Consequences of Massive Bailouts

[30ashopper]

This all sounds very reasonable to me. I guess I had the impression that folks wanted more blood.

Actually- for many, the ability to start out from zero/with zero is like the promised land.

It's really not that bad a deal either for the homeowner, they lose the interest payments they've made, any down payment, and they take a credit scoring hit. Most probably didn't pay big down payments, and some even had LOCs that were used to buy other stuff, or were used to pay off other loans! (I've got a ex-neighbor that did that, used the LOC to pay off his primary mortgage, and walked away from the second home. Unbelievable!) The bank takes the biggest hit of all, they have to cover the loss on the house.

 

[30ashopper]

Andy, I know you believe you are describing people. But you're not. Your description better fits the corporations.

The little guy loses everything. The bank gets the asset, a bailout and then pursues a deficiency judgement. The shareholders get a dividend check. The executives get bonus check. And the little guy as a bonus gets your stigma and dogma.

The bank takes the loss on the house. A lot of these banks are now failing because of this.

CRimages: 2010-05-23

 

[scooterbug44]

The bank takes the loss on the house. A lot of these banks are now failing because of this.

CRimages: 2010-05-23

Damn! That is a sobering list - with too many familiar names and locations!

 

[LuciferSam]

The bank takes the loss on the house. A lot of these banks are now failing because of this.

CRimages: 2010-05-23

I'm not an economist, but isn't it indeed true that if too many banks fail, lending goes way down and the economy goes into the crapper. So isn't a bailout of the banks effectively a bailout of people who have defaulted on their loans? Sure looks that way to me.

 

[DuneAHH]

Which one?

The hurricane destroys my house game plan? The fire destroys my house game plan (it's a different plan than the hurricane)? The unemployed game plan? The oil spill takes out the entire Sowal economy game plan? The I get sued somehow and loose all my assets game plan? The medical emergency game plan? The medical emergency if I lose my health insurance/they refuse to pay game plan? The how do I dress myself well if I go blind game plan? The my bank fails game plan? The entire economy melts down game plan? The identity theft game plan?

The absolute worst case scenario is that I fall back on one of my safety nets and use it to tide me over until I can get back on my feet somehow - insurance, family, friends, government handouts, you name it.

I've never been rich, so I don't have far to fall, don't worry about appearances, and I will do just about anything if necessary. Hell, I'll go to different Sowaller's houses and mooch dinner/wine on a rotation in exchange for chores if that is what it takes to stay fed.

I started out as an agricultural worker (machete provided) at $5 an hour and a babysitter back when you got $6 an hour for 5 kids and wages have gone up since then.

Every single one of them... with every single Safety net tapped out!

You and I were raised in very very similar backgrounds... same values, strong work ethic, thoughtful teachings from pioneer families made strong through experience, strife, deprivation & hardship.

The very-very bottom line passed down from my forebears is "SURVIVE and the King's court be damned." Somewhere in the priorities mix, those teachings included knowing when to cut your losses and walk away from your farm payment before you lose the last mule & milk cow. And above all... cautions about not being too hard on your neighbors, 'cuz one day you may be standing next to them... needing them to teach you how to spear snapping turtles out of the creek for supper!

 

[DuneAHH]

I'm not an economist, but isn't it indeed true that if too many banks fail, lending goes way down and the economy goes into the crapper. So isn't a bailout of the banks effectively a bailout of people who have defaulted on their loans? Sure looks that way to me.

What are the banks doing with the bailout funds?

Are they proactively utilizing the funds to work with people who want to do the right thing? NO they are not. They are cutting off their noses to spite their own faces. They are so fixated on their pieces of paper that they won't think outside the box to save their own arses.

How about using some of those bailout funds to proactively modify fixed loan terms (change 15year to 30year terms... or just flat out lower 8% loans to 4% loans) BEFORE people are totally tapped & in default? Why not get over themselves and their pieces of paper and accept partial payments? Wouldn't it be better in the long run, to work with folks before they're tapped dry and stop paying? To actually get down in the trenches, loan-by-loan, and seek out ways to cut people's payments by a MEANINGFUL amount... keep them paying SOMETHING for 30 more years rather than 'in full' for 30 more days?

