Why would Republicans in Congress rather help too-big-to-fail banks than struggling homeowners?

They're just protecting their donor base best interests...........

It's all about collapsing the US Economy and bringing in a neo-feudal America via debt slavery.

The American Dream Film-Full Length
 
https://www.youtube.com/watch?v=tGk5ioEXlIM

The Money Masters.

http://video.google.com/videoplay?docid=-515319560256183936&q=The+money+changers&ei=Zd4QSMjvB47YqAKQtJmzBA

Police State 4:  The Rise of FEMA
 
http://www.youtube.com/watch?v=Klqv9t1zVww

Police State 3:  Total Enslavement
 
http://video.google.com/videoplay?docid=-448659287463550973
 
 
Police State 2:  The Takeover
 
http://video.google.com/videoplay?docid=2758880303660529314#

Police State 2000

http://video.google.com/videoplay?docid=-1551348336255792191&ei=li3YSe2vEInUrQLMhunlAg&q=Police+state+2000

There are many millions of Americans that have bigger problems than oweing more on their house than it is worth.  I say we set priorities.

As you say yourself, we are in the sixth year of this nonsense (actually the seventh, home prices per square foot peaked in summer 2005.  Not counting the years of the bubble inflating to everyone's ecstatic delight.)  Why pour more resources down this hole?

You forgot to mention the prison camps for all the bad people........

Nope that's where all the Police State documentaries come in.

They are turning their backs on the people who voted for them because they must now get on their knees for the "people" who paid for those votes.

Thom how on Earth is it you think Banks caused the housing crisis? What did they do exactly? Surely if they were foreclosing on people who were paying their mortgage then they would be in breach in contract and be liable to a lawsuit?

I don't get it? Can some one please explain it?

Sigh, do you follow anything or do you depend upon us to explain and educate you?  Did you notice the mortgage loan racket where the banks sold off the bad paper and churned all the rated securities so they would not be holding the bag when the loans went bad?  No.  You were probably dittoheading.

After all, blaming poor people who you presume to be colored for wanting to be homeowners when the mortgage loan officers were promising them that they were making a great investment and that rising housing prices would make the Dream possible for them is far easier than confronting the idea that the powerful were snookering them.  Or, if they were snookered, they must be blamed for being fooled.

Do you understand that people who were paying their mortgages found themselves under water as the housing market undercut their home's value due to the fraud of the mortgage bandits?  If the houses on your block get foreclosed, the value of your own house falls even if you have done everything right.  Do you get the fact that those who were paid commissions and bonuses for moving over-priced properties are not around later?  Do you appreciate that banks that sold these mortgages made money on the deal and will make money on the foreclosures unless there is a new cop on the beat?

How on earth can you dare post this crap and expect anyone who knows anything not to appreciate how ignorant you are?  So, choose.  You either need to sit still and learn from those who understand what happened, or you need to go follow Romney around as a sycophant.  He would love you for not getting it.

I'm honestly trying to find out what went wrong, and you seem very educated an knowledgable of the situation. I'd love to find out more about "when the loans went bad", as you seem to think this is the core of the problem.

What is it exactly that made them go "bad" as you put it?

And yet today they are not foreclosing on people who are not paying their mortgage... in some instances, for years.

I don't put all of the blame for this mess on the banks, but more on the ratings agencies and the local appraisers.  Those are the folks where the buck should have stopped - the loan would not have been approved, and the investors would not have bought the CDO's.  Did the banks exert undue pressure on the ratings agencies, the local appraisers, and the politicians to not enforce the regulations, to get the profits they sought?  Of course. But there were others.

That film deals with the wheeling and dealing of these "toxic" or "bad" loans. I'm trying to go one step back and try to find how we got to these two different classes or subsets of loans, "good" and bad/toxic".

Is it fair to assume that if 100% of loans were in the "good" category that none of the financial meldown would have happened? If this is true, then the key to identifying the root cause of the crisis is to examine what actually happened to make the loan go "toxic".

In general, the loan payments re-set at much higher interest rates after several years....in many  cases doubling the mortgage payment.  Loans were made and taken on the assumption that housing prices would continue to rise and loans could be re-negotiated at low interest rates before the increase in mortgage payments took effect.

Banksters, knowing that wouldn't happen, bundled that category of mortgages, sold lthem as triple A securities to their investor clients and then bet on the derivatives market that they would turn sour. Banksters and financiers taking the opposing bets couldn't pay off the winners.

Losers became insolvent because they couldn't pay the bets. Winners became insolvent because non-payment made their own financial paper worthless.

The economy tanked and then even non-sub-prime loans were effected. Unemployment rose and mortgage defaults expanded. to include the customary market.

Retired Monk - "Ideology is a disease"

The best source of information that I've found on this whole fiasco is Ben Jones' thehousingbubbleblog.com It goes back to early 2005 (maybe even 2004) and contiues to this day.

