Bad Debt Plan May Cost Up to Half a Trillion Dollars

[kirby]

Source: CNBC

"The proposal to create a massive facility to buy mortgage-backed securities could cost as much as a half-trillion-dollars and would involve the purchase of both private-label and government-guaranteed mortgages, according to an administration official."

"The plan would have two parts. The largest part would be the purchase of private-label (those underwritten by Wall Street) mortgages by some as-yet unnamed vehicle. Financing would occur through the sale of treasuries, the official said. That part of the plan would require congressional approval. The idea is to hold the securities to maturity. The average mortgage has a life of about 7 years.

A second part of the plan would involve the purchase by Treasury of additional government-backed (Fannie Mae and Freddie Mac) under a plan it announced several weeks ago to rescue the two government-sponsored entities. Back then, it said it would purchase $5 billion initially. The idea is to ramp up those purchases more quickly. It does not require approval by Congress."

"The administration is contemplating hiring a private investment manager to run the mortgage vehicle. Yet to be worked out with Congress are the amount of mortgage securities the government would buy and from whom the government would accept them. "

Read more: http://www.cnbc.com/id/26779080

[Hawkeye-X]

1. Bill it to the Carlyle Group

That's where it should go to.

When they bankrupt, I won't shed a tear.

[fascisthunter]

2. RICO TIME... go after Haliburton first!

[maryallen]

6. They'll just ignore the subpoenas ...

Like everybody else.

[NeoConsSuck]

9. Halliburton

another 'corporation' that was 100% subsidized by the taxpayer.

[fascisthunter]

14. exactly... "Halliburton: ...100% Subsidized by the American Tax Payer"

[rayofreason]

25. Halliburton??? What BS! FNMA and...

FHLMC are where hundreds of billions were lost through corruption, poor management, skirting the law, and even outright fraud.

http://www.msnbc.msn.com/id/12923225/

Everyone at the top of both of those corporations for the past eight years should be investigated, and the huge bonuses they paid themselves should be taken back. And if explicit wrongdoing can be proven, there should be jail time.

This is worse than Enron.

[rayofreason]

29. Heads must roll!!!!

The corruption in the mortgage industry is a disgrace. Countrywide is a disgrace.

http://money.cnn.com/2008/03/08/news/companies/countrywide_FBI/?postversion=2008031003

Freddie Mac and Fannie Mae are a disgrace

http://www.msnbc.msn.com/id/12923225 /

All of the CEOs and top dogs who made oodles of dollars while steering these companies onto the financial rocks should be forced to answer to the American people who now have to pay for the mess they made.


<b>Heads must roll!!!!</b>

[fascisthunter]

41. it's not "BS"... I suggest we go after all of them...

[rayofreason]

43. Go after the big money first.

Start with FNMA and FHLMC. That is were 500 Billion was lost while top execs were paid 100's of millions.

Who are those people? What are they doing now? Exactly how much were they paid?

Don't you want to know?

[fascisthunter]

44. what makes you think I don't Want to Know?

take it easy... we are on the same side. You are lecturing the wrong person....

[rayofreason]

45. Sorry, don't mean to lecture...

...but why isn't this story #1 with THOUSANDS of posts. This financial meltdown is staggering. For every dollar of lost equity there are 10 dollars of liquidity no longer available. The economic impact will be world wide and very significant.

Meanwhile Charlie Rangel seems to have a new tax problem daily, while Pelosi (she of courage equal to Sir Robin) says that she sees no reason why Rangle should step down as Chair of the Ways and Means Committee.

My view is that an independent commission should get the to bottom of this corruption and through ALL the bums out, Democrat and Republican alike, who helped precipitate this mess.

[fascisthunter]

46. Once again I agree and am pissed off today as well

this government can go fuck itself. I am not bailing out the wealthy so that they and their limp wristed brats can coolect while sipping martinis next to their pool.

As far as I'm concerned, we need to bring back the goddamned guilotine.

[Duppers]

54. "why isn't this story #1 with THOUSANDS of posts" ? INDEED!

Obama ads better make the rethug and John McCain OWN THIS....and they better do it soon.


Can't people comprehend the dire nature of what's happening to our economy?

Unfortunately, the taxpayers are being fleeced only to delay the inevitable.

