I can't wait to see the trashing this panel gets!

Lip.... where is the link to this at?

If I may:

Thank You True Blue!

Well, if Acemoglu Daron thinks so, who is anyone else to argue?

Rush Limpballs doesnt like it either

Nor do 93% of taxpayers.

You understand that these people are EDUCATED in economics. I know that is not the end-all be-all in the world, but it certainly is better set of qualifications than the mouth-pieces that are trying to influence our opinion (one crashed 5 fighter jets and barely scraped by an easy degree program, the other has bankrupted 2 companies as well as our country).

And I'll bet none of these economists can field dress a moose. Now theres a quality that really matters when it come to understanding foriegn policy or economics.

WAKE UP AMERICA!! These economists are the people that are not paid by the corporate welfare recipients. They are trying to help america.

But both candidates support the bailout. Whatever can we do?

"(one crashed 5 fighter jets and barely scraped by an easy degree program, the other has bankrupted 2 companies as well as our country)."

He may be an admiral's son as well as a snake bitten pilot but the Naval Academy can hardly be called an easy degree program.

I have known several military academy graduates, and law review members, and found them to be the cream of the crop.

Maybe it is time to use a "Bubble-up" theory of economics. Rather than bail out the banks with corporate welfare, why not bail out troubled home owners and let the money trickle up to the banks?

Set up an agency to review the failing loans. If the loan is failing because of loss of income or predatory lending, and the loan is on a primary residence, give a grant to pay off the loan (If the loan or balance is $150K or less), or refinance at favorable rates if above a set amount. Second homes and investment properties would not be a part of this program.

This should strengthen the American base economy by stabalizing home ownership and freeing up lower and middle class income for spending and/or investing. The banks will recoup some of thier capital as the pricipal of these loans are now paid off, and could reloan that money under new regulations.

Fire Away DR.

Well, if Acemoglu Daron thinks so, who is anyone else to argue? -- RisR

Funnier than you think. He is very highly regarded in the economics community, but as an econometrician (economic statistician) best known for work on colonial-era economic development.

People like Bob Lucas (Nobel Laureate at Chicago)have the gravitas and appropriate expertise in this particular area, but the strength of the Chicago contingent is noteworthy -- remember that's the home of Milton Friedman, and a bastion of free-market anti-government ideology. Given the way these e-mail letters work, it would be interesting to see how many of the signers have Chicago ties, and so would be expected to be disinclined to intervene in markets.

Maybe it is time to use a "Bubble-up" theory of economics. Rather than bail out the banks with corporate welfare, why not bail out troubled home owners and let the money trickle up to the banks? -- GMDuggan

Yeah, I was suggesting the same thing a week ago. Clinton has made a proposal along these lines, and Donna Brazile was giving it a lot of play (not, of course, crediting Clinton) on CNN yesterday. She did a nice job of pointing out some of the hidden social costs associated with foreclosures -- i.e., neighborhoods with empty houses become social problems and destroy communities.

There's at least as strong a justification to bail out homeowners as there is to bail out banks. Both made bad decisions -- homeowners signed mortgages they couldn't afford, banks assessed risk incorrectly and had too much of their portfolio in non-liquid assets. Given the prevalence of predatory lending, I'm inclined to place a much bigger share of the blame on the professionals (bankers/lenders) in this case.

... and so would be expected to be disinclined to intervene in markets. -- #13

Yikes. I need more coffee.

If you really want to see what was behind this mortgage mess watch this....

Bush is figuring to get one last nail in the coffin of our economy before leaving office. If he gets his way again then there is plenty of time for at least one more.

Stop this fool before he throws in the "lasr" hand full of dirt.

I have known several military academy graduates, and law review members, and found them to be the cream of the crop.

#10 | Posted by Mista Kurtz

You know, you are right. I shouldn't disparage the whole institution just because i can't stand the ideal of one of their grads being president.

I was a little over the top when i wrote that. I'm all better now.

A keith WHY is it that Dem's are pushing hard for this 700 Billion dollar TARP? Is that a GW and Rep. conspiracy??

Last time I checked it was a BiPartisan country. You better play my video link and educate yourself before it's too late....

You better play my video link -- Davethewave

The partisan spin is a bit much -- the fact is that McCain is a deregulator who protected the Keating 5, and the failure to regulate non-depository institutions was a big part of the problem -- but on the whole that's a good video. Tx.

I agree the vid is a little over the top, but you can see how escalating home values sucked in most banks, and when values dropped they were left holding the paper......

Funny thing about appraisers.
Their fee's are based on the appraised value.
And the banks only use their appraisers.

Fair market value is a joke.

It's all about GREED.

A question...

or two...

How many of these defaulted mortgages are there?

What is the average unpaid balance of each?

