And guess where the US will borrow the money from to out lay all that cash...

China
[en.wikipedia.org]
they get us both ways.

I guess that's the problem of racking up trillions in debt funding wars.

Don't worry,buy on impulse and keep up with the Jone's all you want.Uncle Sam will save YOUR ass by saving his corporate buddy's at the sametime.But he'll also raise your taxes and cut out other programs and projects YOU need more than a house you "own" instead of rent.

I've been living life all wrong living with-in means,looking for sales,using budgets,buying generic,getting the lastest craze 10 years later,thinking about the consequences of my decisions.

I think they call it blissfull ignorance.Well you know what it literally pays to go through life blissfully ignorant without a care or thought in the world.

@EightIsEnough: Dude, you should read @art steinmetz's post. The idea that people can pin this on Bush is laughable. Blame FDR, LBJ, Chuck Shumer and any other number of idiots who had their hand in this long before Bush came on the scene.

Well, this makes a lot more sense than, say, the gov't bailing out the airline industry...

@incognit000: "If it was found that his business failure was the direct result of his own negligence or incompetence, he was crucifed."

I would like to subscribe to your newsletter.

(Somewhat) Seriously, what if "C level" officers could be personally liable for the damage they caused the general economy for government backed companies (e.g. mortgage companies, large banks, airlines, etc.) if they acted negligently. It's a litigation slippery slope, but the foundation is good- Through insuring, backing, subsidizing, etc. these companies, these companies have an obligation to the taxpayers to run their company in a competent manner that doesn't trade short term profitability for larger long term losses.

Good:
Idiots responsible were fired.
Fannie and Freddy won't collapse, resulting in a collapse of US currency and a global recession.

Bad:
We're on the hook for when the next round of idiots come in, and since they know that no matter how badly they fuck up they will still be bailed out, odds are they won't care too much about doing a good job.
Freddie and Fannie were foundes specifically so that the government doesn't have to hold the hand of the mortgage indistry, and this proves that 60 years of great leadership can be undone by the Idiot in Chief and his deregulation pen, leading me to doubt that this bailout is well thought out.

In Carthage, when a businessman who ran a business that was "critical to the state" happened to go under or experience a great financial loss, he was put on trial. If it was found that his business failure was the direct result of his own negligence or incompetence, he was crucifed.

Maybe we should bring that idea back.

What you say is true though. Our kids WILL be picking up the bill later. So will our Grandkids. Maybe not on this, but more then likely on something else.

We better start learning how to cook potatoes 101 ways!

Whether you are "fat cat" or a grandmother in FNMA stock or, for that matter, an Obama supporter, you are looking for the government to redistribute income to you. Sometimes it doesn't work out. Obviously, my opinion is it shouldn't.

The GSE's were monsters at birth. If you want to blame somebody for this mess, blame FDR, who created them, or LBJ who turned them into quasi-private mutants. They're already dead so that's no fun though.

Funny how the government (the BUSH Government) can get in the Home Mortgage business at tax payer expense, because it'll be "good for the taxpayers" and save the folks who invested....but mention National Health Care...and the Bush and McBush folks yell hell no...it'll cost the taxpayers too much.

Yeah, right!

Well the broker went out of business, and he had enough cash saved up to pay for Medical School, he's at Northwestern now. Those of you in the Chicago area should watch out for him. :)

My grandmother was always paranoid that the Depression would return. I don't think she'd roll over in her grave over this current economic horror story. She'd rise up and moan,
I...told..you....so!

How the taxpayers don't get a cut of the huge Wall Street bonuses, but when they screw up, we have to pay to bail them out?!

Um ... I get more money?

It's already increased. I'm paying off my student loans faster!

I don't know if this is a starter house or if we'll be here for the long haul -- it could probably fit two kids but would be pretty crowded at three -- but we've already been here for four years, and moving isn't the end of the world. As I'm not planning on having sextuplets, I'm probably set for another 6 years or so. If I have to move then, I have to move then. Maybe I'll be done paying off my student loans!

But we're big believers in the "not so big house" philosophy anyway. We'll probably be in a smaller house than most people think we "need" anyway.

Screw Freddie and Fannie. Let them take a total loss and let the borrowers (homeowners) keep their houses for free. The government didn't bail me out of my bad stock investments. These lenders made BAD decisions and they should be the ones eating the losses.

