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Thread: woah .. check out this 'stealth' provision of the bailout bill

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    Default woah .. check out this 'stealth' provision of the bailout bill

    (snip)"Why is the mainstream media --which keeps lecturing Americans that Treasury Secretary Henry Paulson's Bailout Package Version 2.0 must be passed immediately-- ignoring what might be the most earth-shattering provisions in Paulson's package?

    The media needs to start asking hard questions. Here is where they need to start. If you look at page 180 of the 451-page monster bailout bill that easily passed the Senate yesterday (PDF here), you will see that it includes at Section 116 language about the tax treatment of "industrial source carbon dioxide." It also provides, at Section 117, for a "carbon audit of the tax code."

    What could a provision about the tax treatment of "industrial source carbon dioxide" and another provision about doing a "carbon audit" of the tax code possibly have to do with restoring confidence in Wall Street's troubled credit markets?

    The answer: NOTHING.

    This appears to be an attempt by global warming fanatics to lay the foundation for an economy-killing carbon tax just like the "cap-and-tax" system that is now destroying European industry.

    If you think the Mother of All Bailouts is bad, just wait till you see the carbon tax. Get ready to reduce your standard of living drastically.

    It really shouldn't be a surprise that these non-germane provisions are included in legislation that is supposed to save all of us from economic Armageddon.

    After all, Henry Paulson is a confirmed environmentalist and global warming true-believer who abused his power at Goldman Sachs. While Paulson headed Goldman Sachs he simultaneously headed the Nature Conservancy and his wife was a former Conservancy board member. (See "In Goldman Sachs We Trust: How the Left's Favorite Bank Influences Public Policy," by Fred Lucas, Foundation Watch, October 2008.)

    Henry Paulson presided over Goldman Sachs's donation of 680,000 acres of land it owned in Tierra del Fuego, Chile to the New York-based Wildlife Conservation Society.

    One of the trustees of the Wildlife Conservation Society was H. Merritt Paulson, the son of Henry Paulson.

    As green critic Paul Driessen observed, at no time did anyone "assess the vast area's potential value for timber, oil or metals, so that locals and [Goldman Sachs] shareholders would at least know the true cost of the giveaway."

    And the media tells Americans to trust Henry Paulson to do the right thing when doling out taxpayer dollars to his former colleagues on Wall Street?"(snip)

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    Default Re: woah .. check out this 'stealth' provision of the bailout bill

    PORK! It's what's for dinner! I know that Oregon got $3.3 billion out of this bill. Amazing.


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    Default Re: woah .. check out this 'stealth' provision of the bailout bill

    and here's another 'stealth' provision ...

    (snip)"IRS undercover operations: Privacy invasion?

    The bailout bill also gives the Internal Revenue Service new authority to conduct undercover operations. It would immunize the IRS from a passel of federal laws, including permitting IRS agents to run businesses for an extended sting operation, to open their own personal bank accounts with U.S. tax dollars, and so on. (Think IRS agents posing as accountants or tax preparers and saying, "I'm not sure if that deduction is entirely legal, but it'll save you $1,000. Want to take it?") That section had expired as of January 1, 2008, and would now be renewed.

    Starting with the so-called Anti-Drug Abuse Act in 1988, the IRS has possessed this authority temporarily, with occasional multiple-year lapses. A 1999 internal report said the IRS had 126 "trained undercover agents" working in field offices at the time. This is the first time that such undercover authority would be made permanent.

    Sens. Max Baucus (D) and Chuck Grassley (R) have been pushing to make it permanent for a while, claiming in April that: "Undercover operations are an integral part of IRS efforts to detect and prove noncompliance. The temporary status of this provision creates uncertainty, as the IRS plans its undercover efforts from year to year."

    There's another section of the bailout bill worth noting. It lets the IRS give information from individual tax returns to any federal law enforcement agency investigating suspected "terrorist" activity, which can, in turn, share it with local and state police. Intelligence agencies such as the CIA and the National Security Agency can also receive that information.

    The information that can be shared includes "a taxpayer's identity, the nature, source, or amount of his income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, overassessments, or tax payments, whether the taxpayer's return was, is being, or will be examined or subject to other investigation or processing, or any other data received by, recorded by, prepared by, furnished to, or collected by the Secretary with respect to a return."

