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Old 12-03-2008   #1
 
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Only a Conspiracy Theorist think..

Just a year ago I wouldn't have accused the left of the parody of a free-market economy I see below. So now we are to believe that the government can manipulate interest rates on 30 year mortgages to 4.5% with no unintended consequences? Joseph Stalin, aka Vissarionovich Dzhugashvili, would be proud...didn't O'bama change his name as well?

Maybe they could manipulate the stock market for me!

U.S. working on affordable mortgage plan: sources
  • Wednesday December 3, 2008, 8:01 pm EST
By John Poirier and Rachelle Younglai

WASHINGTON (Reuters) - The Treasury Department is developing a plan to try to reduce mortgage rates on home loans to 4.5 percent on typical mortgages by expanding its purchases of mortgage backed securities, sources familiar with the plan said on Wednesday.
The plan would see mortgage finance companies Fannie Mae (NYSE:FNM - News) and Freddie Mac (NYSE:FRE - News) expand their purchase of mortgage securities to help drive down borrowing costs, the sources said.
The 4.5 percent target interest rate is roughly one percentage point lower than the average rate currently on a 30-year, fixed rate mortgage.
Both the mortgage giants, which finance or guarantee about half of all U.S. mortgages were effectively nationalized by regulators in September after losses on mortgages eroded their capital.
Since they were taken over, the two largest sources of U.S. mortgage finance have become tools for policymakers wishing to lower the cost of home loans and break a wave of foreclosures.
The move would supplement a program announced last week by the Federal Reserve under which it plans to buy up to $600 billion in assets and debt from government-sponsored enterprises like Fannie Mae and Freddie Mac, one source said.
The announcement by the Fed last week helped to lower home mortgage rates by about a half-percentage point and sparked a jump in refinancings among homeowners.
U.S. mortgage applications surged by a record amount last week on news of the Fed's investments in Fannie Mae and Freddie Mac securities, according to data from the U.S. Mortgage Bankers Association on Wednesday.
RESCUE FUNDS
U.S. Treasury Secretary Henry Paulson has doled out hundreds of billions of dollars of a $700 billion financial rescue fund to banks since mid-October in an effort to stabilize financial markets.
But lawmakers have criticized Paulson for making big investments in banks while not giving direct aid to struggling homeowners.
Paulson has said he is duty-bound to help troubled borrowers under the terms of the rescue package and that he has been developing a new workable plan, after earlier abandoning a plan to buy bad loans from banks.
Paulson has been weighing whether to ask Congress for the second half of the $700 billion fund and is certain to face tough questions from lawmakers about how the first $350 was allocated.
(Reporting by John Poirier and Rachelle Younglai

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Old 12-03-2008   #2
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Dude, never trust a chick named Rachelle, don't you know anything?
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Old 12-03-2008   #3
 
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Mr. C- Just so you know, the Treasury Department is currently not run by "Leftists":



So ya know.....
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Old 12-04-2008   #4
 
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Haven't read the full article yet, but will. In the meantime...
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Old 12-04-2008   #5
 
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Quote:
Originally Posted by El Flaco View Post
Mr. C- Just so you know, the Treasury Department is currently not run by "Leftists":



So ya know.....
Yes, I know that a wasn't accusing the left of this play...my point was that only in my wildest dreams would I think something so socialistic would happen. And if it did I figured it would be orchestrated by the left not right wing appointees.
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Old 12-04-2008   #6
 
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Yeah, that's been mystifying me. So many of the most ardent supporters of the free market - i.e. the Big 3 auto companies, pretty much the entire banking sector in the US, and the Bush administration - only seem to chafe at government interference when it has the potential to cut into their (private) profits. As soon as those profits are threatened, then it's all about using the public's money to bail them out. Looking at the end product, how is that not some wacky-assed form of socialism?

If we're going to spend hundreds of billions of dollars to shore up private companies' profits under a rightwing governing philosophy, why don't we just throw in the towel and get some national health insurance instead? I know I would appreciate that a little more than knowing my taxes are reinforcing the short-term profit mongering that has gotten so many of these companies in trouble in the first place.
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Old 12-04-2008   #7
 
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Why not split the 34 billion thats going to the car companies or whatever between all the citizens and let us stimulate the economy? I sure would like it.
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Old 12-04-2008   #8
 
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Quote:
Originally Posted by bluesky View Post
Yeah, that's been mystifying me. So many of the most ardent supporters of the free market - i.e. the Big 3 auto companies, pretty much the entire banking sector in the US, and the Bush administration - only seem to chafe at government interference when it has the potential to cut into their (private) profits. As soon as those profits are threatened, then it's all about using the public's money to bail them out. Looking at the end product, how is that not some wacky-assed form of socialism?