Great... Whoever wins, the malicious Republicans or the sloven Democrats, the taxpayer is screwed.
It's sad to see that the only on with the right solution, is deemed crazy and stupid and will be ignored. Where are you?

We has a $145K mortgage now, but hindsight being what it is, we probably should have bought more house since we now have 3 kids and the house is too small. Average increase of comps in my neighborhood had been about $100K, now it is about $75K, not bad, but still not enough for me to sell and get a better house in the market I'm in.

Sounds silly, but it really helped me to chart all this out, Especially since my utility bills are a lot more, and i had to put in a lot of money into appliances/furniture etc.

@bohemian: I don't mean for this to be rude, but you've been around the last 8+ years, right? CEO isn't going to change in the next 6 months or so. And depending on who's elected president, it will change a small amount or none at all.

I think we're too quick to default to blame the speculators. They account for some of these problems, not all. This is very similar to the 80's where Reagan talked about "welfare queens" when the actual number of these was probably less than 1%. But it got everyone riled up just like they wanted you to. Same here, they're going to conveniently blame speculators for the bulk of the problem when the real source of the problem is nuanced. That's right, it won't fit on a bumper sticker, so you'll have to think about it a bit:

1) Regulators not watching the banks loan standards carefully enough.
2) Banks dropping any real standards for loans. As I've suggested above, if you loaned $25k to a homeless person, who's at fault if they don't pay you back.
3) Housing price bust. This is a bit of a feedback loop as some of the pricing bust is caused by the loan defaults, which causes excess inventory.
4) Speculators
5) Irresponsible borrowers who thought they could refinance or "grow into" in their mortgage.
6) Gas prices, inflation, etc.
7) People being lured into a false sense of security about the market since stocks, productivity, consumer spending, and CEO pay were up, but wages and employment rates were down. So if Faux News can blame the alarmists for the slow-down, we can blame them for their false sense of security about the economy. F-U Cavuto.
8) People relying on credit cards and equity in their home to finance their lifestyle since wages weren't going up.

BTW, most federal backed loans have income limits and purchase price limits that are supposed to stop this from happening. Why people are defaulting on these loans I am guessing have more to do with house prices tanking than poorly written loans.

@JayDeEm: In my case, I decided what was "within my means" by comparing what the monthly cost for buying a house would be with what market rents are. My mortgage rep got my documents and said that I could qualify for a $200k house (pretty much anything in the area) with 20% down, and I simply decided not to spend every last cent I had available.

@ARP: To be fair, they always announce this kind of news over the weekend so that everyone can get have their sell orders entered when the market opens...

Luckily we defined our "means" by 1950s standards. :D We knew we didn't want to be house-poor, and we knew that we wanted to pay even less than 1/3 of take-home, if possible, because we had student loans to pay off.

Our realtor was an older woman who raised ELEVEN CHILDREN on one salary (AND WITH ONE BATHROOM!!!!!) for most of her life before going into real estate, so she was with us on the whole frugality thing and helped us find inexpensive, cute houses in safe neighborhoods. But we were APPALLED by what the bank approved us for, assuring us we'd have no trouble paying it. It would have been around 75% of our takehome, which would have left us with just enough to pay student loans and starve with no heat.

(We do not live in an overheated market. I know that 1/3 is not reasonable in overheated markets.)

Question: Are these companies associated or owned by sallie mae?

Wondering if I could consolidate my student loans at a decent rate. Thanks.

I am so frackin' P.O.ed about this. Case in point, a now former neighbor was a "developer". About 2 years ago he re-mortgaged his house to finance the purchase and construction of a "Monster" Million Dollar House here in Southwest Minneapolis. When I first heard of his plan, I knew it was going to end badly. Well, they finally let the bank take control of their old house. They're living in a rental now. And I hear that they are negotiating with the bank to let them take over the Monster House.

And in the end this neighbor is going to walk away without owning anything and no responsibility for his bad planning. No, now I'm going to be stuck covering the bill for his ineptitude. Feh!

I say if people have to suffer foreclosure and doom, so should the business' responsible. It's funny how individuals are just now seeing how skewed "Capitalism" really is......

HERE IT IS!!!