    That provision had already existed in federal law and automatically expired on January 1, 2008.

    What's a little odd is that there's been little to no discussion of the IRS sections of the bailout bill, even though they raise privacy concerns."(snip)

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    Default Re: woah .. check out this 'stealth' provision of the bailout bill

    Beautiful......I'm for ANYTHING that makes the environment cleaner....don't expect me breathe your pollution and crap simply because you don't care.




    Bailout Bill Benefits Wind and Solar Power Companies

    By Sarah Lai Stirland October 03, 2008 | 4:58:10 PMCategories: Politics


    The general public may not be thrilled with the $700 billion "financial rescue" package that the House approved and President Bush signed Friday, but the alternative energy industry cheered its passage because the legislation includes renewals of tax breaks that company executives had worried would expire at the end of the year. Included in the legislation Friday was a one-year extension of a tax break for wind energy production companies, and an eight year extension of a 30 percent tax break for residential and commercial solar installations.
    "The bill is a major step in our long journey toward energy independence and ensures that solar energy will be a significant part of America's energy future," said the Solar Energy Industries Association president Rhone Resch in a statement. "This long-term extension of solar tax credits will create a domestic solar industry with hundreds of thousands of jobs while providing clean, affordable, carbon-free energy to millions of American families, businesses and communities."

    The renewable energy industry had been fretting all year that members of Congress would adjourn without renewing the tax breaks, which company representatives said would have put a crimp in the industry's growth because they would have had a harder time obtaining financing.

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    Default Re: woah .. check out this 'stealth' provision of the bailout bill

    ^^^ a continuation of the tax credits for solar / wind / biofuel etc. was a guaranteed lock one way or another. After all, how else will uber-rich Democrats be able to avoid actually having to pay the higher taxes that Obama is proposing to levee on them ? How else will solar equipment makers remain in business and their employees remain employed ?

    Ironically, this is one of the few provisions of the bailout bill that will actually expand / maintain employment levels for some US workers ... albeit at significant cost to taxpayers living on 'main street' who are more likely to face losing their own jobs.

    Some of the other provisions that will actually expand / maintain employment levels for some US workers are lower profile but more entertaining ...

    $33 million to Nancy Pelosi's StarKist and Chicken of the Sea operations in American Samoa

    $192 million to Rum producers in Puerto Rico ... I'm still trying to figure out whose votes were 'bought' with this expenditure

    $128 million to auto race tracks ... must be to buy some votes from representatives in NASCAR territory

    $10 million to Hollywood film producers ... Nancy Pelosi again

    ~
    Last edited by Melonie; 10-04-2008 at 01:55 AM.

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    Default Re: woah .. check out this 'stealth' provision of the bailout bill

    You haven't even mentioned Section 110 which empowers Account Managers to re-write mortgages. If the borrower isn't satisfied with the work-out proposed by a U.S. TREASURY employee (a bureaucrat) they can hop into Bankruptcy Court and
    have the judge reduce the principal and/or adjust the interest rate.

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    Default Re: woah .. check out this 'stealth' provision of the bailout bill

    ^^^ true ... I posted about the additional 'moral hazard' of mortgage 'cram downs' by bankruptcy judges in the Dollar Den. For a fact, if someone's income is in the <$75k per year range, and they are struggling to continue making mortgage payments with the current outstanding balance and current interest rates, they will be FAR better off to simply stop paying. After 9 months or so of 'rent free' living in their own house, they can then get a bankruptcy judge to drop the outstanding balance of their mortgage down to the currently assessed market value, plus get their interest rate dropped by a couple of points. And just to make sure this 'bargain' is entirely in favor of the 'distressed' homeowner, the bailout bill even waives income taxes otherwise due on the 'forgiven' debt.

    So who pays for this ? Well the mainstream media hasn't put the pieces together yet ... or maybe they have but don't want to report on it. When the judge 'crams down' the outstanding balance and interest rate on a mortgage, this results in a double loss to the investor who owns the loan. So on the surface, cram-downs would exacerbate the problems banks are having with 'subprime' mortgage bond losses, by lowering the value of those bonds even further. However, thanks to the 'bailout' bill, banks are essentially guaranteed that they can sell these 'subprime' mortgage bonds to the FED at 'near' face value despite the fact that their actual value is only 35 cents on the dollar and despite the fact that cram-downs will probably further reduce their actual value to 25 cents on the dollar. So the answer is ... the US taxpayer !!!

