Thursday, September 25, 2008

Bail out smail out

I don’t understand the bail out. I got the following from

Question: Viewer from North Carolina: If the mortgage company that holds my mortgage goes out of business, what happens to my home?

Velshi: If your mortgage company goes out of business, your mortgage is still safe. ... The mortgage part of that business, the good mortgages get bought by another bank. So nothing will happen to you or your home at the moment.

OK. So here is my question. My bank can still sell my mortgage to another back, even if they are going out of business. I understand that a bad mortgage, one in default or bankruptcy, may not be sellable. Why would anyone want to buy a bad mortgage. Banks today are closing their doors because they have no more money to lend. The government is going to come in and buy many of the bad mortgages so the banks have more money to lend and don’t go out of business. My question, why don’t the banks sell the good mortgages, like Mr. Velshi said they will do anyway if the go out of business? Then they would have more money to lend and wouldn’t go out of business. They still have the bad mortgages and will probably lose money on them, if they sell today. Last night Pres. Bush said that if the government buys the bad mortgages, holds onto them, and then sells them when the values return, that the government will actually make money off this deal. Great, so I ask my question again. Why don’t the banks sell the good mortgages they have and then loan out that money to other people that will be able to repay the loans? All the while holding onto the bad properties until the values raise and then sell them at a profit.

It seems to me that our society of getting everything we want right now, no matter what the cost, has extended into our government. Sure the banks won’t have all that money now, but the market will return. It always has. It may be 2, 3, or 10 years. But, the market will return. Their stock will be down until then. No bonuses for the big guys. But, then there is no need for a $700 billion dollar loan from us citizens. I think having our housing market and the stock market down for while would be a good lesson for all of us. We need to be more fiscally smart with our money. That applies to my 8 year old son, the millionaire CEO, and everyone in government.

So, I say let us reap the rewards of our wrong choices for awhile. Things will get better and we will all remember our mistakes a lot longer, if we are required to feel the sting and not immediately bailed out.

1 comment:

Grandma & Pop-pop said...

Yes, I've grown very tired of news interviews of people who are losing their homes. I know I should be more charitable, but I just want to say, "What were you thinking when you bought that huge home on your puny salary?"

There doesn't seem to be much personal responsibility for bad choices anymore. It's all "blame somebody else!" Unfortunately, we hear this every day from the top down.

Virginia Wood