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kavajava
Penny Collector Member
USA
490 Posts |
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jadedragon
Administrator
Canada
3788 Posts |
Posted - 09/08/2008 : 06:27:59
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CNN is speculating that this bailout/takeover could lead to lower interest rates, maybe below 6% which will support the housing market. They are also saying this is going to cost the taxpayer up to $200 Billion Dollars (I hope I got that right - numbers that large stress me out!)
My assessment is people will have an easier time affording debt on thier home, but they will be paying through the nose as taxpayers for the privilage. The US banking industry is truly out of control. It has been far to easy to get a high ratio home loan. When I was selling real estate in Missouri I write purchase contracts for people that I wouldn't personally loan $100 to because I might never see my money again, yet they were getting 100%+ financing from the banks, thanks to Freddie and Fannie. The banks don't have to worry about collecting the loans, and as long as someone pays that insurance premium, the GSE just keep making loans. It all works pretty good as long as home values keep going up which allowed all the loser loans to get paid off when the borrower sold the home for a profit.
But when the economy goes south, this crazy lending leads directly to the current bank failures and the credit crunch.
Compare to Canada where most borrowers need 20% down (few exceptions, with a big insurance premium), strong verified income, and good credit rating. We are starting to suffer colateral damage from the US melt down, but we are not at any risk for mass foreclosures or any bank failures. Somehow the US is going to need to move its lending system more in line with Canada's if Americans are ever going to get away from a cycle of free for all lending followed by massive foreclosures followed by bank failures that we saw in the S&L crises and repeating today. |
“The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.” – George Bernard Shaw.
Why Copper Bullion ~~~ Interview with Silver Bullion Producer Market Harmony
Passive Income blog |
Edited by - jadedragon on 09/08/2008 06:40:08 |
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eharrison
Penny Pincher Member
USA
234 Posts |
Posted - 09/08/2008 : 15:12:48
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Welcome to the beginning of the great depression.
This is the largest government bailout in...maybe the history of time. The government now owns half of America's mortgages. Straight up communism.
They will also become the most effective collecting group. People might be able to dodge Countrywide, Chase bank, or others however when the government comes a knockin' things are a little different.
This is one of the saddest days in recent memory. |
Freedom is popular
That's why I voted
Ron Paul! |
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jadedragon
Administrator
Canada
3788 Posts |
Posted - 09/08/2008 : 15:31:47
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The Chinese and Russians were dumping Fannie and Fredie securities like crazy inspite of the impliciate government guarentee, leading directly to the timing of this takeover. Russia and China must have been using all the money from selling mortgage pools to buy other US government backed debt or just US dollars because the US Dollar is going strong, against all logic, which gives the appearance of depressed commodity prices when expressed in US dollars. The price of Silver expressed in Canadian Dollars did not really move week over last, but the strong US Dollar caused silver to drop relative to the US Dollar.
The mortgage market takeover is further boosting the US Dollar as investors figure this move will prevent worse bloodletting. Interesting times we live in. |
“The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.” – George Bernard Shaw.
Why Copper Bullion ~~~ Interview with Silver Bullion Producer Market Harmony
Passive Income blog |
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horgad
1000+ Penny Miser Member
USA
1641 Posts |
 Posted - 09/08/2008 : 18:21:49
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One of the stated goals of the government take-over is to make it easier for people to get mortgages. So now that the government is in charge of issuing home loans, they will likely try to re-inflate the housing bubble using tax payers dollars. The only thing that could stop their plan would be an all out dollar crash.
Fundamentally, of course, this is all dollar bearish and bullish for gold, silver, and even lowly copper. Meanwhile, we continue to get kicked in the nads. |
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Bailout of Fannie Mae and Freddie Mac
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