    Arguably section 110 lays the groundwork for large numbers of distressed home 'owners' to wind up under a future gov't run system very similar to section 8 rental housing. In essence, the government owns the house, the government collects mortgage 'rent' payments at below market rates etc. The only difference, which has yet to be sorted out of course, is what happens if and when the section 110 home 'owner' actually pays off their mortgage several years in the future. Is the government going to require that the homeowner also pay back the 'forgiven' original loan amount before they relinquish title to the house ? Is the government going to 'tax' the forgiven loan amount back out of the proceeds of a future property sale or inheritance in order to allow the sale or inheritance proceed ? After all, you can't go bankrupt on money owed to the US government !!!

    I can see a whole stack of houses winding up in the hands of the US government or subject to a forced sale when the distressed home 'owner' dies ... and his heirs don't have the cash necessary to pay off the 'forgiven' original loan amount in order to obtain title.
    ~
    Last edited by Melonie; 10-04-2008 at 01:48 PM.

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    Default Re: woah .. check out this 'stealth' provision of the bailout bill

    Quote Originally Posted by Melonie View Post
    ^^^ true ... I posted about the additional 'moral hazard' of mortgage 'cram downs' by bankruptcy judges in the Dollar Den. For a fact, if someone's income is in the <$75k per year range, and they are struggling to continue making mortgage payments with the current outstanding balance and current interest rates, they will be FAR better off to simply stop paying. After 9 months or so of 'rent free' living in their own house, they can then get a bankruptcy judge to drop the outstanding balance of their mortgage down to the currently assessed market value, plus get their interest rate dropped by a couple of points. And just to make sure this 'bargain' is entirely in favor of the 'distressed' homeowner, the bailout bill even waives income taxes otherwise due on the 'forgiven' debt.

    So who pays for this ? Well the mainstream media hasn't put the pieces together yet ... or maybe they have but don't want to report on it. When the judge 'crams down' the outstanding balance and interest rate on a mortgage, this results in a double loss to the investor who owns the loan. So on the surface, cram-downs would exacerbate the problems banks are having with 'subprime' mortgage bond losses, by lowering the value of those bonds even further. However, thanks to the 'bailout' bill, banks are essentially guaranteed that they can sell these 'subprime' mortgage bonds to the FED at 'near' face value despite the fact that their actual value is only 35 cents on the dollar and despite the fact that cram-downs will probably further reduce their actual value to 25 cents on the dollar. So the answer is ... the US taxpayer !!!

    Arguably section 110 lays the groundwork for large numbers of distressed home 'owners' to wind up under a future gov't run system very similar to section 8 rental housing. In essence, the government owns the house, the government collects mortgage 'rent' payments at below market rates etc. The only difference, which has yet to be sorted out of course, is what happens if and when the section 110 home 'owner' actually pays off their mortgage several years in the future. Is the government going to require that the homeowner also pay back the 'forgiven' original loan amount before they relinquish title to the house ? Is the government going to 'tax' the forgiven loan amount back out of the proceeds of a future property sale or inheritance in order to allow the sale or inheritance proceed ? After all, you can't go bankrupt on money owed to the US government !!!
    BINGO ! That's the whole point and WHY the Libs LOVED this bill. It radically expands the role of the Feds in both banking and real estate.

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    Default Re: woah .. check out this 'stealth' provision of the bailout bill

    Quote Originally Posted by Eric Stoner View Post
    You haven't even mentioned Section 110 which empowers Account Managers to re-write mortgages. If the borrower isn't satisfied with the work-out proposed by a U.S. TREASURY employee (a bureaucrat) they can hop into Bankruptcy Court and
    have the judge reduce the principal and/or adjust the interest rate.
    I see this as a positive thing. Just like if, oh...say a dog food manufacturer sells poisonous food, the consumer can sue the company when their dog dies after eating that bad dog food.

