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[Wooster]

After the unprecedented bail outs for the likes Fannie Mae and Freddie Mac of we've seen over the last few months and the AIG bail out today, the US treasury is desperately trying to raise cash.

But this isn't a crash, it's an 'adjustment'..

In the UK we (the public) had to buy out Northern Rock to the speculated tune of £90Bn and now they've given the green light to the possible merger of LLoyds and HBOS despite it going against the monopoly rules.
If the figures are correct, every $1 of actual value in US mortgages was artificially inflated to $8 in the ten or so years preceding the crash and it was all based on thin air, they just continued to bet that the bubble wouldn't burst and the figures got higher and higher.

Taking money out of the public purse seems to be leading to a new era of Socialism in the USA, but it's a perverse kind of Socialism where the Mr and Mrs average has the money taken out of their pockets and handed straight to the wealthy idiots who caused the problem in the first place.

These are the same arseholes who also say that homeowners would suffer if they were allowed to go to the wall.
Why should they?
If there's a wholesale meltdown in the mortgage market then there's options available. Homeowners could rent the property until the market stabilises and then resume with their mortgage payments or in extreme cases have their payments suspended for a time to give them a chance to sort themselves out.

That won't happen though, for the simple reason that the arseholes previously mentioned would see their incomes dry up.

[keasy]

If I just rent out my home until it sorts out, where shall my kids sleep ?

HBOS mereger with Loyds is better than it going under, 1/3 of mortgages are with them in UK market (including me).
Abbey went to a Spanish bank as the Office of Fair Trading deemed it unfair, now all that cash pums up the Spanish economy when we need our home front sorted.

I'm glad it's going the way of Loyds, I dread to think how me and my family would end up.

[Wooster]

You rent your house from the bank, you still live in it.

The merger is actually worse for you, with nearly 30% of the mortgage market in their hands they have too much influence on the rate you pay.
It's just a matter of time before they try to recoup their losses by taking the money out of your pockets and food from your kids mouths. It might be five years from now and you might not even have the morgtage with them anymore, but it's now even more likely to happen.

The rental plan means that you can weather the current climate by paying the going rate for rent and make up the difference when your mortgage restarts.
Which is a damn sight better than having to struggle and maybe default due to a sudden increase in the cost of living and a hike in mortgage payments.

The moratorium on payments (mortgage holiday) means that people get say 6 months to get things back on track, if they don't then they get repossessed. But it does mean that the market isn't suddenly saturated with houses the bank needs to get rid of, lowering the price of property even further and plunging people into negative equity (making the banks even more eager to get you out and sell the place before the price crashes).

[Wooster]

P.S.


 

[Hallcat]

We'll just print more money, its already almost worthless so who cares.  Anyway we'll need something to burn this winter to keep warm with the price of heating oil rising. 

Seriously, though.  If the government hadn't bailed out AIG the ramifications would be global. 

I think I heard this morning that since 1932 no company bailed out by the US Federal Govt has defaulted on their loan.  Hopefully, this is still the case. 

[Wooster]

Bailing them out didn't seem to help yesterday though, their stock continued to fall (they closed at $2..earlier in the year they were $70). But you're right enough, that particular pie is pretty well spread around the world.

I wonder if the directors will still get their usual bonus payments this year though.

*edit* I should add that the Lloyds/HBOS merger is probably better than throwing public funds at it to buy it out, like we did with Northern Rock.

[corroded]

We'll just print more money, its already almost worthless so who cares.  Anyway we'll need something to burn this winter to keep warm with the price of heating oil rising. 

Seriously, though.  If the government hadn't bailed out AIG the ramifications would be global. 

I think I heard this morning that since 1932 no company bailed out by the US Federal Govt has defaulted on their loan.  Hopefully, this is still the case. 

lol, that worked out well for Zimbabwe and Post WWI Germany

In 2006, 1 GBP was worth over 1 million ZBW dollars (originally, the ZBW Dollar was worth 1.4 USD). So they reissued it with 1000 dollars = 1 dollar.. Their current inflation is 11,268,758.9%.

Essentially, printing extra money only causes one problem, hyperinflation... as everyone realises their currency isn't worth anything, and becomes more and more worthless! Inflation goes over 100%, and the money just devalues as the countries value stays the same, they just have 'more' money around. Basically, it never works. Germany tried to do pay off the reparations at the end of WW1 by just printing off more money.

The germans issued notes worth upwards of trillions of marks!

