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McArdle on the bailout proposals - Condensing fact from the vapor of nuance [entries|archive|friends|userinfo]

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McArdle on the bailout proposals [Sep. 24th, 2008|03:26 pm]
A particularly excellent post from Megan McArdle on the bailout proposals.
I feel bad for the homeowners, and outraged that so many people got gigantic sums of money for screwing up the financial system. But that money's gone. The mortgage bankers have already mostly lost their jobs, because their market (and often their firm) collapsed. Much of the outrageous compensation was in now worthless (or nearly worthless) company stock. And even if we dun, say, the top executives at Bear, Lehman, and AIG (I'm not opposed to doing so if it's legal), we will get only a trivial fraction of the money lost in these markets. You know who made most of the money on the subprime bubble? Anyone who bought a house in the last ten years. Yes, that's right, you, with your low fixed interest rate on a reasonably sized house. You're the profiteer who laughed all the way to the bank.

[User Picture]From: bostonista
2008-09-24 07:45 pm (UTC)

I disagree with her statement that this is somehow a teachable moment for homebuyers, and that a bailout negates the lesson. The point of the bailout is to save mortgage-backed securities, right? The little homebuyers are just on the end of the massive credit food chain.

Also, re: low fixed interest rate, etc.: guilty as charged. Thankfully.
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[User Picture]From: harryh
2008-09-24 07:48 pm (UTC)
I don't think that she's saying that it's a teachable moment for the homebuyers or, for that matter, the various Wall St financial entities that were also part of the problem. I think she's saying that we'll be better off if we don't worry so much about blame and/or fairness and just concentrate on fixing the problem.
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[User Picture]From: bostonista
2008-09-24 07:49 pm (UTC)
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[User Picture]From: queen_elvis
2008-09-24 08:12 pm (UTC)
Man, I need to go to the library and get an Econ 101 book.

But even I can agree that we are better off moving past blame to fixing the problem and trying to avoid having it happen again. Also, I like that people on all sides of the aisle can agree that this smells like a power grab.
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[User Picture]From: joshc
2008-09-25 01:51 am (UTC)
Isn't a big part of the problem that lots of people bought houses in the last ten years with variable interest rates (that they weren't able to pay for when the magic introductory low rate disappeared)?
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[User Picture]From: harryh
2008-09-25 01:57 am (UTC)
The people that bought relatively recently are running into that problem. People that bought far enough before the peak built up enough equity that they were able to refinance when intro rate disappeared. This is what the recent buyers were counting on as well, so when the housing price bubble popped they got into a world of problems.
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[User Picture]From: seratonein
2008-09-25 05:02 am (UTC)
Yes, that's right, you, with your low fixed interest rate on a reasonably sized house. You're the profiteer who laughed all the way to the bank.

well, i am still making payments on my mortgage, but i won't have the chance to be a profiteer until the market recovers ;)

it will be interesting to see if WaMu survives on its own, or if my mortgage gets passed over to a different institution.
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[User Picture]From: camiolo
2008-09-26 01:41 pm (UTC)
The part of the bailout proposal that's missing is the upside. We keep hearing how we might lose $700 B. But what might Uncle Sam make?
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