Bird-in-the bush-and-all-that-jazz?
The banks may have played the 'coy debutante' game for too long.

Considering the demographics... are today's 50-60 year old defaulters likely to let their Depends get in a wad over cobwebby deficiency judgments when they're 75-85 years old?

 

[scooterbug44]

I just can't get over the fact that the banks won't accept a partial mortgage payment when the other option is 0 and a foreclosure process that costs the bank money and is sure to end in a loss.

The Fictional Bank of Scooterbug would be happy to get a partial payment instead of none at all in this situation and the interest on the unpaid amount is in the bank's favor. Plus every partial payment improves the bank's balance sheet just a little bit.

They aren't moving forward quickly with foreclosures - I think the FL average is in the 500 day range, the short sale process is still a cluster, they don't want these properties and they aren't selling, so WHAT DO THEY HAVE TO LOSE by accepting partial payments?

 

[30ashopper]

What are the banks doing with the bailout funds?

Not much. Most of the money lent has been paid back. The FED also purchased stock, the proceeds of which went into increasing savings for capital requirements. Most of this money exists in a virtual world maintained by a computer at the FED. (i.e., it doesn't exist.)

 

[Teresa]

Every single one of them... with every single Safety net tapped out!

You and I were raised in very very similar backgrounds... same values, strong work ethic, thoughtful teachings from pioneer families made strong through experience, strife, deprivation & hardship.

The very-very bottom line passed down from my forebears is "SURVIVE and the King's court be damned." Somewhere in the priorities mix, those teachings included knowing when to cut your losses and walk away from your farm payment before you lose the last mule & milk cow. And above all... cautions about not being too hard on your neighbors, 'cuz one day you may be standing next to them... needing them to teach you how to spear snapping turtles out of the creek for supper!

thank you for putting things into a more human, thoughtful perspective Dune-ahhh, as you usually do. also, let me point out that most of us came from the same background with strong work ethic, strong families, educated, successful but not without hardship - and most of us were raised to work hard to build our home and family - and also to live within our means. nearly every friend and family member I have ever known is highly responsible in their personal financial and other matters. though all of our experiences and perspectives are different.

I just wish "how I was raised" were not part of a discussion about real people here doing the best they can in a really hard situation. . because you are so right: it could be YOU. (I'm not talking about you Dune-ahhh.. you so definitely get it). It is about a lot of economic/social/business/corporate/government factors coming together over the last dozen or so years. It isn't all about how you were raised or what kind of person you are, or even what kind of decisions you have made. these are personal judgments which may or may not apply but I have a hard time reading some of these posts making such sweeping statements. none of which apply to a single person I know.

 

[LuciferSam]

What are the banks doing with the bailout funds?

Are they proactively utilizing the funds to work with people who want to do the right thing? NO they are not. They are cutting off their noses to spite their own faces. They are so fixated on their pieces of paper that they won't think outside the box to save their own arses.

How about using some of those bailout funds to proactively modify fixed loan terms (change 15year to 30year terms... or just flat out lower 8% loans to 4% loans) BEFORE people are totally tapped & in default? Why not get over themselves and their pieces of paper and accept partial payments? Wouldn't it be better in the long run, to work with folks before they're tapped dry and stop paying? To actually get down in the trenches, loan-by-loan, and seek out ways to cut people's payments by a MEANINGFUL amount... keep them paying SOMETHING for 30 more years rather than 'in full' for 30 more days?

Bird-in-the bush-and-all-that-jazz?
The banks may have played the 'coy debutante' game for too long.

Considering the demographics... are today's 50-60 year old defaulters likely to let their Depends get in a wad over cobwebby deficiency judgments when they're 75-85 years old?

I'm not sure what they're doing with the bailout money. The smarter banks might be making better loans for one thing. Some of them have paid some of the money back. Thing is, a major source of their income has always been things like fees and credit card interest, so they don't really have to worry about saving their arses.