    The bankers that made wise and conservative decisions about whom to lend money, will still be in business. The ones that went for the fast money and cut corners are the ones that have to worry. All that section does is tell the banks to use a little judgment when writing mortgages. If they had done this in the first place, there wouldn't be a foreclosure crisis now.

    Unless I misunderstood your post, Eric, I don't understand why anyone would have a problem with that section. It is telling bankers that they must be responsible when lending money or they will have to pay the price of their irresponsibility. What's wrong with that?


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    Default Re: woah .. check out this 'stealth' provision of the bailout bill

    Quote Originally Posted by Melonie View Post
    So who pays for this ? Well the mainstream media hasn't put the pieces together yet ... or maybe they have but don't want to report on it. When the judge 'crams down' the outstanding balance and interest rate on a mortgage, this results in a double loss to the investor who owns the loan. So on the surface, cram-downs would exacerbate the problems banks are having with 'subprime' mortgage bond losses, by lowering the value of those bonds even further. However, thanks to the 'bailout' bill, banks are essentially guaranteed that they can sell these 'subprime' mortgage bonds to the FED at 'near' face value despite the fact that their actual value is only 35 cents on the dollar and despite the fact that cram-downs will probably further reduce their actual value to 25 cents on the dollar. So the answer is ... the US taxpayer !!!
    Maybe I missed something, but did someone hold a gun to the heads of mortgage companies and force them to write these loans and give unqualified borrowers money?

    I know that some risks are taken whenever loaning someone money, but it seems to me that the risks the lenders took with the motivator of greed, came back and bit them in the ass.

    If you guys honestly believe that the burden of responsibility lies at the feet of the borrowers, then your basic understanding of human nature is seriously flawed. Why would anyone just give out loans to individuals that clearly cannot repay them? Because the lenders were gambling on the housing market's rising value to continue indefinitely. And they gambled more than they could afford to lose.

    Sucks to be them.


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    Default Re: woah .. check out this 'stealth' provision of the bailout bill

    Quote Originally Posted by Paris View Post
    I see this as a positive thing. Just like if, oh...say a dog food manufacturer sells poisonous food, the consumer can sue the company when their dog dies after eating that bad dog food.

    The bankers that made wise and conservative decisions about whom to lend money, will still be in business. The ones that went for the fast money and cut corners are the ones that have to worry. All that section does is tell the banks to use a little judgment when writing mortgages. If they had done this in the first place, there wouldn't be a foreclosure crisis now.

    Unless I misunderstood your post, Eric, I don't understand why anyone would have a problem with that section. It is telling bankers that they must be responsible when lending money or they will have to pay the price of their irresponsibility. What's wrong with that?
    As Melonie explained it is going to ENCOURAGE defaults. And make it harder for
    everyone else to get mortgages except the creme de la creme of mortgage risks.

    Most of the mortgage companies and banks that initially wrote these crap mortgages are already out of business. They took the money and ran.They didn't have to commit fraud. Most of what they did was 100% legal Fannie and Freddie who bought them up are only still operating because the Federal government took them over.

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    Default Re: woah .. check out this 'stealth' provision of the bailout bill

    Quote Originally Posted by Paris View Post
    Maybe I missed something, but did someone hold a gun to the heads of mortgage companies and force them to write these loans and give unqualified borrowers money?

    I know that some risks are taken whenever loaning someone money, but it seems to me that the risks the lenders took with the motivator of greed, came back and bit them in the ass.

    If you guys honestly believe that the burden of responsibility lies at the feet of the borrowers, then your basic understanding of human nature is seriously flawed. Why would anyone just give out loans to individuals that clearly cannot repay them? Because the lenders were gambling on the housing market's rising value to continue indefinitely. And they gambled more than they could afford to lose.

    Sucks to be them.
    You're totally ignoring the role of the CRA; groups like ACORN and most importantly Fannie and Freddie. If HUD under Andrew Cuomo didn't change the regs. these mortgages NEVER would have been written. If Fannie and Freddie had stuck to dealing with FHA mortgages there would NOT be a credit crisis. If they hadn't been buying these mortgages; nobody in their right mind would have
    ever written them.