If we're going to spend hundreds of billions of dollars to shore up private companies'






profits under a rightwing governing philosophy, why don't we just throw in the towel and get some national health insurance instead? I know I would appreciate that a little more than knowing my taxes are reinforcing the short-term profit mongering that has gotten so many of these companies in trouble in the first place.

Who is this Bluesky guy and why does he be seem to making sense. Eventhough I'm opposed to nationalized health, I'd rather have it go there then mortgages or auto companies. Did anyone here the "fine print" behind the auto the auto bail will closer to a Billion!

I'd like to here Helio's economic analysis.
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Old 12-05-2008   #9
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The more I have read about the Big 3 (now the little 3), the more I realize they have a larger problem with pensions than I realized before. When I originally examined this, I wanted any 'future operation' concept to guarantee promises made in the past with regard to retirees. That's still important, but at the basic 1-to-1 level, the future operation can't guarantee everything it already has. It just can't do it. So people who retired are going to lose money they'd been promised, and that they'd budgeted their entire livlihoods around. That SUX, but it's the only way these companies can continue to exist. And if they go out of existence, everyone loses everything they were promised anyway... So some reconciliation of those accounts has to take place in a humane way.

As for whether or not I believe these entities should be kept from Bankruptcy Liquidation, I say yes, their survival should be ensured.

I have a different motivator for these companies than I would for Wall Street companies (I was never in favor of TARP as it was implemented, and hey, looks like my concerns were accurate). For the Big 3, I believe they are essential to the nation primarily because they produce much of the technology for our national defense. Whether it's Hummers, Abrams, Strykers, or LAV-25s, I believe (and it may be more emotional than rational) that we need Detroit's industry to ensure national defense.

I could see letting Chrysler go, however, because they are a privately held entity. And I think consolidating one failure into two 'victors' is probably going to provide some good overall, so Eff Chrysler.

There was a great article in Time.com about Detroit's current predicament.

Where I discussed this issue before, I said that any aid should require Chapter 11 Restructuring before the government cruised in to offer its support. I now retract that requirement, because analysis shows that if these companies have the stigma of "bankruptcy" associated with them, consumers are going to avoid these brands and buy elsewhere. So Bankruptcy would have the snowball effect.

The UAW has stepped forward and offered to renegotiate (which was one of the reasons I felt Chapter 11 was necessary - to force UAW's hand). Good for them.

Management has written down on paper that it understands the giant-SUV/Truck era is over, and making that market the lions' share strategy toward profitability is a losing bet. Ford, in particular, has a promising business plan for electric-hybrids, transitioning to electric cars, with a present-time emphasis on increasing small car profitability.

(Full Disclosure: I pay more attention to Ford and defend them more strongly because my fiance's father is a retired Ford engine designer; however I do see that they are in the strongest competitive position of the 3)

In all of this, however, and after skimming (and I mean skimming) over some analysis of what these companies brought to Congress yesterday, these 'plans' are over-generalized, non-specific, and rely on assumptions whose probabilities of being true are unknowable in this economy...

So if Congress allocates money to these companies, I would say that it is in fact only the first payment of several, and overall costs will go higher.

I think we should save Ford and GM, and allow Chyrsler to perish and be consolidated.

Behind this goal, I understand that the government has already spent a buttload on TARP, on Fannie/Freddie, on AIG, etc. Is there money left over for Detroit? I don't know. It's too bad we rushed into TARP and bailing out these financial companies, I think. I wish we were still debating all these bailouts, rather than to have spent hundreds of billions trying to catch a greased pig. I was never convinced that it was necessary to do bailouts before the new administration is sworn in, and I felt very strongly more analysis was needed. I think (but don't assert unequivocally) that the trend since September has proven that that option would have been superior...
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Old 12-05-2008   #10
 
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Ah, there's always a human factor in there that I forget about... It would be nice if retirement savings and associated costs were standard in every big company around the world. Unfortunately, the casualties in a global market ultimately end up being whatever the Chinese don't give to their workers, and that's a whole lot. Although I'm not a supporter of public bailouts for failed business models I don't want to see the collapse of these companies take out the retired workers' living incomes.

At this point in the game, our hand is kinda forced. Good for the UAW for coming forward. Someone in there realizes that the old ways of doing business (and labor) just aren't going to work so well on a world stage anymore.
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