Here is how I saw it may work:

1) FASB will declare that REO’s on bank balance sheets longer than 2yrs. is a depreciable Long term productive asset, and are qualifying assets for mandatory reserves.

2) Banks holding more than 15% of total assets or 150% of net worth in REO’s will earn a low income credit for tax purposes, that refunds taxes paid from prior years.

3) Government will provide low income housing ,rents going directly to the banks. Prior inner city property will go to HUD, to be demolished and sold to certain privlelged globalist in crowd corporations for a song. (aka REFO S& L bailout}

4) Majority of middle class files BK#13 and they are thrown out on the streets, while they watch govt. assisted living people move in to their homes. {aka Detroit in the early 1980’s.)

5) All others (still holding a job) will agree to Chatttel mortgages and sign their paychecks a way for life

If this rule goes into effect, the delinquecy rate in the area will skyrocket ... I mean, if people could stop paying and not lose their houses, WHY pay?

lama

The bright side is that if that happens, I will be a sub prime.

I was going though my offers of the morning and found that Chase will do a variable rate HELOC at 8% or do a cash advance at 7% on my credit card.

The horse is gone! The horse is gone! Lock the barn!

here's an interesting site:
Credit Slips

Just one basic reality point: If such legislation passed in NJ, what do you think would happen to new lending? Who would lend in a legal environment such as that?

The proposal would inflict a world of economic pain on New Jerseyans. Other commenters are correct - default rates would skyrocket. Who is going to buy homes in NJ if such legislation passed? The result would be that many home values would drop sharply.

Georgia's badly designed foray into responsible lending legislation caused the rating firms to nix subject GA loans in bonds because of the risk. NJ followed GA's lead, which caused the ratings firms to issue a polite warning to NJ. Terms in both laws had to be changed in order to preserve access to financing for would-be homeowners. This is more of the same.

"winjr, I'm suggesting that if a borrower were not hopelessly upside down before the moratorium, he or she would likely be so after it expired, once we add another six months worth of unpaid interest to the bar tab."

I know, Tanta. I was just trying sarcastically to step into the analytical skin of a poster from a previous foreclosure thread.

Thanks,
I missed the rain and snow so much last week. Ah, back to Tysons Corner.
I missed you all too!

The whole idea of gov't bailouts smells of another giveaway to the politically well conected, disgused as helping the poor and downtrodden. However, I do thing that there is one change that could be very usefull made. Out law any prepayment penalty on an ARM that extends beyond the date of the first reset. At the margin this would help some of the people faced with the exploding ARMs to refinance into a fixed rate mtg. Or alternatively make it easier to sell the house and go rent. Wouldnt help everyone, but at the margin could help. Still the underliing problem is that houses are just plain to expensive relative to incomes in most of the country. Dont see how any govt bailout will help that situation. That is the disease, pretty much everything else is just a symptom.

In general, the art of government consists of taking as much money as possible from one party of the citizens to give to the other.
-Voltaire (1764)

Just because you do not take an interest in politics doesn't mean politics won't take an interest in you!
-Pericles (430 B.C.)

No man's life, liberty, or property is safe while the legislature is in session.
-Mark Twain (1866)

Talk is cheap...except when Congress does it.
-Unknown

The government is like a baby's alimentary canal, with a happy appetite at one end and no
responsibility at the other.
-Ronald Reagan

The inherent vice of capitalism is the unequal sharing of the blessings. The inherent blessing of socialism is the equal sharing of misery.
-Winston Churchill

The only difference between a tax man and a taxidermist is that the taxidermist leaves the skin.
-Mark Twain

The ultimate result of shielding men from the effects of folly is to fill the world with fools.
-Herbert Spencer, English Philosopher (1820-1903)

There is no distinctly native American criminal class...save Congress.
-Mark Twain

What this country needs are more unemployed politicians.
-Edward Langley, Artist (1928 - 1995)

A government big enough to give you everything you want, is strong enough to take everything you have.
-Thomas Jefferso

Said before, said again: attempts to re-regulate how a traditional form of business is done will scare away any potential investors; mortgages will be very hard to come by for the next few years - no matter what interest rate changes the Fed makes.

Folks here seem to have difficulty coming to terms with the idea that political risk is real

I don't doubt that it's real, just that it'll be ineffective. A couple of billion here or there won't make any difference.

Any major changes to the financial system will need years to take shape.

Max: I don't doubt that it's real, just that it'll be ineffective.

This comment suggests that "political risk" is confined to tinkering at the margins. We should be so lucky. You really need to read some history to understand the potential impact of political interventions in the economy.

Tanta: I claim credit for all Big Dog metaphors on this blog.

I know, and I accept this. Your royalty check is in the mail.

Jim (and all),
Keep in mind that many of the people who are going to be bailed out are people who "were not able to obtain proof of income". People who cannot substantiate income are, in every case, tax cheats. Undeclared income is estimated at 20% of the US economy. Therefore, 20% of all taxes you have paid in your lifetime has already been stolen by the people who have the granite countertops for which you will be paying.

lama said: "...Therefore, 20% of all taxes you have paid in your lifetime has already been stolen by the people who have the granite countertops for which you will be paying..."