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    Default Re: woah .. check out this 'stealth' provision of the bailout bill

    Quote Originally Posted by Paris View Post
    Maybe I missed something, but did someone hold a gun to the heads of mortgage companies and force them to write these loans and give unqualified borrowers money?
    Yes, Bill Clinton and Janet Reno did it in the '90's. They got this whole ball rolling by forcing banks to stop red-lining.

    Shame on Bush and the Republicans for not being more forceful in their attempts to fix the problem, but this banking crisis is really the Democrat's baby.
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    Default Re: woah .. check out this 'stealth' provision of the bailout bill

    Maybe I missed something, but did someone hold a gun to the heads of mortgage companies and force them to write these loans and give unqualified borrowers money?
    ... eric didn't cover this point in sufficient detail. CRA enforcement DID hold a gun to the heads of banks via the threat of a 'community organization' veto preventing banks from opening new branches / merging / growing. CRA enforcement DID hold a gun to the heads of banks in the form of highly negative mainstream media publicity and expensive lawsuits being brought against them for racial discrimination ( with Barack Obama being a party to the precedent setting landmark Chicago case against Citi) if they failed to make X percent of minority / low income loans. Fannie and Freddie also held a de-facto gun to the heads of banks by enabling competing banks to offer lower interest rate mortgage loans to the same customer base via utilizing mortgage money at Fannie / Freddie 'gov't subsidized' interest rates instead of more expensive free market interest rates.

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    Default Re: woah .. check out this 'stealth' provision of the bailout bill

    So what is it? Do you want free and unfettered markets or do you want government regulation of those markets?

    It can't be both ways. It's impossible to have smaller government and free markets and have more government regulation of the market simultaneously.


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    Default Re: woah .. check out this 'stealth' provision of the bailout bill

    there's a difference between government regulation and government PARTICIPATION !

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    Default Re: woah .. check out this 'stealth' provision of the bailout bill

    Quote Originally Posted by Melonie View Post
    there's a difference between government regulation and government PARTICIPATION !
    Really? How so? How would the government regulate the private sector without participating in that regulation?

    The government regulates crime by participating in arresting, trying and convicting criminals.

    A law means absolutely nothing if there is no enforcement mechanism. When the government merely throws cash at a private entity to act to enforce laws, corruption ensues because no one is regulating the regulators. That was a big problem in the late 1800's with the Pinkertons and is a problem today with companies like Blackwater and KBR.

    When the government is regulating industry practices, they are accountable to us, the taxpayers. Who does Blackwater answer to when they screw up their jobs?


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    Default Re: woah .. check out this 'stealth' provision of the bailout bill

    Even under emergency conditions, it's business as usual in DC.

    Shame on Bush and the Republicans for not being more forceful in their attempts to fix the problem, but this banking crisis is really the Democrat's baby.
    No. Its the Rebublican administration's baby that got BURNED when no one was looking. That CRA thing occured over 10 years ago, plenty of time to change things if anyone cared.
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    Default Re: woah .. check out this 'stealth' provision of the bailout bill

    Quote Originally Posted by Melonie View Post
    ... eric didn't cover this point in sufficient detail. CRA enforcement DID hold a gun to the heads of banks via the threat of a 'community organization' veto preventing banks from opening new branches / merging / growing. CRA enforcement DID hold a gun to the heads of banks in the form of highly negative mainstream media publicity and expensive lawsuits being brought against them for racial discrimination ( with Barack Obama being a party to the precedent setting landmark Chicago case against Citi) if they failed to make X percent of minority / low income loans. Fannie and Freddie also held a de-facto gun to the heads of banks by enabling competing banks to offer lower interest rate mortgage loans to the same customer base via utilizing mortgage money at Fannie / Freddie 'gov't subsidized' interest rates instead of more expensive free market interest rates.
    Melonie,

    Please provide statistics showing what percentage of these bad loans, dollar-wise, were minority / low income loans.