Statement by Secretary Henry M. Paulson, Jr. on Treasury and Federal Housing Finance Agency Action to Protect Financial Markets and Taxpayers

[www.treasury.gov]

@bilups: So, isn't that the "market" sorting things out? I thought people were capitalists? Yes, a little snark. But the people who are supposedly capitalists seem to have no problem letting shareholders reap profits and the public take on debt with any "can't fail" business. This encourages any large company to take any risks it wants, it's got a safety net. Combine that with the largest expansion of government in recent history (let alone the contractors) and who is the soclialist? Geez, at least in other socialist countries, I get healthcare, education, regulated cable prices, etc. Here I get none of the benefits all of the bad stuff.

@Optimistic Prime: The problem is that the way these things are set up precludes that normal response. They are unprecedented public/private institutions. just letting them die would basically destroy the economy.

@CaptainSemantics: That's a little overkill, don't you think? I expect what this will ultimately mean is bye-bye to low mortgage rates. In the late 70's /80's the average mortgage rate was like 21% !!!! While it would suck to see it return to that, the takeover of two bloated institutions that had no right existing in their current form in the first place is hardly a sign of the apocalypse. To make changes when things are failing is a sign of proactive behavior. The apocalypse would be if the gov't just said 'to hell with it' and let them fail.

The person selling us that loan (and trust me, the loan is a product which they are selling) asked if we were interested in a 5-year ARM, "because rates could come down in a few months" (that was when rates were 5-6%.) I figured rates are at historically comical lows, why would we get an ARM? We got a 30 year fixed.

When the Realtor and Loan Officer are both getting a percentage of the sale, of *course* they don't have your best interests at heart - no more than the salesman and loanie at a car dealership do. You have to look out for yourself.

That being said, not everyone is good with numbers, and many honest and hardworking people were taken advantage of.

"EIGHT is enough".

That's a little out of context. Ronald Regan actually said:

"Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it. "

An Obama supporter and voter and lifelong progressive quoting Reagan. These are interesting times.

My fiance and I have been together for more than ten years. We haven't ever bought a house because the prices have been too high for us (that is to say, we have an idea how much they should cost and they're far in excess of that). Now it looks like we'll never have one because our taxes will go up to protect the greedy bastards who live way beyond their means and are now whining about being homeless. Makes me want to kick a fricking whiner out of their house and move in, since I'm paying for it anyway.

And I think the idea that taxpayers are *now* paying for the people who overextended themselves is grossly generalized. Why don't you do some research on what other things your taxes go toward these days and THEN get your panties in a wad. If you are JUST getting upset NOW at the fact that your hard earned dollars are going to "bail out" people, then you obviously don't have a good understanding of how your money gets distributed in this country, regardless of the President in office.

This should have happened five years ago and in some ways was an inevitability. The system was flawed from the get go - you do not finance a mortgage market with private institutions set up by government. What you might expect to happen did indeed happen - those institutions took part in an orgy of speculation, got caught and hid the mess until the government had no choice but to step in.

What sucks is that it didn't happen until now, when things are seriously F****ED.

It's driving me crazy, but what movie is the header pick from? I know it's not "Network"

[consumerist.com]

Did you sell your home in California or Florida at the height of the bubble, thus making a huge profit? That extra money came from the taxpayers, essentially. Your welcome.

This is what you get when you infuse Democratic market manipulation into the free market. Why we needed these outfits when we had functioning capital markets is beyond me. Those who advocate Obama-like policies, take note that if the free market isn't doing it already it probably isn't a good idea. Kinda like loaning your sketchy cousin Eddie money when no one else will. You got to ask if those folks know something you don't.

"That means the fate of U.S. taxpayers rests squarely on the shoulders of the housing market and the global economy."

Fixed it.

BTW- I don't think it was an accident that this was announced late friday/over weekend and after the RNC convention had completed. I'm sure they sat on this information for bit.

A lot of personal finance articles focus on cutting out the excess things, which in many cases means cable, internet, phone, etc. But not very many of them consider that to cancel those services before a contract is up would be a lot in fees. I know, I considered canceling my satellite service today and it would have been about $340 in fees.

So to me, at least, living within my means is NOT canceling things prematurely, and to suck up the fact that I wanted internet, satellite television and a place with pool and gym access. It's okay, because I'm not wallowing in debt, but for others, a drastic move like actually moving might be warranted.

So I suppose being within your own means includes having the discipline to not go nuts with credit cards and to pay off your debt, whether you want to or not. And you should want to. Smart people realize most kinds of debt are very, very bad.