[PSPS]

3. So the taxpayer will outright buy these worthless securities at 100% value.

This is truly depressing. It's like the bush cabal wants to hurry up and finish draining the treasury into its cronies' pockets before leaving office.

[fascisthunter]

4. that's exactly what I Think they are doing

[wanpete]

8. Yep! And they are lying about it being half a trillion. It would take tens of trillions to finance

this bail out. this is really outrageous.

[calmblueocean]

17. I don't think anyone knows how deep the hole goes.

This is crazy. I don't think anyone knows what they're getting in to here.

[KamaAina]

48. By comparison, the S&L bailout cost just over $100 billion

to cover the a$$ets of Neil Bush, Charles Keating et al.

http://en.wikipedia.org/wiki/Savings_and_loan_crisis#Consequences

U.S. General Accounting Office estimated cost of the crisis to around USD $160.1 billion, about $124.6 billion of which was directly paid for by the U.S. government from 1986 to 1996.

We could be looking at something an order of magnitude greater than that. :scared: At that point, even the Bush oil war begins to look like a bargain. :eyes:

edit: Billion, not million. :dunce:

[Trajan]

5. This is staggering ....

You know ? .... Why not just let the WHOLE BUNCH fall off the cliff, and not pay ONE FUCKING DIME to those who risked their asses in the market ...

Then: Boost public spending by the same amount, providing food stamps to the hungry, college funding, mass transit, development of alternative energy sources ... etc etc ....

WHY waste the national treasure on assholes who knew the risk going in ?

I am getting more frustrated by this nonsense ....

[NeoConsSuck]

7. The only time this market has gone up the past two weeks

was when the taxpayer was told to drop 'em and bend over.

Freddie, Fannie, AIG and now the ultimate Wall Street bailout.

And I guarantee in one month, these same wall street pukes will again start their mantra: 'When is the lower class going to pick themselves up by their bootstraps.'

Ah, aren't we all proud to be americans?

[Wednesdays]

22. Their even bigger mantra will be "Democrats raise taxes!!"

Never mind that they've left the Dems with little choice, especially now.

[Solly Mack]

10. I'm sick at my tummy

[rayofreason]

35. So am I.

This will hurt me, but I can probably recover since I am not on a fixed income (yet).

But what about those who are? This is going to impact pensions, and future growth through loss of liquidity. I have talked to several people who are scared.

There needs to be congressional hearings to get the bottom of this. Let's start with "Who was running Freddie Mac and Fannie Mae, and what did they get in bonuses while fraud was being perpetrated?"

http://www.msnbc.msn.com/id/12923225/

All those bonuses need to be paid back, just to start.

[Solly Mack]

40. This has the feel of been there, done that - didn't like it then either...deja vu

I'm worried about people too. :(

More worried about others than I am for myself. Which is silly because I'm no better off than a great many. Still...

[Xipe Totec]

11. That's okay; institute a special tax bracket for executives

We should be paid up by april 2009, and they won't notice it.

7 houses, 8 houses, what's the difference.

[rayofreason]

34. How about a special investigation...

...for mortgage company executives?

Strip the greedy assholes of the money they looted from companies that they knew were making bad decisions.

http://www.msnbc.msn.com/id/12923225%20/
http://money.cnn.com/2008/03/08/news/companies/countrywide_FBI/?postversion=2008031003

And no mercy for the politicians who covered for them!

[earthside]

12. Reid, Pelosi, Conrad, Frank ...

... and the Democrats will surely oppose this plan, right?

I mean this is a total Republican elitist subsidy, bail-out, and wealth-transfer to the rich scheme.

[dixiegrrrrl]

37. uhhh..no, they won't

Our DINOs are going to adjourn.
Reid says they don't know what to do.

see next thread over:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x385281

[JCMach1]

38. No they'll love it--- And, to be honest, I haven't heard an alternative from our side yet

Barney Frank, C. Dodd, Pelosi, all seem pretty clueless as to how to deal with this crisis...


Where is someone like a Senator Robert Reich when you need one... (Hah, wishful thinking)

[Union Thug]

13. Brilliant. We'll be paying off the 'treasuries' for generations to come...

And we still have no health care.
And we still have crumbling schools.
And we still have no plan for universal access to education.
Our infrustructure is crumbling.
Our communities are being torn apart by the foreclosures and repos.
We can't afford to extend unemployment benefits...


