$700 Billion Bail Out


#1

I wonder if our goverment would be so kind as to bail out someone who made a bad investment choice when buying a mobile home park?

I am really struggling with this goverment bail out of all the financial institutions. Do you think they will take back the big paychecks that the banking executives took home after selling all these investment products that are failing? I have always like most people worked hard and smart for my $$ and when I made a mistake no helping hands were around to pull me up. I realize this crisis has far reaching worldwide implications. I just needed to vent to fellow investors whom I know work hard to get deals done and be successful.

Rick


#2

Rick,

I agree with you. I watched CNBC show FAST MONEY last night with special guest Carl Icahn (bilionaire businessman) and he really told it like it was. The ones responsible for this mess collect severence in the millions and walk away and let someone else (taxpayers) clean up their mess.

Check out www.icahnreport.com.

Like him or not he shoots straight.

Sam


#3

Rick, yesterday the bail-out was $500 billion; today it is $700 billion; shortly it will be over a trillion dollars. The US government is bankrupt. The government with all its functionaries is not composed of the best or the brightest, but of that which rises to the top in a cesspool. One could say that they are either stupid or lying, or both. To solve our problems, they appoint the same people who caused the problems in the first place, those whom they anointed with unprecedented powers, and those “anointed” are not stupid. Even at a 90% taxation rate, the government could never pay for all its unfunded obligations ( which are approaching 100 trillion dollars). So an extra trillion or so will not make any difference. Therefore, it is quite conceivable that the electronic printing presses will be running 24/7 until that goes out of style and a new currency is introduced. I expect, as a consolation, that in 10 years the worst crisis in all of US history has come to an end–everything does end sometime–and we will start an era of unprecedented creation of wealth: we work, we save, we invest our savings, and technology will have advanced to fictional levels.

In the short run, I expect major pain to be inflicted on the general population, with most people forced to reduce their lifestyle substantially; great demands for our services are just about guaranteed.

Let’s not forget the banker Baron von Rothschild’s statement that those who control the currency, control the government (country).


#4

I’m right there with you Rick. We live in an era where those in government want their subjects to not feel pain, but not even discomfort! I simply feel that this bailout is only going to hide the outside of the wound, yet not do anything for the internal festering that is gathering.

That will have to happen in the natural course. The bailout is simply prolonging the inevitable and that worries me. Because I think people will be blindsided with it instead of seeing a few of the big guys fall now, they are all going to fall in the future in one huge default.

I hope I’m wrong, but I just don’t see things improving immediately. I thought we had hit bottom, but as this week proves, we haven’t even hit bottom yet. As Karl mentioned to me during dinner one day, some big players are probably next such as Wachovia. I don’t think we’ll see the government be able to bail out any more big players.

I agree with you Bernd that Mobile Home Parks may be perfectly positioned as rational people take steps to address their financial needs, but that raises a few questions as well. What happens when the bank that is carrying your note defaults? Can that hurt us in a big way by a call? Will home prices drop so much that we are priced out of the market (where we can only rent or sell for prices below our debt)?

How can we prepare to capitalize on this without increasing our risks too much?


#5

Much of the crisis is the product of inferior, un-American philosophy, which is what happens when we lose the “virtue” emphasized by the Founding Fathers and put crack-head idiots on the same level as contributing citizens (One man, one vote. One idiot, one vote. One dead guy in Chicago, one vote. And so on…). If there are enough uneducated or mis-educated fools with votes (and there are), you can be certain that a political party will rise to cater to their undeserved wants at the expense of productive people (and it has).

For example, the Clinton administration used Fannie Mae/Freddie Mac and certain banking laws to push loans for the “poor” and “minorities”, even if they didn’t qualify based on trivial little details like no down and/or bad credit. The banks figured it was a no-lose situation…charge higher rates on the upside, get insurance from government or an outright bailout on the downside…this is known as “moral hazard” - and is routinely ignored in the name of “compassion”. Oddly, Fannie Mae and Freddie Mac seem to have had lots of higher-ups from one political party, who collected what they would normally call “obscene salaries” if earned in the private sector. The same people also steered funds to candidates from the same party. In fact, one of the two presidential candidates had a former head of Fannie Mae on his VP search committee, until it was discovered that said former head of Fannie Mae gave sweetheart deals to private bank execs and somehow got below-market mortgages from the same bank execs for himself and his friends. Hope and change, indeed. I just hope they give me change in something greater than dimes and nickles when they sieze more of my hard-earned profits.

To be fair, a lot of people from the other party, including their presidential candidate, often tend to act like a$$es, I mean donkeys, and vote for many of the items described above. Depressing.

Not that I’m partisan or anything.

Post Edited (09-21-08 06:55)


#6

Rick,

I think you have verbalized something that has been bothering me for a long time. We are all patting ourselves on the back saying how smart we are to position ourselves to take advantage of the coming wave of people needing affordable housing. I am starting to question this philosophy. I had the “foresight” to buy in an area where people can go from MHs to SFRs fairly easily. I can’t help but wonder what happens if home prices fall even more and those who have jobs can afford to jump to stick-built homes even easier than they now can? Does that leave me only the worst of the bad as potential residents?