It's a real question, no snark intended. I'm not trying to dismiss the common sense element of the decision, I just want know how much the 'responsible' folks out there relied on advice from others.

To Junkmail...your wife's grandmother very likely has debt, not equity and would be made whole.

As a taxpayer I now own most of the houses in the US. This is going to be fun.

It's gonna get messy.

@junkmail: If your grandmother has 75K in common stock Edward Jones should be sued for negligence since most of her investments should be in bonds.

You know who's the only ones making serious money now? CEOs who don't need to worry about making mistakes, because if they do, the government will bail them out and they won't lose a penny of those pretty bonuses they get paid no matter what happens to their company. And you know who's paying the CEOs of all these companies bailed out by the government? Us.

I just laughed hysterically through the entire RNC. People really buy their BS, especially in the middle of the country, where they play to the fact that people in NYC and the "ruling" areas of the country routinely ridicule, mock, and generally treat the residents of the "flyover states" as ignorant hicks who don't deserve any consideration.

Your prize for acting this way, coastal people? Bush '00. Bush '04. And if we're unlucky...McCain '08.

People on that side of the fence (who don't know) will look at this and tout it as eveidence that gov't should just privatize everything, because then the losses wouldn't be spread to everyone else. Which is true, but...

What happens is that (as is evidenced here) when you lift regulations and turn a blind eye, bad things happen (good-bye mortgage market!). THEN, since they don't want the rich people who are responsible to foot the bill for their mistakes, they send in the same gov't that they had stop regulate things to save them and put the financial burden on US, collectively. US who are not typically as well-off.

Say one thing, do another, right?

Check, and check.

@MakGeek: So if a homeless guy off the street asks to borrow $25k from you, and you lend him the money, who's fault is it when he doesn't pay you back?

What I'm saying is that there's plenty of blame to go around. But the taxpayers are now asorbing their losses. So, who has the gains from all those years? Also, if they ever become profitable, will the taxpayers get that profit to pay us back for the fact that we subsidized their losses? Nope. So we have a situation where we pay for the losses but the shareholders/head officiers who are at least partially to blame for this mess get off scot free. In fact, they probably will get paid MORE once this turns around.

So if they become profitable again do the taxpayers get the profits too? Thought not.

I'm so sick of this neoconservative approach of private profits and public losses. And yet, they talk about the "market" "capitalism" and all the other buzzwords to scare you into thinking that socialism is just around the corner. Socialism has been here for a while, just not in the way they've scared you into thinking. Our version of socialism just for the wealthy and "can't fail" corporations, so regular peopel get zero benefit from it like other countries do (e.g. healthcare, education, infrastructure, etc). So my opinion is that we either become partially socialist a la Canada, UK, etc. or we become more capitalist and let shitty businesses fail.

/rant

@MakGeek: Agreed.

@junkmail:

if your wife's gran had 75k worth of fannie and freddie common stock, it might not be worth diddly when the market opens monday morning. being an edward jones rep means never having to say you're sorry. as woody allen observed, a broker is someone who invests your money until it's all gone.

Can somebody that knows what the hell they're talking about PM me about this? I don't have a lot of experience in these matters. My wife's grandmother has over $75K wrapped up in these assholes through Edward Jones. When things initially started looking bad, my wife and I advised her to contact EJ immediately to find the consequences of these events, and if necessary/possible, to pull her money out. It goes without saying that the EJ rep told her to "settle down" and "ride it out". "Everything will be fine." Now this happens, and they're saying the stockholders are screwed.

What are her options at this point? Even if every cent is still there, she's going to be penalized 25K for pulling out her money early, or whatever. Losing that 25K is obviously better than losing everything, but I don't know what to tell her now. Help?

TO DO: Add bailout massive bank failures to the list.

Ron Paul 2008. Sad to have to say it again, but he called these events in his books.

This will be good for PIMCO and the Chinese banks...large holders of the bonds. Tomorrow night here we can see how the Asian markets are doing (Monday am their time)

I worked hard not to get in debt, and now I get to bail out the assholes who were too stupid to only borrow what they could, not what they were TOLD they could. If any of you reading this are in hardship and not paying your mortgage, barring any job loss or family matters, I hope you rot in hell one day (period)

How big a sign of the apocalypse is this?

We're pretty much screwed, aren't we?