New Obama/Geithner Plan..........No requirements for banks to lend money....

[Postman]

http://www.nytimes.com/2009/02/07/business/economy/07bailout.html?_r=1&partner=rss&emc=rss

and the taxpayer gets to own all the bad assets.

[TWiley]

1. Not a bad thing

Remember, it was the Bush administration that encouraged banks to lend more money which lead to this problem.

QUOTE: The new financial industry rescue plan, to be outlined in broad terms on Monday in a speech by the Treasury secretary, Timothy F. Geithner, will not require banks to increase their lending. That is despite criticism that institutions that already received money from the Troubled Asset Relief Program, or TARP, either hoarded it or used the funds to acquire other banks.

The incentives to investors could be in the form of commitments to absorb some of the losses from any assets they purchase, should their values continue to decline. The goal is to relieve the banks of their worst assets so that private investors might then provide more capital.

Officials hope that that part of the plan is not labeled a “bad bank” administered by the government, although they expect that some might call it that. END QUOTE

1) They are letting the market determine risk
2) They are attracting private money to capital markets through incentives

It was the government deregulation of the mortgage and credit card industries that encouraged banks to loan and created all the bad mortgages. I am kind of glad they are not going down the same path to failure.

[Waiting For Everyman]

2. Yeah, tight credit will be a big help right now.

Lots of extra businesses can go under. And only a few of the untouched people can finance homes and cars. Wonderful. That'll soak up all this excess inventory for sure. :sarcasm:

And what the hell does the market know about risk? If it did, we wouldn't be in this mess. Or are you saying that all the regulators and CEOs and speculators did this on purpose?

And Bush didn't hold a gun to their heads, the system was designed to fail... derivatives, ratings agencies, none of it was an accident. The system did exactly what they intended. THEY, the decision-makers in this, are the risk - all of them. So now they're exercising the same toxic judgement some more, and being praised for it.

It must be Stockholm Syndrome, I guess. Or else being among the predators too.

[TWiley]

3. well, what do you propose? deregulation?

They decriminalized the risk through deregulation which lead to bad loans. How do we safely tread the same path when so many people are loosing their jobs? It could create an exponential problem if we did.

Deregulation and incentives created the sub-prime mortgage problem. And, you want to do it again?

[Waiting For Everyman]

7. No, I'd like to see affordable lending with common sense (real) guidelines.

The kind VA and FHA have been doing for decades. Our credit scoring system is a substitute for real judgement, and it's a fraud and a failure. THAT is what caused this. I guarantee you that if the subprime loans had been FHA or VA, this never would've happened because they do consider borrowers on a more real basis than credit scores, and predatory practices are not allowed in their loans.

We need something more like FDR's Home Loan Bank, for new affordable loans to create new mortgages out of the defaults that can be saved, and to new buyers who are ok now, but whose scores have been damaged by past hardships like layoffs. Many economists (and HRC btw) are in favor of just that.

The "market" will not be any part of the solution to this. It is the problem. It's crazy to think that what caused it will solve it.

Interest has to get lower on all loans for those who still have a job, and arbitrary credit score blackballing has to stop, or there will not be enough consumers to restart the economy.

Many of the homeowners in default can be restored to good standing, but the banks refuse to. The modifications which are used to show "redefaults" were not a change of terms, but only added missed payments on top of the current. Any idiot could predict that wouldn't work. It's dodging the problem (of exorbitant interest), not fixing it. This isn't rocket science. It's a refusal to correct it.

Only Sheila Bair's Streamlined Modifications so far, actually address the problem. But they are limited to Fannie and Freddie loans, and only began on Dec. 15th. It's too soon to have redefault stats on them, but I'd make a heavy bet that they're a lot better.

[KharmaTrain]

4. We Already Own Them...

We took control the day Klink Paulsen took over all Wall Street's bad debt. The end result of this crash that isn't talked about (for good reason) is how insolvent our banking system is. While there was a lot of the first bail out money that was squandered (and very worthy of vigorous prosecution), but a good chunk went to prop up banks to protect their existing assets...the end result was the stabilizing of the markets...people weren't making money, but at least they weren't losing.

The money was horded...little, if any, was used to fix the large foreclosure mess that's at the heart of this collapse. Capital needs to flow to keep companies from closing and more people losing their homes and dignity. I see a lot more detail in this bill than in the previous one to address the sub-prime mess...Dodd passed a resolution on the matter...and that there will be a move now to try to keep those who are facing the foreclosure or bankruptcy bomb to renegotiate their loans. But that doesn't address the bad assets.

Those need to be isolated and taken off the banks books so they can work from a positive balance. While those assets are toxic now, they do have value...and while we'll end up paying more for them than they're worth, in the end, if the economy stabilizes, those assets will have some value as well.

[Dawgs]

5. Good, a "bad bank" has always been the best idea.

Looks like many economists think it's a really smart idea.

[mdavies013]

6. We keep missing the point...

From what I read if we paid all of the defaulted mortgages...it would cost $70 Billion.

We are if this catastrofuck because wall street was selling the scent of a mortgage as a real mortgage backed by some asset. Reality is that Wall Street had the greates ponzi-scheme going and the house of cards has fallen...just like Maddoff...only a whole lot worse.

We need to make things more affordable so working families have more money to spend. Let everyone refinance their mortgages for a 3.5% fixed rate...save people thousands of dollars every year for the same $$$.

[Waiting For Everyman]

8. Yes, and similar relief for student loans and credit card balances.

Then we'd get out from under them. The banks don't deserve this sky-high interest anyway - it's the result of the systematic scam you referred to - regardless of "contracts", that isn't the point. It was ALL FRAUD. So we need to fix it, in line with REALITY, and get it done.

People have been ripped off, and that needs to be addressed and corrected - FAST. That would bring immense, immediate relief, and passing a law costs us nothing. Plus, the banks have been compensated for it already.

I agree with you 100%.