I said an " all or nothing rant". It all seems fairly logical and well thought out to me.
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Old 09-12-2007, 05:11 PM   #29
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I am not sure that I see your point Texas Proud.
Me either.

I think Texas Proud is confusing the fact that we all give up rights and freedoms in order to be a member of society. We can't do whatever we want (pollute, speed, be a public nuisance, etc) because those things impact other people.

But we should be allowed to make our own choices if they don't impact others. One of those choices is to invest in an FDIC insured product, or not.

Doesn't seem like 'all or nothing' to me.

-ERD50
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Old 09-12-2007, 05:48 PM   #30
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I can say my experiences buying huses are not typical. My first two houses were purchased when me and my wife were young. The closing lawyer explained all of the documents clearly. I thought this was somewhat standard, but later found out it isn't.

Houses 3-5 I found the line to sign on and signed it, didn't even look at what I was signing. Now before your opinions of me go lower than they were before I posted this. My wife has worked with mortgages for many, many years in all areas from origination to auditing and when we sat down she looked at all of the documents before me. If she signed, then they were good if she saw any issues, which she didn't, they were handled before I received the paperwork.

With all of this stated, up until recently she has not seen any instances of questionable practices on the part of the originators. The ones that were detected were quickly weeded out, the originator fired, and the loan package closed. Notice I said originator, meaning there has been one originator who has submitted questionable loans. This does not mean it does not occur more frequently, but she has worked with a total of over 1,000 originators and only one has submitted anything questionable enough to be fired. She has on the other hand seen numerous "liar loans" come in that were obviously inflated. It is impossible to tell who was lying. Since the buyer is supposed to fill out the application and sign it, it would seem the applicant is attempting the fraud.
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Old 09-12-2007, 10:06 PM   #31
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This has been a really interesting read so far. I never would have thought there would have been that many divergant opinions. But I am learning how others see the world and that is always a good thing. I think I would have to completely agree with ERD50.
The most important part of being a US citizen is our right to choose. If the govt starts curtailing my right to choose then I have in fact lost some of my freedom, and not gained more. Even if the mantra of the govt becomes, "We are taking away your right to choose, because WE feel we know better than you, or you might make a bad decision and wreck your life". Does my life not belong to me? Am I not allowed to make bad decisions? Some of the wealthiest people in this country got that way because they were willing to make some large risks to get there. Sure... some lost it all... but others became very wealthy by taking the risk.
I also have to question FarmerEd's premise about people getting "screwed over". If you want to make the claim that most folks are just not intelligent enough to make their own decisions in life, then why not commit them all to an institution and be done with it? I believe that most people are fully able to take control of their lives, and that even the man with the most basic knowledge and skills should know enough to ask questions when they do not understand something. I condsider myself fairly inteligent, but I still ask questions all the time and find no shame in it at all. The only way that anyone in america can get "screwed over" by anyone else, is if their was some form of fraud involved, or if they did not pay attention to what was happening. To my undertanding the Banking system got just as "screwed" as the people themselves.
Then again... there are those who believe that theft of $5 from a weathy man is not the same as theft from a poor person. Because the weathy person can "afford" it. New wealth is created in the US all the time where there was none before. For me to make $100 does not mean that I had to "steal" $1 from 100 people to do it.
Let me see if I understand your premise -- none of is free unless every one of us is free to starve to death in the street. Is that close?

Lovely world view you have.
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Old 09-12-2007, 11:45 PM   #32
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It is the mantra of the Republican party these days..."I'm looking out for number one and screw everyone else." Funny how most of these wackos go to church on Sunday and believe themselves good Christians too....
Yeah, especially Leiberman.
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Old 09-13-2007, 08:10 AM   #33
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Let me see if I understand your premise -- none of is free unless every one of us is free to starve to death in the street. Is that close?

Lovely world view you have.
Well that is a pretty harsh interpretation there Gumby, but you know what? Yes, within the context of the original post, that is EXACTLY what I'm saying!

And you know what else? I submit that the 'no-bail-out' approach is LESS HARSH than your 'bail-out' approach. So I could turn the phrase back at 'ya: Lovely world view YOU have, Gumby.

OK, I'll explain:

Remember, the people we are talking about are mortgage applicants. They are buying a home. That should mean that they hold a job, and probably not a minimum wage job. That does not make them rocket scientists, but let's give them SOME credit (no pun intended). I don't think we are talking about a segment of the population that is unable to care for themselves and in need of social services, etc. So, we should be able to expect that they can understand simple terms like 'monthly payment', 'can increase', 'limit', 'time', 'late fee', 'your income', 'consequences for non-payment', 're-posses'. And if they don't understand it, as was explained above, the 'Dummies' book and most sources say: 'get a lawyer'.

When I'm in over my head, I get help. You can be pretty dim, yet still be smart enough to understand THAT. It's not a tough concept.

So back to your statement: Yes, if someone is capable of supporting themselves, and they choose not too, they can starve in the street. That IS freedom. Freedom is choice, and Freedom comes with responsibility. These people chose these mortgages, they need to face the consequences.

