5 Things to Know About the Bank Bailout

In 2005, where were the votes needed to reign in Fannie Mae and Freddie Mac? One new senator from Illinois voted against stricter regulation. Plenty of blame to go around.Need more in Washington to care about the country and less who care about Party. In case anyone hasn't noticed, this is a crisis and political posturing and finger pointing is not going to get us out.

Peggy of KS 1:50PM February 17, 2009

Banks are allowed to lend ten times the amount of their reserves. If a bank has reserves of $100,000.00 they can lend ten times that amount. So with $100,000.00 in reserves the bank

lends $100,000.00 to ten home buyers for a total of 1 million.

The bank is allowed to electronically create 1 million dollars in order to make 10 $100,000.00 loans.

So now the bank is owed 1 million dollars by 10 home buyers.

The rate of interest the home buyers are charged is insignificant to the bank because they don’t plan on servicing the loans anyways. The bank groups the 10 loans together and calls them a “Securitized Mortgage Loan Bundle” which it then

offers for sale to another bank or private investors at a discount. Lets say a 25% discount. An investor comes along and

buys this package of 1 million dollars in loans for 25% of it's value $750,000.00. The investor increases his worth to 1 million dollars. The bank receives $750,000.00 for 1 million in loans. Then the bank puts the $750,000.00 into their reserves. Now the bank has $850,000.00 in it's reserves which means they can now lend 10 times $850,000.00. Now the bank makes 85 $100,000.00 loans for a total of 8 and 1/2 million dollars.

The bank can concievable repeat this proceedure over and over and over again. There is no reason for the bank to care if the loan is good or bad since it doesn't intend to keep it anyways.

WOW! What a greed and fraud producing system that is. It's no wonder the problem is so big. In fact I wouldn't be surprised if the problem is still being sugar coated. It won't surprise me if this housing thing checks in at 50 trillion dollars before it's all said and done. Unbelievable allowing Banks to create money. It sure would be nice to know and prosecute the people who put this fraudulant system in place.

If gambling was legal I would bet you the banking industry and the my fellow Republicans are responsable for this fraud.

Thomas Lewis of CA 5:39AM February 15, 2009

I agree with you Tony,that every person, no matter what race or socio-economic level, should have enough common sense to spend responsibly. We've been living in a society of self-absorption... we want and absorb everything we see that we want, such as buying a home they can't afford and then now bailing out, default on their homes, bring down the value of real estate... a big ripple effect. The banks are just as irresponsible for risky lending... but let's not beat a deat horse already. What's done has been done and now we're all in a jam, both the irresponsible and responsible people.

As everyone knows by now, the TARP, bailouts, and now the stimulus plan aren't going to do jack to help the average Joe, i.e. 90% of Americans, because none of these programs are addressing the core problem (housing and real estate) the correct way. It doesn't make sense to help owners by giving the money to the banks so they can take back the homes more easily through foreclosures. As many people have said, the best way to stimulate the economy is to put money back into average Joe's hands, but only those Joes who really need it, and make sure they spend that money responsibly.... through a voucher program. People can apply for debt relief vouchers, processed by federal employees in each region (this would create some government jobs), the voucher would go directly to help pay for a percentage of unpaid mortgages. That money goes to the bank, in turn, the banks can reinvest into the credit market, keeping businesses open, which in turns keeps more people employed, which in turns keeps them happy because cash is flowing and they're continuing their payment on their mortgages, decreasing bankruptcy and foreclosure, and they're also spending which keeps other business open... etc.

Why do politicians turn a simple solution into such a complex, complicated, convulated one? Greed. Were back to square one.

dna of NH 9:52AM February 12, 2009

Why would any reasonable taxpayer with the ability to read, analyze and do their homework believe that the Feds tinkering with the economy and the free market is a good thing. The fact of the matter is regardless of the spin put on our current financial crisis the genesis lies in government trying to affect and change the free market process. The collapse of Freddie and Fannie can be tied directly to the Feds manipulating lending practices leading to artificial growth in the mortgage markets, new home construction and all of the associated industries. Just like children, sometimes adults need to be told NO. No you cannot afford that house, No you cannot buy a house if you've not saved a downpayment. No you can't take an equity line on a house that you don't even own yet, to buy that same house. Wake up and smell the coffee, sometimes we can't have whatever we want whenever we want it. Our Federal Government overspends, our states overspend, our counties and municipalities overspend, and it's all because no one ever stops to think, who's money is this? Do we really need this? Is this our business? Who will pay this bill? The Republicans should be ashamed and mortified at the fact that they completely abandoned their moral and financial compass. Democrats should be ashamed at their naked ambitions to control other people's lives presumably because they can't make their own decisions. As a husband, father and employer - I do not want anything from any other person or entity. It is my responsibility to provide for my family, I do not expect anyone or any entity to do this for me. It is my responsibility to save part of my earnings not the Federal government mandated pyramid scheme called Social Security. It's my responsibility to pay my medical bills, put gas in my car and find a way to put my kids through college. These are the priveledges of life, freedom and self determination. These are the trials and hardships that build our character, makes us recognize the most important people and moments in our lives, and in the end make success sweet. It is the contrast of tough times and good times that make life worth living. Is this really where we want to go? Is this really what our founding fathers intended a social nanny state, where we depend on the government for our guidance. This is a group of people who virtually consider themselves to be royalty, produce nothing, have never met a payroll, fly in private jets, don't pay their taxes (but write laws that will incarcerate you if you don't) and in their own way have nothing but a patronizing contempt for regular citizens. Think about it, decide whether you want someone else to clear your path or do you want to do it for yourself. Do you want to be on cruise control and sleep through life or do you want to live an adventure that is ever changing and not yet determined? This country is great because at the right times we've avoided the path of least resistance and made our own way.

Tony Faeth of KY 11:42PM February 11, 2009