TedBaxter-
Important question, one would think. I don't see any attention paid to any serious discussion of why the billions are going to the people they are going to.

I don't see any attention paid to any serious discussion of why the billions are going to the people they are going to. -- BetelG

Yeah, I keep waiting to hear why it's more sensible to give the money directly to the banks than to help the affected homeowners refinance on terms they can handle. If you do the latter, the banks get the payments they need to stay solvent AND the homeowners get to keep their homes AND you avoid all the difficult-to-predict economic consequences of people losing their homes and neighborhoods being full of empty houses.

Google this name for some excellent insights into the mortgage situation.

Dr. Christopher Cagan

#24 | Posted by Phoenix

give that man an award, cause he nailed it.

Kinda makes you thinks 'something else is going on', like the actual problem turns out to be that some fat cats are loosing their free ride and that's unacceptable considering how many 'campaign contributions' they have passed out.

That "man" has at least one more vagina than you.

And she's usually ti.., er, right.

Google this name for some excellent insights into the mortgage situation.

Dr. Christopher Cagan

#25 | Posted by Johnson

Damn. Credit where credit is due -- www.csupomona.edu is really interesting. Cagan's research indicates default risk to be almost 3 times higher in cases of predatory lending (teaser rates) than subprime lending

Spud thought the majority of sub prime loans came with teaser rates and that that was part and parcel of the overwhelming default rate. No?

Also, he finds that in around 85% of the mortgages most likely to end in default, the homeowners have positive equity. (Slide 15 -- groups C and D are the high-default risk folks.) This suggests that banks should be refinancing rather than foreclosing

Um, yeah ...that sound reasonable to Spud too.

It also sounds like a lot of the "rush to payment" panic is manufactured.

"Bubble-up" has more credibilty with Spud than trickle down (which has NONE)

Good find, Lippy!

Be Well.

Spud thought the majority of sub prime loans came with teaser rates and that that was part and parcel of the overwhelming default rate. No? -- Spud

His classification system is presented on slide 7. It appears to be based on initial interest rates -- his "Teaser Rate" group is defined as those with adjustable-rate mortgages with initial interest rates below 3.9%. His "Subprime" group is defined as those with adjustable-rate mortgages with initial interest rates of 6.5% (I think -- resolution on my screen isn't very good) and higher. This isn't my field, but this seems like a reasonable classification scheme. (It's not, of course, if subprime borrowers were being offered initial rates of 3.9% or lower.)

So yes, part of the problem with variable-rate subprime loans was that when interest rates rose, many borrowers could no longer afford their payments. But (as he notes on the same slide) the payment increase to this group was only about 26%, from 30% of their incomes to 38% of their incomes.

The payment increase in the case of the "Teaser Rate" group, otoh, was 97% -- from 30% of their incomes to 59% of their incomes.

And don't call me Lippy. ;-)

Good find, Lippy! -- Spud

Oh, and as much as I hate to admit it, Johnson pointed the way to this study.

Thanks to both Phoenix and Johnson.

That's an OK review of mortgages, and anybody who went variable took a huge risk.

A. that rates would be the same or lower at reset date
B. that they'd qualify to refi and change mort. companies at reset date if rate was high

That link was done a year ago, the picture has gone down hill since then.

This economist opposes it as well.

Its not going to stop the bubble from deflating.

the governments actions will prolong the bubble long enough for the wealthy to move their money to safer havens and profit off americas eventual financial demise.

bet on it..

Congress has chosen dollar devaluation over asset class deflation..

america has been lubed ..here comes the pink torpedo.

I believe the bailout may be necessary.
The price should be the refunding of all bonuses, and any amounts paid to the boards of directors, CEOs and CFOs of the institutions being bailed out for the last five years.
The concept of risk is essential, and when you make poor decisions, risk leads to losses. So far I see no losses for directors and executives, so they have no risk.
That is what led to this crisis.
The creation of a system with great profits and little or no real risk will always lead to poor decisions.

ZapataBob

im glad to see democrats and republicans standing up against this outrageousness. theres still a chance to bring it down. taxpayers should not have to pay for the funny business of bankers and investors. there is a reason why fannie mae and freddie mac are under court subpeona, and also a reason why you dont hear it on the news. the irresponsibility falls upon the bankers, you must admit, as deregulation led to them opening the doors and promising more than people could handle. they saw this coming and went right for it, because, as i am sure, the bailouts were promised. democrats and republicans, stand together against corporate welfare. our great grandchildren don't need to pay for the funny business of the wealthy.

as woody guthrie once said:

Some will rob you with a six gun
Others with a fountain pen

if this were the 30's, this would be laughed out of congress. there is a reason why our country has maintained a healthy distrust of bankers for so long. let us stand together, america, united, against usury....