It's worse than that. The reason I kept my Formica countertops and never bought granite is that when they chip (and they do) there's no fix for it.

S.

hjwlax said: "...Running mutiple times has been a Diteck 125% LTV add and some thing called Green light loans advertision in a very cutsey fashion, no anything 6.02% APR fixed rate mortgages but "only if you act this week". I ask you, is this not a great country..."

It is. I keep getting credit-card solicitations in the mail offering to allow me to do a balance-transfer at a fixed 4.99% (sometimes less) for the life of the loan.

Credit crunch? Yeah, right.

Sebastia

The debate may be heated, but the issue is resolved. More jobs for us, at higher wages, based on our greater productivity, superior infrastructure and business conditions in the U.S.

Faith based.

I spent all day today with Asians planning the opposite. Try it sometime - it will wake you up. There are some advantages we hold but they are slipping so fast as to make my head spin.

The irony is many of the Asian managers are decent people. I actually prefer working with & for them than I do working for many American managers... too many of them seem to think they are the next coming of Neutron Jack Welch.

That's why so much of the money we send abroad to pay for imports comes back to us in the form of investment.

Their FCBs 'invest' in our debt... not our capacity. It is to keep their currency weak & our currency strong so they can export even more.

Their populace generally DOES NOT want to invest in the US - they prefer local investments. Considering the recent TIC data I'm not even sure Americans are so eager to invest in America anymore (see the recent growth of int'l funds). Setser covered this pretty well a few weeks ago.

I talk to these people almost everyday. Neo-merchantilism is no secret. I actually had this discussion with Indians today - regarding currency manipulation... they complained that their gov't doesn't do near enough of it, unlike the Chinese... how in the heck are they supposed to compete with the PBoC? You had to be there to believe it.

They want world class capacity & capability and they are getting both in manufacturing, services & now research & development (IP). I can't blame them for that. while it is not a complete zero sum it also isn't a complete win-win - at least not in the short run.

As for those automobile ASSEMBLY plants you mentioned... they are assembly plants. Sort of like IKEA on an industrial scale. 75-80% of the value added at many of those transplants is done offshore (components) - value added equals potential for good jobs... meaning not here.

Even US mfgrs are doing more VA offshore - Delphi is the largest employer in Mexico behind the gov't... Their employment in China will soon top it. Meanwhile employment at Delphi here drops (white & blue collar).

I have actually sat in meetings where senior executives have told me personally that they don't know what the hell will happen to the US in the long run, that they are as concerned about their kids future as anyone... but that they can't 'fight the tape'... so 'we' decided to move more operations offshore (and a couple dozen more lost high paying work & headed off to WalMart). The exec I'm sure got bonuses - the company is doing well.

As the dollar weakens the opportunity for easy labor arbitrage changes. I've seen the numbers. We got a long way yet to go.

I'm not saying it is impossible to make globalization work... I'm just saying it is NOT working now for well paid (by world sta

dryfly's 04.13.07 - 9:23 pm response to Sebastian is completely correct ... as far as it goes. But Sebastian's 04.14.07 - 1:17 pm post is partially valid.

The underlying problem is that the Asians have subsidized export manufacturing so heavily for so long that their economies will fall into depression if they stop.

When I lived and worked in Japan in the '70s, I wondered whether Japan's apparent success might mean that economists' were incorrect in their arguments that such subsidies are harmful. But I also wondered whether Japan's success might be only apparent and short-term. Today I believe quite firmly that is so.

Many think that the fact that the Japanese have achieved a standard of living not greatly inferior to ours is evidence that their system is superior. Since I believe that on average Japanese are smarter and harder working than Americans, my view is that their somewhat lower standard of living is, rather, evidence that their system is inferior. If their system were equally good, their standard of living would be higher than ours. It's not.

Subsidies distort economic activity -- poorly run firms that ought to fail survive, while better-run firms expand beyond proper scale. The result is excess capacity whose output can be profitably sold only as long as the subsidies allow unnaturally low pricing. Once in place, the excess capacity demands continuing subsidy. The excess capacity includes not only too many factories and too much equipment, but also too many people building the wrong kinds of careers.

The theory of comparative advantage makes a compelling case that free trade results in optimal resource allocation and maximum (not necessarily equal) economic welfare for all. But it implicitly assumes that exchange rates will adjust so that prices reflect the relative values of the resources in each trading nation*. If the allocation that results is optimal, then any different allocation exchange rate manipulation creates must be suboptimal.

Since trade with manipulated exchange rates is in fact not free trade, it does not maximize economic welfare for all. It's simply bizarre that economists who would be vituperatively critical of any US government move to expend $500 billion a year on export manufacturing subisdies are silent about or even approving of Asian policies that provide subsidies of similar per-capita scale. How can anyone speak of "free trade" in the presence of such distortions?

The last time I ran the numbers for Japan, its cumulative current account surplus with the US was around $10,000 per Japanese citizen; that was years ago, and it must be $15,000 or more by now. That means each Japanese has, on average, shipped that much more worth of useful stuff to Americans than they've gotten in return, and each American has, on average, gotten about half that much useful stuff without having to send the Japanese anything useful in return.

Though it's probable that Am