[Thermalsig]

You can't just blame the US loan companies. A lot of US people walked into mortgages they could never have even have sneezed at when they were offered ARM's. If you buy a house for 400,000$ when realistically you should be buying 125,00$ and your mortgage adjust a thousand a month to reflect the real payment, you're an idiot. Some people were hoodwinked, sure, but some over stepped themselves keeping up with the Jones's. I think a market correction is in the works and every person involved should get a swift kick in the ass. The only good side is that some of the banks pushing this mess went under and won't arise again to f*ck us up again. I think we have a ten year rough ride ahead of us and that we as American's(the one's involved) should face possible jail time and stripping of assets.

[corroded]

unless the consumer actually deliberately overstated their earnings, the loan companies are definitely at fault. shouldn't be offering those rates, in reality. most really dont know that there is a problem till something like this happens, and just see a figure they can afford turn into something they cannot.

[Wooster]

They were starting to do the same here.
125% mortgages were certainly starting to appear a couple of years ago, and more often than not the buyer was told to lie about their earnings.

These areshole advisors should be among first on the scrapheap.


I agree with Thermals sentiment that those further up in the chain should do hard time, regardless of where they're hiding.

[Nivlac]

If you have money to invest now is the time to buy all that you can of AIG. That $2 a share price is the best thing you will see in a long time, 6 months from now it will be $10-12 a share and within 5 years it will be back to its $70 a share true value.

ok ok I know your thinking he must be insane...they almost collapsed, they just went through a massive devaluation etc etc - and that is exactly why you should be buying all you can. They just had all their debt wiped clean leaving them fully intact and ready to roll....and remember they have a massive amount of income so now with no debt they are golden and will become a money making machine again.


sigh....if I only had the money LOL

[Hallcat]

Our investment club bought $1000 worth of shares yesterday at $3.50.  Too bad I'm not in the club anymore.  

[Vasco]

It wasn't just the loans as I understand it but the futures on the loans.  They were into some serious ramping action.  Now if I have it right it goes somethig like this:-

The bank loans someone $1 as a mortgage on a property
They then sell that $1 debt to a future trader (investor) for $3 and he insures it against default for $8.

The bank is happy as it has made a profit on the loan provided it does not default.
The future trader is happy that he has a deal that will make him money if it does default which he is pretty sure it will do, and if it doesn't he still retrieves some of his risked money back.

Basically it is gambling, the banks bet one way and the future trader/investor bets the oposite.

What happend of course is that the bottom fell out of the property market and the defaults were huge.  The banks couldn't afford to pay the insurance and went bust and the future traders had all these over valued default mortages that they couldn't get their money back on because the banks were bankrupt and the mortgages had all defaulted so were valueless.  Both sides lost big time.

ANd because the banks and Future Traders were using the ordinary investors money to play their little game of chance everyone else lost as well 

It was a system that was detined to fail at some stage but the easy money it was producing blinded the investors to its weaknness which was the heavy reliance on a strong property market.

[Thermalsig]

It wasn't just the loans as I understand it but the futures on the loans.  They were into some serious ramping action.  Now if I have it right it goes somethig like this:-

The bank loans someone $1 as a mortgage on a property
They then sell that $1 debt to a future trader (investor) for $3 and he insures it against default for $8.

The bank is happy as it has made a profit on the loan provided it does not default.
The future trader is happy that he has a deal that will make him money if it does default which he is pretty sure it will do, and if it doesn't he still retrieves some of his risked money back.

Basically it is gambling, the banks bet one way and the future trader/investor bets the oposite.

What happend of course is that the bottom fell out of the property market and the defaults were huge.  The banks couldn't afford to pay the insurance and went bust and the future traders had all these over valued default mortages that they couldn't get their money back on because the banks were bankrupt and the mortgages had all defaulted so were valueless.  Both sides lost big time.

ANd because the banks and Future Traders were using the ordinary investors money to play their little game of chance everyone else lost as well 

It was a system that was detined to fail at some stage but the easy money it was producing blinded the investors to its weaknness which was the heavy reliance on a strong property market.

Nailed it. You did forget the words idiot and dumbasses though.

[corroded]

If you have money to invest now is the time to buy all that you can of AIG. That $2 a share price is the best thing you will see in a long time, 6 months from now it will be $10-12 a share and within 5 years it will be back to its $70 a share true value.

ok ok I know your thinking he must be insane...they almost collapsed, they just went through a massive devaluation etc etc - and that is exactly why you should be buying all you can. They just had all their debt wiped clean leaving them fully intact and ready to roll....and remember they have a massive amount of income so now with no debt they are golden and will become a money making machine again.


sigh....if I only had the money LOL

yeah, i've been hearing this too... i'm thinking that i could probably afford a £200 gamble on a fairly long term investment, which at current rates could end up at ~£10k