Consequences of Massive Bailouts

[Teresa]

I guess I haven't witnessed one single person, living frugally or living the "high life", get a free bail out of any kind. yes, I'm watching good people lose homes, some of them very nice homes. they are working very hard to rebuild lives and financial means. not a single one is going to be comfortable financially for a very long time due to their investments in their careers of real estate and development/building. its a double whammy for them. there is nothing free whatsoever about what they are dealing with here. or elsewhere for that matter.

maybe there are those who work the system in a way that is completely inappropriate. but I don't know who those people are and I probably wouldn't have any reason to know them or care what they do. consequences do catch up to people doing the wrong thing for very long (if they are in fact doing anything wrong) - but that is really not what has caused this mess. certain people always work the system. nothing whatsoever new.

I think every single person here on this thread has hit the nail on the head with the many factors involved in this economy. but when we start to say people did this to themselves because they failed to make good decisions because they did not behave as I did over the last 25 years, well I do take exception. only because I do know too many around me who just do not deserve one extra ounce of negative thought or blame. I know how they are already blaming themselves.

 

[Busta Hustle]

The failed and failing banks were part of what Hank Paulson called the "system". Remember he never said he wanted to save the economy he wanted to preserve the system. Now those failed banks for a number of years were able to sell all their mortgages to ibanks for bundling and selling as derivatives to fund managers and gov. investors etc.

Colonial and Wamu (probably as well as others) set up mtg brokers with less regulation than FDIC banks to sell even the crappiest of loans, no risk when you can sell the junk plus huge upfront fees. It was only when the system realized that the quant algorithms were bogus and ponzi like did the local banks get stuck holding the bag of unsellable loans.

Many years before the bust some called the CDO and CDS market economic weapons of mass destruction. But the lobbyist did their jobs successfully in 2000 and again in 2010 (see the watering down of derivatives regulation.)

 

[Lynnie]

Dune-AHH and Tootsie,

Thank you for such thoughtful, compassionate posts and positions with this mess. There are several here who have repeatedly pointed out that this is not a one size fits all situation and that every case has its own extenuating circumstances.

I know good people, great people who are losing their homes right now and it is heartbreaking. Florida is seriously affected by this economy and for many the only way out is to walk away.

A lot of these people deserve a pat on the back and an 'attaboy' for trying to do the right thing AND for actually doing the right thing for as long as they did, however have been caught up in a very repressive economy that has been unforgiving and is tenuous at best. I know no one who has been cavalier in their decision, but rather wrangled with the options and lost sleep until slamming into their personal thresholds before missing their first mortgage payment. They are and have depleted their savings and retirement plans.

The banks are still playing games. They won't talk modification or short sale unless payments have been missed thereby backing people into corners and leaving practically no choices. For the Gubernatorial Race in GA, the democratic nominee is making this his #1 platform - banks cannot foreclose without mandatory negotiation. (Foreclosure in GA is easy because it's not a judicial process like in Florida.) This makes sense to me and GA is not a state with as heavy a foreclosure rate like FL, AZ, CA and NV.

Also, statistically, the percentage of foreclosures nationwide are at 6%. Listening to the news makes it seem like we are at 50% or more. Banks/creditors build into their proformas (and rates) a default rate of approximately 3% +/-. I fear for many what is down the road with commercial properties sitting vacant and anchors filing BK, closing their doors. I look forward to the entire world pulling out of this and no more blame because there is plenty to go around.

 

[Teresa]

very well said Lynnie. thank you .

you know, I've seen a range of folks lose jobs, lose property, etc. even though everyone is effected greatly, it does appear that the people with the "most" to lose are hit hardest. that may be an unfair statement, I don't know if it has a bit of validity. But, in SoWal where real estate and development were the main industry, people worked very hard working and building their careers and personal investments. whoever said it was money for nothing is wrong. in the end there were plenty of inexperienced people throwing money at investments for a flip. but those were amateurs. but the pros were working their butts off around here many years building, developing, buying, selling, etc etc etc. yes, the market built up to a frenzy. yes, we knew something had to give. but no one really knew how or what or when.

my point is that those who had worked long and hard to build their careers in a real estate based community were the ones to take the biggest hits. many have hit the road. many remain here to stick with a community they helped build. they are even now working harder than ever to work within a new market. they are still here, humbled, and just as professional, just as giving to their families and community, and just as wonderful as ever. living in SoWal is always a good thing, it can be healing, even when times are difficult.