However, I do have a 'heart': If someone is unable to support themselves, some sort of social service support should be there for them. They can even take some of my tax money for that (sorry to disappoint you).

It seems that you are saying that when someone chooses a 'short cut' or the 'easy way out' and then it back fires on them, the rest of us tax payers, the ones that took a prudent approach and have some money, should pay for their choices/mistakes. No thanks. And here is why I think that a 'bail-out' is a CRUEL world view:

Have you ever seen what happens when someone gets bailed out from every bad judgment they make? They keep making them. And it gets worse and worse over time. Simply because, they aren't really 'mistakes' if there are no consequences. Those people often go on to ruin their lives. I've seen it up close and personal. I don't want that to become national policy.

I'd rather see someone get a few bumps and bruises, and learn for themselves that maybe they need to modify their risky behavior. Protect them from everything, and they will go on to kill themselves, and maybe take some innocent people along with them. Whether you realize it or not, that is the world that YOU are asking for.

Remember 'You can't cheat an honest man' - those people were looking for the easy way out. Most of them didn't get any more 'cheated' than the 'cheating' they were looking to pull.

For the sake of completeness (and since I long ago blew any chance for 'succinct'), I'll repeat my earlier post. If any of those lenders are guilty of miss-representation, with-holding info, fraud, etc - prosecute them, harshly. Give the people their money/homes back, plus treble damages in those cases.

-ERD50

PS: (edit/add) - I just took a 'succinct pill': Get off the 'holier than thou' soapbox, Gumby!
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Old 09-13-2007, 10:25 AM   #34
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Let me see if I understand your premise -- none of is free unless every one of us is free to starve to death in the street. Is that close?

Lovely world view you have.
Yes Gumby... that is preciesly what I believe. But let me examine the opposite of what you are saying I believe in. Obviously if my thinking is completely wrong, then the opposite of that should be your point of view. By your reasoning that would mean " Are all of us are free, when none of us can starve to death on the street?" There is one and only one form of government on earth that can allow that statement to become a reality. And that government would be communist. If you do not believe me, then you are free to look up what a communist government believes in. In such a society, no one is rich, or poor, your basic needs like food and shelter are provided for you. And you will probably never "starve to death on the street" as you have put it. Then again, I doubt hightly it is a life that you would choose to have. Because no matter how much you work or try to succeed in such a society, you would never be "allowed" (by the govt) to have more than your neighbor.

Thanks for the kind words ERD50.... made my day..
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Old 09-13-2007, 10:54 AM   #35
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...no matter how much you work or try to succeed in such a society, you would never be "allowed" (by the govt) to have more than your neighbor.
Or retire early.
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Old 09-13-2007, 03:16 PM   #36
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Sorry Armor99 and ERD50; I was feeling particularly snarky when I wrote that. Just in case you were wondering, I am on record on this board as opposing a "bail out". Among other things, I think it would encourage continued irresponsible speculation by those who should know better. (similar to the effect of the "Greenspan put" on Wall Street).

You guys are obviously intelligent, financially sophisticated and careful. You paid attention in school, followed the rules, worked hard and succeeded. All of which may make it more difficult for you to believe that there really are people who go through life heavy laden by naivete and a simple lack of mental capacity. Similarly, there are people who lack impulse control and any real foresight. We may regret that this is the case, but we cannot deny that it is true.

Are some of the people in trouble now the victims of their own greed and unbridled optimism? Undoubtedly. For them, I have no pity. However, there are many who were simply not smart enough or sophisticated enough to understand what they were doing. Add in overbearing mortgage brokers who get paid to close the loan no matter what and loan documents that are confusing at best and deliberately misleading at worst, and you have a recipe for disaster. It's easy enough to say "well, they should know enough to call a lawyer". But some of these people are not even smart enough to do that, and they could not afford to pay one even if they did know enough to call. Simply put, you have a number of people who were led down the garden path and did not know any better.

Probably, many of these people are not suited to be homeowners and should simply go back to renting what they can afford. But I'm sure you can appreciate that the idea of having a place to call your own was a powerful incentive for them and not a dishonorable one. Perhaps just a little more understanding and a little less condemnation would be in order. To the extent that we can find some way to help, short of an outright bail out, I think we should. And for practical reasons, I think many banks would prefer to restructure and keep a performing loan rather than foreclosing. If government action can encourage that trend, it should be taken.

Finally, I don't think either of you would want to live in a land of unbridled freedom to win or lose; one where, if you are not smart enough or careful enough to make the right decisions, you might well end up starving in the street. I know I would not want to live there. However, it is a far cry from my asking that there be some minimum support network to my advocating communism. And I think you know that.
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Old 09-13-2007, 03:32 PM   #37
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I've been trying to ballpark how many of those people were led to buy homes they simply couldn't afford.

In CA, homeownership rates went from 55% in 1996 to 60% in 2005. CA population is about 36M. So, that suggests maybe 2 million new homeowners who might not have been homeowners in the old days. Even half that would be scary.