Instead, we have to pay for the greed and corruption of the wealthiest among us. There is no justice. These guys will continue to be wealthy. Meanwhile, our children will be subsidizing their crimes.

[trthnd4jstc]

15. My idea is the US government to receive stock or property for all of the debt that we take on. n/t

[izzybeans]

18. And that capital should be moved into paying down the personal debt load of citizens.

[trthnd4jstc]

21. Yes.

This will sound strange to anyone prejudiced against all self-proclaimed democratic socialists, I want the government to become smaller. I wish for us to increase the value of the dollar. I want the national debt to decrease. Then there are some other ideas, which if you read my journal you can find out for yourself.

Pay down the national debt. Make the dollar more valuable.

[izzybeans]

33. Government growth is inevitable so long as the population continues to grow and become more complex.

It's what we do, how we do it, and for whom we do it that matters. It's a simple maxim but it's the only one that works.

The only truly big traditional government entities involve the military and the new levers of state surveillance power. These are the things that reduce freedoms. Setting up bureaucracies to run government programs and services is no different than setting up one as a for-profit entity to provide the same service; except for the simple fact that when it comes to public goods and services, the profit is the service and good itself and a profit that can be controlled through the democratic and institutional mechanisms we have in place to run them. This means more capital can be pushed into the production of goods and services and In essence if run right government bureaucracy can be more efficient because it doesn't have to trim the edges to run up budget margins (in other words, it doesn't have to ration services to enrich those who control it). Whether it is a government entity or not, no matter, it will still grow naturally along with the complexity of the issues it responds to. I'm one who believes its more about managing the government in a way that is responsive to the needs of the citizens than it is about managing its size. At the end of the day its just a bureaucracy with the same organizational structure of the corporation and it is one that can be controlled through democratic participation if need be (something impossible in the corporate fiefdoms).

The rightwing confuses bureaucracy for a loss of freedom. They overlook the fact that its just an organizational structure nothing more, it can be steered to reduce (as is obviously the case with a monopolized industry) or it can be steered to enhance those freedoms. Our government currently is a hodgepodge of organizational structures that work at cross-tendencies. Our military and police state tendencies drive this contradiction and cause many to distrust the thousands of programs and services that enhance the very freedoms that they have fooled themselves to believe is actually provided by the institutions that perpetuate state sanctioned violence.

This is why they see no problem in the growth of monopoly industries and in the military. Somehow limiting those types of growth are off limits. What they miss is that for every privatization comes the loss of a little more of their liberty. Because now the provision of their need falls beyond the sphere of their control and lies in the hands of the bureaucrats in the corporation and when's the last time any of them has been fired by a popular vote.

[adamuu]

16. That's $1,667 per American (including children and seniors)

Thank you, deregulation!
Gee, that worked so well!

[lapfog_1]

31. I guessing that the REAL debt of the US

US government obligations NOT including future expected payouts for veterans, possible SS bailouts, etc...

is about $12 Trillion to $15 Trillion.

That's about $120,000 per taxpayer.

[Triana]

19. Cost TAXPAYERS up to half a Trillion dollars - while the CEOs get their golden parachutes..

..WE get to clean up their mess - AGAIN.

Thank you very LITTLE and f*ck you very MUCH REPUBLICANS!

[rayofreason]

32. Screw the golden parachutes!

Every CEO who took millions from these mortgage companies must answer to the people for the mess that they have made!!!

I call for a no-holds-barred investigation of Fannie Mae and Freddie Mac. I want to know who got the money and what they knew when they were taking it. And I want to force them to PAY IT ALL BACK!!!

[dysfunctional press]

20. they got ONE thing right- it is definitely a BAD debt plan.

(the plan, not the debt).

socialize the risk, privatize the profits- republiconomics 101.

[Miss Chybil]

27. Nail, meet head.

You are exactly right. It's Republican Heaven.

[dabenpb]

23. A better plan ...

A better plan would be to increase the pre-tax contribution limit on 401k to $30k. This would infuse money back into the market and actually spur people to save more and reduce taxes for the middle class.

[Union Thug]

24. Not me. I sold all my company stock and bought land a long time ago. I'll NEVER buy stock again..

not in a 401K or anything else. These pricks will never see another dime from me.

[dabenpb]

49. You don't have to invest it in commodities.

You can do bonds or even CDs in an IRA. Otherwise, the clowns in office just get more of your tax money. This only makes sense for those who do not have any debt -- I know that is a tough call though.