Calperson, I hope the above posts answer you sincer inquiry.  I am sorry if I was rude or short about my response, but there really has been a lot of public exposure on liberal sites in general about the precise way this took place.  I admit that finance and all the players involved can be confusing and that many people of good persona taste and values stay away from politics and Wall St. crimes because they are ugly and nasty.  The popularity of 'reality tv' is testimony to the need for a narcotic substitute for real reality.  For those who "love America" and want to live in their patriotic dreams, all this stuff is emotionally and psychologically disturbing.  Avoidance is a natural reaction.  To want to know, you have to be ready to give up your favorite myths and flattering lies about America and ourselves.  To be good in therapy, you have to get past revulsion and disgust.  To really want to change, you have to face a lot of personal stuff and not just blame others.

This is why Hedges is good, and hard, for Liberals.  He makes us address our shit and not just get mad at the Con crap.  It does not make the latter less crappy or toxic, but it does explode the binary polemic.

The deregulation of banking and the derivatives markets allowed for financial wizards to create new, innovative products that in 1998 would have been considered illegal, and in any rational person would have rejected. But once the mania starts, rational people become scarce.

So PickAPayment loans go from moneymakers at the front of the bubble, to toxic on the downside. The subprime market went from foreclosure rates of 6% in 2005 to 18% in 2008, because the market ran out of suckers. Everyone knew prices would always go up, so everyone bought at higher prices, until they ran out of suckers.

It would have taken $80 billion to bail the bad mortgages and make them whole. Instead, we chose to bail the derivative players on bets that never would have come due had mortgages been bailed. So far, $13 trillion and counting. according to the audit made on the Fed.

An $80 billion "give-a-way" to homeowners was an ideolgical no no. A $13 trillion bail for banksters  and financiers was just fine. Austerity for the many to pay for enriching the few seems to be the chosen global course.

Retired Monk - "Ideology is a disease"

Even if this were true, and I don't think that it is true, it would not have solved the problem. 

The subprime borrowers distorted the comps and caused future buyers (and future cash-out refinanciers) to get more money.  Comps don't reflect if the sale was all cash, 30-year fixed, or NINJA.

For every subprime borrower there were 5 non-subprime borrowers.  All those houses were overvalued and overleveraged.

Thom,

The Tea Party would like nothing better than to see failing banks fail and their CEOs thrown out on the street with all of their assets plundered by creditors starting with pension funds getting their investment back.

Ask obama and virtually the entire progressive movement that voted in lockstep with bush on why they bailed out the failing banks?

Of course, we already know the answer when you look at the make-up of obama's cabinet -- mostly wall street types. 

progressive want to plunder responsible Main street citizens to bailout negligent, perhaps greedy, homeowners who overpaid for homes -- often without putting any money down.   Big government republicans want to bailout equally negligent, shortsighted and greedy corporate interests that issued bad loans and speculative investments.

IN contrast, the Tea Party opposes bailouts of all kind unless given by civic institutions in a free, voluntary and competitive marketplace like Thom's Salem house charity that I guarantee provides far more bang per buck than any for profit government scam.

and yes, government is a 'for profit' entity -- if you dont believe that, I got some bridges to sell you.

Give me some names that are up for reelection this year and I'll help you get them out of Washington.

The American Dream Film-Full Length
 
https://www.youtube.com/watch?v=tGk5ioEXlIM

This film goes into the extended history of banking.....  Give yourself 4 hours this weekend and absorb the info.

The Money Masters.

http://video.google.com/videoplay?docid=-515319560256183936&q=The+money+changers&ei=Zd4QSMjvB47YqAKQtJmzBA

poly replies: Actually, it is true. The mortgages that turned sour had multiple derivative bets made upon them. Trillions! Had they been bailed, derivative payouts never would have been triggered. The housing market would ,have collapsed much later and without all the drama and the bankrupting of one government after another to bail finance for allocating funds so "efficiently".with derivatives..

Currently, there are about $600 trillion in derivative bets...in a world economy of only $87 trillion. Just another disaster waiting to happen. Most of those bets, at one time, would have been illegal just as the bets on housing by non-stake parties were once illegal.. However, since a free market knows best how to allocate funds, the Casino is now open. Place your bets!

Credit as a national policy to replace wages to keep the economy humming...combined with bankster gambling... created the mess

QUOTE: .

"The US economy cannot recover, because the US economy depends on consumer expenditures for more than 70% of its activity. The offshoring of middle class jobs has stopped the rise in middle class income and caused a drop in consumer spending power."

"The Federal Reserve under Alan Greenspan compensated for the absence of US consumer income growth with a policy of easy credit and a policy of driving up home prices with low interest rates. This policy allowed people to refinance their homes and to spend the inflated equity in their homes that Greenspan’s policy created."

In other words, an increase in consumer indebtedness and dissavings drove the economy in the place of the missing growth in consumer incomes. PAUL CRAIG ROBERTS was an editor of the Wall Street Journal and an Assistant Secretary of the U.S. Treasury.

Full article here: http://www.counterpunch.org/2012/02/01/economic-101/

Retired Monk - "Ideology is a disease",

Existing detached home sales 2006 5,677k x 221k median price = $1,254 billion

New detached home sales 2006 1,051k x 246k median price $258 billion

Total new mortgage debt for 2006 totals $1,512 billion. This doesn't include condo sales.  The bubble price per square foot apples to apples peaked in 2005, but I chose 2006 figures (which are actually lower) because the flipping activity pretty much died after 2005.