I don’t think a single person on this forum or anywhere else for that matter really knows how this mess will affect the country, the world and the MH business. We’re all getting screwed in one form or another by the people who created this mess and those seem to be the only ones who will escape unscathed without having to pay the price for their avarice. These people are still in power so why should we think much of anything is likely to change down the road?

For my own situation, I somehow managed to get a fully-amortized loan with no call feature. That is the single best thing I did in getting this community and it will probably save my b**t.

Rolf

Wheat Hill MHC


#7

My frustration in this whole mess is the perpetuation of this notion that the Government is somehow going to


#8

I agree with you, Rick G. For every action there is a reaction. The bail-outs, as you say, just postpone the inevitable consequences. There is no free lunch in life; we have to pay the piper, though it promises to be very painful for all of us. We have hardly seen the tips of the icebergs we are approaching. Watch the weekends, when the charlatans with apparent, unbridled powers and no accountability to “…we the people” reconstruct our lives, our laws, our country at our expense. Not only will many of our institutions merge or disappear, but also other industries such as the auto manufacturers, the airlines, and of course real estate will stand in line for tax-payers’ assumptions of their egregious financial mismanagement.

Of course, our nominal obligations to the lenders remain intact, regardless of who will eventually hold the mortgage. The silver lining for us is that we will repay with highly devalued dollars as inflation escalates. Lenders do not want to become managers of MH parks. As families lose one income and are forced to manage on their remaining provisions, their survival instinct will naturally consider to live in our accommodations while trying to meet ends. Rome is burning! The powers are adding fuel to the fire daily. Heads, we win; tails, we can’t lose. You cannot beat cash flow.


#9

At Lin’s dinner in Ascheville (Tony’s and Scott’s Boot Camp), Daphne, whom I like and admire, asked for whom I would vote. I snapped back with the well-known “voting for an apparent lesser of 2 evils is still evil.” Daphne laughed and ,I think, forgave my immutable opinion as somebody else suggested that it was not appropriate to discuss politics. I used to think that politics was a subheading of ethics, which is a major subheading of philosophy. John Hyre, in his succinct style, identified the cause of all our social and economic problems in our country: our philosophy, and that of our leaders.

The philosophy that made this country the envy of the world, is enshrined in our Constitution and further elaborated by the writings of our founding fathers and in the Federalist and Anti-Federalist Papers. Fundamentally, the Constitution provides for the individual’s liberty, property rights, a sound monetary system, and above all, a limited and responsible government, and no interference in the internal affairs of other countries. The further we got away from the founding principles of this country, the more we ignored, in fact scoffed at, the basic tenets of our philosophical guiding foundation. Like pure gold, it is referred to and treated like a barbarous relic.

As John Hyre gives us realistic examples of the characteristics of a mature democracy, I am forced to recall that historically, such a democracy has given birth to subsequent tyranny. Our action or decision is undeniably an expression of our philosophy, either on an individual or national level.


#10

I dont know if patting myself on the back for being smart is what I do.What I do for sure is feel great for taking something that was an eye sore to the City of Burlington and making it into a place where people can live affordably, and safely. I love cash flow - profit, but taking on a project and improving it is what really energizes me. This is not an easy business and all the economic doomsday stuff we hear everyday does not help. I will always have the attitude that problems create opportunity and most people never pursue opportunity. In fact if statistics are correct most people never acquire the knowledge to take advantage of opportunites. There is no competition in my view. Whether our goverment bails out $700 billion or Trillions of dollars of mistakes I still believe opportunities are abundant for those that push forward, gather knowledge and go into action.

John and Bernard dont get me wrong I am not happy about the new billions of $$ of debt being forced down our throat. I hope my kids can afford the tax bill. Great Posts


#11

Rick,

Actually, in terms of how I personally deal with things, I’m with you. I’m buying what I view as cheap assets and think (or at least hope they are!) that I’ve bought cheap enough to weather or even prosper during rough times. I do not know how rough things will get - I tend to be the anti chicken little and pay little attention to hype about economy, especially during an election year. On the other hand, I think the US is clearly a “mature democracy” as Bernd put it, which means trouble over the long term, and need to teach my kids how things are different in a decadent and decayed republic…the historical precedents are not very encouraging, most of the fools in our country wouldn’t know, as a knowledge of history requires a decent school system and ripping oneself away from the bread and circuses (or American Idol) long enough to care. Even then, there are those who prosper in such circumstances, and I mean for me and mine to be among them.


#12

Besides the obvious emotion of being upset at the government for bailing out private companies who made bad decisions, I find myself very much in a state of despair about where we are headed as a nation, after these actions.

Economic principals in this country are based, most times, upon the assumption that markets are free and efficient. This is no longer the case. So there is this unknown force that is now affecting markets, which is going to make it so difficult to make correct decisions for companies and individuals alike.