Similar story across the country: rate went from about 65% to 69% nationwide in the last few years.

So, what's the right thing to do for potentially millions of people who bought more house than they can afford? I'd really like to know the magnitude and potential costs of a true bailout.
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Old 09-13-2007, 03:39 PM   #38
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I am not sure that I see your point Texas Proud. I am certainly not for anarchy in this country. As you rightly point out, there should be laws to protect the quality of water, speeds for safety in school zones etc. What I am saying is that there will never be a time in my life EVER, when somehow the govt will know what is "best" for me. Only I can know what is best for myself. If I choose to eat too much fast food, or buy a fast sports car, or even go bungee jumping for that matter, I should have the right to do so. All of those choices have risk associated with them, and that risk only affects myself. I do not believe there is ever a point where the govt should be able to tell me, "Well... you MIGHT screw this up yourself, so we are not going to allow you to do it". Contrary to popular belief, you do have the right to "fail" in this country because of bad choices that you make. I would hardly call any of what I said an " all or nothing rant". It all seems fairly logical and well thought out to me.
You did not limit your 'right to choose' to anything... Just that govmt should not stop you from choosing... and I pointed out many things that you do not have the right to choose, for your benefit...

How many states have motorcycle helmet laws?? You do not have the right to choose to ride without one (in those states) because if you crash and crack your head open, we usually have to pay if you don't kill yourself..

Now, don't get me wrong.. I do NOT think they should bail anyone out for making a bad decision on buying a house (or anything else for that matter) IF they were not lied to or defrauded..

there are many people who buy to much car or TV or everything... why not bail them out also... why is a house different? I don't think it is..
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Old 09-13-2007, 04:02 PM   #39
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Sorry Armor99 and ERD50; I was feeling particularly snarky when I wrote that. Just in case you were wondering, I am on record on this board as opposing a "bail out". Among other things, I think it would encourage continued irresponsible speculation by those who should know better. (similar to the effect of the "Greenspan put" on Wall Street).
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Finally, I don't think either of you would want to live in a land of unbridled freedom to win or lose; one where, if you are not smart enough or careful enough to make the right decisions, you might well end up starving in the street.
Well thanks Gumby... from what I have read above you are obviously a highly educated man in your own right, and I understand that sometimes we all get a bit heated. (myself included).
I also did not want anyone to get the idea that I am a completely heartless human being either. I really do get the fact that there are those who are just not very bright out there, and truly did not "know enough" to get help when they needed it. I would hope that their familes, friends or loved ones, would try to interviene on their behalf (not to control them), but perhaps inject a voice of reason to what they are about to do. I believe in trying to persuade people to your way of thinking, rather than forcing them to do something they do not want to do. The choice should always ultimately be theirs.
I have read over your thoughts Gumby and I must admit... you make a very compelling arguement, but I still think I will have to agree to disagree with you. Why should anyone be entitled to more than what their own mind or skill can get for themselves? I believe that highly intelligent, or highly skilled people (such as actors or athletes) should make more money than the average man. Why because they can do things that the average man cannot do. As much as it might seem like a good idea to try to save people from themselves, ultimately it is a loosing battle. Because the very learning process itself sometimes demands failure as the teaching tool. Sometimes small children need to touch a hot stove and get burned no matter how many times the mother and father yell "No!!! Hot... do not touch that".
Strangely enough... I really do believe that I "live in a land of unbridled freedom to win or lose". As a matter of fact I think that is the only sort of life worth living. That is even why I joined this forum in the first place. I know that I can get fired at any time, get a bad disease, have something financially bad happen to me through no fault of my own, etc. So do I sit in a cave and worry about it happening? No!!! I take all of the steps that I possibly can to safeguard myself as much a possible. To me, that means accumulating as much wealth as I can. This is not greed either, it is self preservation. I have a moral right to try to take care of myself the best that I am able to. I try to calculate the risk in all of my financial decsions... and I think the thing that keeps those decisions in check, is the knowledge that if I do the wrong thing.. I can really hurt myself financially. A trapeeze performer will usually perform less dangerous stunts if he has no net. I live my whole life under the concept of "if I fail... there is NO net to catch me". Sometimes I think that if everyone lived their lives that way we would all tend to make better choices...
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Old 09-13-2007, 04:20 PM   #40
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Its not clear that any bailout would work, at least for more than a portion of the troubled borrowers. What is likely to happen is a combination of things: some borrowers will default and lose their homes, some will get help from a gummint program, and some will get their loans modified to terms they can live with.

What interests me is more what regulations come out of all of this mess. Banks and thrifts (i.e. actual depository institutions) have been effectively precluded from doing the truly stupid loans for some time. Most of the bad actors are non-depositories taht are acting outside of the reach of teh bank regulators. I suspect that Congress and others will take a stab at imposing regulation on the non-bank lenders, but it isn't clear what will actually come of such efforts. Will be interesting to watch.
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