Here is how it works – AIG fails, banks who bought CDSs (and all other insurance policies, including normal insurance policies) don’t get their money and fail too. This means a lot of banks all over the world. Less banks = less available money = even tighter credit. Plus tens of thousands, even hundred of thousands of these banks’ employees out of work.

Tighter credit – more businesses fail, including those who have nothing to do with finances, more businesses lay off people.

Newsflash – unemployed people don’t pay taxes, hence less revenue for states and for government. Less revenue for government, so the deficit goes up anyway. Plus, municipalities can’t afford to pay for their bonds, so they may default too. Stock holders and bond holders lose money – any stocks and bonds in your 401K left? Unemployed people don’t spend money, so less stuff is sold and more companies can’t earn money and close. Etc. Prices start coming down, even fewer people are buying: why buy now if I can buy it for less 3 months later?

Got the picture? BTW – everyone is so sure the economy can recover by itself. Really? Did it recover by itself in the Great Depression? Nope. The war did it. What exactly is the war if not a large spending bill?

Deflationary cycle is very difficult to get out of, much more difficult than high inflation.

For the record. I paid off my mortgage a few years ago and have no debt. I also lost 20% of my money last year and probably additional 10% this year as well – a six digit amount in total. I don’t know if this plan will work but I’d like to forgo my righteous indignation if there is one chance the combined plans will help the economy. The expense of doing nothing may be greater.

If loaned your brother knowing your brothers history of irresponsibility including poor credit, little or no income etc. and yet you loan him the money–shame on you–and now you are asking the rest of us to bail you out, and to make matters worse you took huge fees out before the known risk came crashing down.

I was just trying to add a different perspective to this discussion, though we can all agree this lady is an idiot who deserves no sympathy.

We are responsible homeowners who purchased far less than we were approved for. Our debt to income ratio is 31% – for EVERYTHING on the books. We save over 18% for retirement. So WHERE is our reward for being responsible and sensible!? Why on earth should we have to fork over our hard earned money to prop up bad banks and foolish homebuyers!? I’m absolutely infuriated.

“>> “…or we let everyone get foreclosed on and the housing market continue to crumble, banks lose money, and some smart people swoop in and buy the foreclosures at a fire sale?””

it is the resulting “buying at basement prices” that drives the value back up.

>> “…or we let everyone get foreclosed on and the housing market continue to crumble, banks lose money, and some smart people swoop in and buy the foreclosures at a fire sale?”

yes…that is the most efficient way to solve the crisis. trading mistakes is how the game works.

>> “Blame the government? Sure, but I totally disagree with “you can’t blame banks/rating agenecies/homebuyers” there is plenty of blame for everyone.”

Please give me a logical (and more importantly “unemotional”) explanation why you CAN blame the banks, ratings agencies, or homebuyers. Pick one (banks/RAs/homebuyers) so that the task doesn’t seem so daunting.

So, what is best for the country? That we help out some idiots who took out idiotic loans that can stay in their homes under some new terms (what about 5%?), or we let everyone get foreclosed on and the housing market continue to crumble, banks lose money, and some smart people swoop in and buy the foreclosures at a fire sale?

I’m not smart enough to know what is best for the country (it sounds bleak no matter how you look at it), but really, that is the question we should be thinking about.

Blame the government? Sure, but I totally disagree with “you can’t blame banks/rating agenecies/homebuyers” there is plenty of blame for everyone.

@Bill
“What about a taxpayer revolt??? I’m not kidding”
I’ll stand shoulder to shoulder with you and anyone else who wants to move forward with this. We just need to organize ourselves. I lack the drive, so I’ll follow.

“Oh please all you mortgage brokers, DO NOT try to skirt the blame on this. There were MANY pigs at this proverbial trough and you were one of them.”

if a mortgage broker committed fraud, that is one thing.

However,
car salesmen:cars::mortgage brokers:houses

If a mortgage broker simply put someone in a mortgage vehicle that the buyer was “approved” for (based on the current lending standards of the bank), then the brokers are CERTAINLY NOT to be blamed.

Furthermore, you can’t blame the banks(lenders) either. As private entities, they have every right to run their business however they like…including running it into the ground by not properly assessing the risk of said Buyers defaulting.

And you can’t blame the CDO buyers for buying up these toxic assets from the banks/lenders…since, again, as private entities, they have every right to run their business however they like…including running it into the ground by not properly assessing the quality of risk assigned by the ratings agencies for said CDOs.

And you can’t blame the Ratings Agencies, since, again, as private entities, they have every right to run their business however they like…including running it into the ground by not properly assessing risk of CDOs.

And you can’t even blame the home-buyer. After all, they were approved for the mortgage and are allowed to stop paying anytime they want (obv going into default, lose house, yada yada yada).

If you want to blame anything/anyone, blame the GOVERNMENT for not letting the companies experience the results of their poor decision making (banks/ratings agencies/brokers/etc) and instead making decisions to pick winners and losers as an attempt hold up the value of assets owned by their rich buddies who keep them in office via lobbies and contributions and blackmail and other tinfoil-hat-wearing-scenarios.

QuickFact: AIG is being held up because GS and other “I-banks with close govt friends” made bad decisions by relying on AIG to make good on its CDS contracts. So instead of letting AIG fail, GS fail, and their friends fail, they convince the sheeple that this is in THEIR best interest. The absurdity of it all leaves me pounding my head against my desk almost on a daily basis. I’m just glad I’m young and have a small net worth. I don’t think I could stomach these next few years if I had more than 5 figure net worth.

BLAME THE GOVERNMENT. They are the problem NOT the solution! Of course once you start digging deeper, you will find out the Govt is merely run by the FED due to the dependency on being able to run massive deficits in order to expand.

Next Chapter: BLAME THE FED!!!