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    Default Re: woah .. check out this 'stealth' provision of the bailout bill

    well, according to the '2007 Economic Trends' published by the Fed ( see ) ... private sector subprime loans constituted 14% of total mortgages, and exhibited a 13% delinquency rate. This compares to private sector prime loans constituting 76% of 'free market' mortgages that exhibited a 2.5% delinquency rate. Mortgage loans made directly through the gov't via the FHA and VA constitute the remaining 10% of mortgage loans, and no figures are available as to the breakdown. However it is logical to assume that a high percentage of FHA and VA loans were made to minority / low income borrowers since FHA policy re a targeted increase in subprime lending came from the same source as Fannie / Freddie policy re a targeted increase in subprime lending ( HUD ).

    There is also some interesting info on mortgage breakdowns available at - although it is now a bit dated.

    To answer your question, it's not possible to answer your question because only the banks and the gov't know who owes what. The repackaging of loans into tranched CDO's yields total estimated dollar loss figures, but obscures the information you are looking for ... or more precisely the point you are trying to float.

    I agree that, in general, the cost of housing financed by subprime loans is typically lower than the cost of housing financed by prime loans. However, the cost of a typical subprime financed house in the Bronx NY or Los Angeles CA is higher than the cost of a typical prime financed house in Bangor Maine or Biloxi Mississippi. Also, there is no justification to automatically assume that the average market price of total prime financed homes correlates to the average lender loss on delinquent prime financed homes, or that the average market price of total subprime financed homes correlates to the average lender loss on delinquent subprime financed homes.

    As to dollar recovery, your attempted point about average outstanding balances of delinquent subprime loans being lower than average outstanding balances of delinquent prime loans is probably true but not proveable. But there is also the issue of recovery ... i.e. how many other assets are available to partially satisfy creditors in a subprime bankruptcy filing versus a prime bankruptcy filing ... how many future subprime defaults versus prime defaults will NOT be foreclosed and partially recovered as a result of past and present 'bailout' laws. In addition, there is some logic to assume that prime financed home delinquencies tend to cluster at the low priced end of the scale (marginally qualified prime borrowers would have been limited in approvable loan amount ), whereas similar logic supports an assumption that subprime financed home delinquencies tend to cluster at the high priced end of the scale (speculators and simple over-reaching)

    In regard to guesswork, it's reasonable to assume that between outright subprime loans through banks plus subprime direct loans through FHA and VA, that some 20% of total mortgage loans are subprime. It is also reasonable to assume that the default rate on subprime loans is at least 5 times higher than that of prime loans. This would lead to a conclusion that 1/2 of all defaulted mortgage loans are subprime. As to average lender loss dollar values after bankruptcy / recovery for defaulted prime versus subprime loans, who the hell knows (or if they do know they're not telling). And lender losses on subprime loans that are now protected from foreclosure plus subject to 'forced renegotiation' via a HUD bureaucrat or a bankruptcy judge ( who are empowered to order a reduction in outstanding loan balance and a reduction in interest rate) adds a new financial loss variable to the overall lender loss equation.

    One thing is for certain ... delinquent subprime borrowers are a LARGE part of the bank losses problem.
    Last edited by Melonie; 10-05-2008 at 03:01 AM.

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    Default Re: woah .. check out this 'stealth' provision of the bailout bill

    Really? How so? How would the government regulate the private sector without participating in that regulation?
    well, for starters, the gov't could easily lay out regulations for private sector mortgage lenders WITHOUT also taking an active role in mortgage funding ( Fannie / Freddie ) and mortgage origination ( FHA ). However, with the passage of the 'bailout' bill, the federal government has arguably now inserted itself as an integral part of the mortgage / banking / real estate business. This active market participation by gov't entities has and will continue to distort natural market forces - will create 'moral hazard' - will create gov't selected 'winners' and 'losers' etc.


    When the government is regulating industry practices, they are accountable to us, the taxpayers. Who does Blackwater answer to when they screw up their jobs?
    Well, let's see. Ken Lay of ENRON juggled earnings and was subjected to criminal charges. Kozlowski of TYCO juggled earnings and was subjected to criminal charges. Same for WorldCom and others. However, Franklin Raines of Fannie Mae juggled earnings in exactly the same way, was allowed to settle instead of facing criminal charges (he also got to keep a large percentage of his ill-gotten bonus money), and is today an Obama advisor and potential Obama cabinet member i.e. the next Secretary of the Treasury ?. So much for accountability !

    !
    Last edited by Melonie; 10-05-2008 at 05:01 AM.

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