To me this is equivalent to changing the laws of physics, and the concept of gravity is no longer a sure thing. How do you live with such circumstances?

While I do not like the fact that these executives had golden parachutes after destroying companies, this was a result of an efficient market at work. I don’t have a problem with that. Government interference, with this and everything else, usually just creates inefficiency, adds cost, and slows down the wheels of commerce.

Hell, you can’t even short sell financial stocks anymore.

I was reading an article about foreclosure scams that has caused one local government to declare that anyone buying a home in foreclosure or pre-foreclosure must pay a minimum of 82% of market value for that home.

There is a name for extreme government control, and ownership of corporations… it’s called socialism. I love this country dearly, but it’s so scary how much like China we are becoming.

Jeff (who leaves nobody guessing his political affiliation, and makes no apologies for doing so)


#13

is this was the lesser of two evils.

If you want the whole story of how bad it could have been (or still could be) read US News:

http://www.usnews.com/blogs/capital-commerce/2008/9/22/bailout-prevents-great-depression-20.html

We have allowed some (most) Wall Street firms to get so HUGE that we can NOT allow them to fail. There are billions of our retirement dollars in these bankrupt institutions.

I am speechless,

Greg


#14

Let’s see what the rest of the world thinks; this taken from:

http://www.guardian.co.uk/commentisfree/2008/sep/21/marketturmoil.economy

The bailout is simply a scheme to transfer money from the many to the few. From the middle class to the rich. If you analyze the details you see that the Treasury, using public funds, will overpay for the depreciated assets of the financial institutions that will consequently make out like bandits instead of having their stockholders wiped out as should be the case. What else what you expect from a Republican administraion peopled with figures from Wall Street? Transferring money from the masses to the rich in all sorts of ways has been what the GOP has been about for as long as one can remember. They are simply continuing to do so.

Or this:

This lesson from America is still not learned in London."

Nor has it been learned in America, and sadly, it will never be “learned”, because the fact is, this is not a crisis for the rich and decision-makers, it’s only a crisis for the poor and powerless.

For the “leaders”, this is what they call “a business model”.

Here’s how the model works:

1)convince people that efficient markets take care of all needs, and that dreams can come true;

  1. commit blatant highway robbery, accompanied by reassuring words about “trickle down” and GDP growth;

  2. suck the system dry until the point of collapse;

  3. suck yet more money from the taxpayers in the name of emergency rescue; 5) begin a new bubble economy in a different and equally absurd product/commodity/service;

  4. repeat the cycle.

Or this from bernie Sanders:

My favorite? This:

And where is the money coming from Will? Is the US ‘to big to fail?’ Who bails-out America?’

The point has already been made that the US with its hollowed-out industrialised base and its largely financialised Wall Street dominated economy is already in hock with the rest of the world. East Asian and middle-eastern investors are sitting on top of a mountain of bubble-dollars and dollar-denominated assets. And yet the US proposes raising more money on world markets (one supposes by selling more Treasury bills) What effect will this have on the value of the dollar, and can the dollar remain the world’s reserve currency with this sort of volume of bubble-dollars in circulation.

In addition, US government deficits, both state and federal, are assuming unredeemable levels (counting social security and medicare). For example.

‘‘In 2003 the American Enterprise Institute projected a $45 trillion shortfall; $47 trill countered the IMF in 2004; the National Center for Policy Analysis and the Brookings Institution came up with $50 trill and $60 trill respectively in their own research reports published in 2003 … but the biggest of the projections came in 2004 from the Social Security and Medicare Trustees themselves. They estimated the unfunded benefit liabilities to have a current value of $74 tillion.’’ (Empire of Debt - Bonner and Wiggin - 2006)

And of course we have left out the huge deficit on current account.

The US endless foreign wars and its uncompetitive economy is in irreverisible decline. The figures speak for themselves. For the two decades it has been kept going on a life support machine principally since the dollar has been the world’s reserve currency and East Asian banks have been recycling bubble-dollars by the purchase of US dollar-denominated assets (in the main, Treasury bills). This can go on as long as the holders of these assets are willing to take more of them. But there must be a limit. Any further US borrowing on world money markets will surely test this limit.

In short the consequences of the massive bailout of which you speak so approvingly only buys time for the US (which by now must be approaching technical bankruptcy) and the cost could be a massive fiscal crisis for the US some way down the road.

Moreover, tax increases and public expenditure cuts will adversely affect the US economy since they represent a withdrawal from the circular flow of income. This will inevitably mean rising unemployment and more fiscal problems since tax revenues will fall and public expenditure will need to rise because of uenployment.

So you see Will that the ‘solution’ to the financial crisis, even if it works, will only sow the seeds for future crises. No way out I am afraid.

Scary stuiff here,

greg


#15

Our forefathers would not have founded a new Representative Rebublic/Democracy.

You’re right. It is scary stuff

I for one could give a rats patootie what the rest of the world(s Media) thinks.

But there are varied opinions on how this mess was created

For another view