And it doesn't include mortgage debt for bubble years 2002-2005.

http://www.census.gov/prod/2007pubs/08abstract/construct.pdf

In order to claim that $80 billion would have solved the problem, that would suggest that home purchases in 2006 were only 5% overvalued (80 / 1,512) and that no purchases prior to 2006 were overvalued.

I agree that we could have taken different actions, earlier, for less (but not much less) money than we have done so far, but I think $80 billion just doesn't pass the smell test.

Chilidog wrote:

In order to claim that $80 billion would have solved the problem, that would suggest that home purchases in 2006 were only 5% overvalued (80 / 1,512) and that no purchases prior to 2006 were overvalued.

I agree that we could have taken different actions, earlier, for less (but not much less) money than we have done so far, but I think $80 billion just doesn't pass the smell test.

poly replies: Read more carefully. It was $80 billion in sub-prime mortgages, bundled and sold as triple A securities that were the initial problem. Payoffs of trillions in bets on a mere $80 billion in mortgages were triggered when defaults began being made.

Had those mortgages been bailed, the financial tsunami wouldn't have taken place. Derivative bet payoffs many, many times the value of the mortgages wouldn't have been triggered. The housing market wouldn't have collapsed. Quickly rising unemployment wouldn't have created defaults on regular mortgages.

Currently, derivative bets on financal paper exceed $600 trilion. The entire productive output of the globe is only $87 trillion. Every dollar, yen , Euro, etc on the planet could bail about 15% of current derivative bets.. Most current derivative bets used to be illegal...until the de-regulators were allowed to run rampant.

Dems like to ignore Clinton's prime role in de-regulating finance. That's where the current meltdown began. Without Clinton's repeal of the Glass-Steagall, Act , it couldn't have happened. Non-payment of $80 billion in mortgages wouldn't have triggered an overnight  multi-trillion dollar meltdown.

Retired Monk - "Ideology is a disease"

Poly, much as I dislike Bill's concessions, he was not the prime mover in deregulation.  Please put the blame on the GOPimp Congress while slapping Bill for giving in to them.  Making it look as if Clinton was pushing this agenda is misleading.  There is enough blame for him and the DLC without letting Gramm and the Hammer off the hook.

INITIAL being the key word.

I do not buy the $80 billion number.  What is your source?

http://en.wikipedia.org/wiki/Subprime_crisis_impact_timeline

"2003-2007: U.S. subprime mortgages increased 292%, from $332 billion to $1.3 trillion, due primarily to the private sector entering the mortgage bond market, once an almost exclusive domain of government sponsored enterprises like Freddie Mac.[90][91]

As far as the word "initial" goes, the only real difference between the subprime loans and non-subprime loans was the interest rate and time at reset.  NOBODY in 2005 was buying first-time homes for residence with 30 year fully amortizing fixed rate mortgages.  A non-subprime loan might be 5 years interest only at 3% and then 25 years fully amoritizing at 7% fixed.  A subprime loan might be 2 years interest only at 3% and then 28 years fully amoritizing at an adjustable rate starting at 9% I'm pulling these numbers out of my but the illustration is the same.) The current mortgage payment was the same for both buyers. And neither buyer could afford the reset payments.  This was true probably going back to 2002, but the game was always that you would be able to "refinance" and never face those reset payments.  It worked as long as "real estate always goes up." It stopped working when real estate didn't always go up.

You're assuming all sub-prime morgages went into default. They didn't. They didn't all need to be bailed. Step back a few years...to the beginning of the crises rather than its re-write:

"Take the much-vaunted $50 billion program designed to renegotiate mortgages downward for “troubled homeowners" - Michael Hudson, economist. Full article here: http://www.counterpunch.org/2009/02/17/the-oligarchs-escape-plan/

The meltdown was the trillions in derivative bets made on bundled securities...not defaults on mortgage payments which could have been absorbed/guaranteed. Had that been done, derivative payouts never would have been triggered.

The problem wasn't the mortgage defaults. That could have easily been handled. The problem was the trillions in derivative bets on the mortgages. Banks became insolvent almost overnight when they were triggered  It didn't take a default on every sub-prime mortgage to trigger them.

Even given your figure of $1 trillion, 300 billion...had they all gone into default, which they didn't, it would come nowhere close to the $13 trillion in total bail money to date, would it?

It will be interesting to see what detrivative bets come to light on Greek, Italian and Spanish bonds when they default.  Trillions on each $100 billion in bonds, like trillions on each $100 billion in mortgages wouldn't be unusual. Not enough money on the planet to bail that one. $600 trillion in bets on financial paper going up or down...in a total world economy of only $87 trillion. Interesting.

Ah, the now "free" financial markets. Gotta love the excitement of 'em  if nothing else.

Retired Monk - "Ideology is a disease

Did you read the artlcle that you linked?  Because I think his points support my argument.  I don't see anything in it that suggests that $80 billion would have cured the problem.

And this sucker was going down even if there were no derivatives.