[lapfog_1]

26. That's waaaay too low.

We are approaching $800B already in cash injections by central banks and bailouts over the last 16 months.

$1.8 T would be a low estimate. Quite a number of Prime mortgages are going to go belly up too.

[Gregorian]

28. So that's half a trill for that. Then there's that war for a couple more.

Fannie and Freddie, if you'll recall. AIG.

Why am I thinking of Dr. Strangelove where the pilot is reading off the list of stuff and then says a guy could have a pretty good time in Vegas with all of that stuff?

We're going to pay for this, how?

[rayofreason]

30. Heads must roll!!!!

The corruption in the mortgage industry is a disgrace. Countrywide is a disgrace.

http://money.cnn.com/2008/03/08/news/companies/countryw...

Freddie Mac and Fannie Mae are a disgrace

http://www.msnbc.msn.com/id/12923225 /

All of the CEOs and top dogs who made oodles of dollars while steering these companies onto the financial rocks should be forced to answer to the American people who now have to pay for the mess they made.


<b>Heads must roll!!!!</b>

[lumberjack_jeff]

53. We're getting what we deserve for being unwilling to wield pitchforks. n/t

[aquart]

36. Bailout or wars, George. You choose.

[Turbineguy]

39. The Bush Presidency

has already cost about $17 trillion. An economic collapse could double this.

Those who are Bush supporters wouldn't understand it anyway.

It's what you get when you put a prize-goof in charge. Pay the money and move on. $1/2 trillion is pocket change.

[joeglow3]

42. Help me out

I posted this in another thread, but got no response. This one seems to be a bit more active.

I was watching CNBC yesterday and someone said that of all the times the government has done this in the past, they have never lost money. How can this be true? I know that they are assuming real assets so we will not see a complete write-down of all assets (i.e. it won't cost us the full half a trillion), but will the government actually be able to make money?

I also know the government is charging AIG the 3 Month T-Bill rate plus 850 basis points, so if the debt is paid, there is money that the government will make there. Additionally, the government jumps to number 1 in the list of creditors. But, that is a BIIIIIG "if."

Basically, is there anything discussing the real potential cost to the government, compared to when this was done in the past?

[kirby]

47. That is bullshit...

I too have heard them claim that the taxpayer 'makes' money on these things. Total bullshit. I posted a link the other day to the GAO report a bout the S&L bailout. Basically, when Congress created the program in 1989, it allocated $50 billion dollars. The Resolution Trust Corporation came back to Congress needing more money several times. Over 6 years, they eventually got $110 billion. Table 3 of the GAO report (from 1996) says the total cost was $160.1 Billion. Of that $160.1 Billion, only $28B was from the private sector. The rest was from the Taxpayer!

(http://www.gao.gov/archive/1996/ai96123.pdf)

RTC closed 747 institutions with $402 billion in book value of assets when
they entered the conservatorship phase. During conservatorship, assets
were reduced by $162 billion to $240 billion...

I believe the current mess is magnitudes larger than the $402 billion S&L failures. Many many trillions.

The big scam here is that Taxpayer will buy all these Mortgage Backed Debt and plan to hold them until Maturity. Most loans are 30 years. The big lie here is people saying 'the average life of a mortage is only 7 years'. Well that may be true when you can refinance, but if you have no equity (due to the house bubbles) we will be stuck with the loan for 30 years.

[BearSquirrel2]

50. No buyout without a roundup ...

I don't think anyone should be deceived. When the Republicans get lemons, they make lemonade. This is a payoff to their buddies, not saving the American economy.

We need people in jail and their assets confiscated for what they have done.

[Zorra]

51. "The administration is contemplating hiring a private investment manager

to run the mortgage vehicle."

Bu*h's whole gig is to deliberately destroy the United States.

Whoever they put in charge will end up ripping us off until there is nothing left for anyone but the top 2% of the wealthy.

[lumberjack_jeff]

52. I have an idea. If I'm forcibly going into the mortgage business, how about some good mortgages?

I don't want to be the *anything* of last resort. I'm gettin' tired of that shit. I want to be able to benefit from the cheapest possible mortgages AND benefit from loaning money to creditworthy causes.

'nuff of these half measures. If we're going to half-nationalize entire industries, I don't want to be stuck with the shitty half.