Is the Panic Overblown?

Yes we should panic! Not at the market, at our GOVERNMENT that is out of control and has been that way for a long time.

Seems over-simplified and probably somewhat dated now. From day one I have supported helping the homeowner/taxpayer and not providing funds directly to the lenders, who at this point cannot be trusted to do the right thing. Why should taxpayers provide their repayment guarantee on funding provided to the lenders. There is no direct benefit. That seems to be what everyone is upset about. The governments approach is back-sswards.

Nice thought, but what about those of us that have done it the right way, we are entitled to have our mortgages "reset," arn't we? If we are an nation of equality what those undisciplined, irresponsible people get we that have been responsible and disciplined should get it to...right? Anyway I can still make my payment...can they? No! Even if you reset there mortgages, they still can't make the payment...then what? Another round of foreclosure. We need to just let it go...and take our lumps. Anyway, they signed the paper, but didn't read the print!

This is what John McCain proposed last night. According to Carly Fiorina, John McCain proposed this back in March of this year, but it went unnoticed. It seems the most obvious solution. No one knows the value of these mortgages. By doing this plan, we will know. Also, if the mortgage holders can start paying their loans back, the banks will have cash coming in. By giving the $700 bil to the banks, there is no guarantee that the mortgages will get paid back. Alex Avallon Hatboro, PA

i was thinking the same thing, this is really the root of the whole mess and the numbers show that it is really not that large at its foundation. the reason it gets so "large" is that all of the derivitives that resulted that the "financial companies" are struggling with is the fact that these guys have to value them at a mark to market value which is very distorted and does not relate to the root cause, so it is effectively multiplied a lot making the problem look much larger than it really is. the real value of all of the derivitives will ultimately be known over time as the real number of forclosures is actually known and the work out known... meaning if a mortgage is for 100,000 and the bank has to sell for 80,000, the real loss is 20,000 not the full 100,000 and this proposal adresses this. too simple for our financial wizards in washington???

Thanks for another good perspective. The idea of buying the mortgages at the source makes a lot more sense than buying all of the convoluted paper out there. Buying the actual mortgage with the home as collateral assures we are getting the real deal at the source. The government has collection abilities like no other so someone will have to pay off the mortgages eventually. Where as paying for the paper!? Does anyone think that those in right places and are less than scrupulous will not add more unverifiable paper to the government’s purchase?

Why bailout the homeowners and banks who entered into a irresponsible relationship? Why doesn't the government reward the taxpayers who are paying their mortgages, car payments, and credit card balances? These are the people keeping this sad economy afloat. Why shouldn't we have an opportunity to shore up our personal balance sheet with the government bailout funds? Why can't the government reduce all mortgages and forgive us our debt as we forgive those who trespass against us. Spread the wealth among all and not just the few irresponsible people who are pulling the masses down! Get your heads out of the sand!

Elizabeth, Understanding the facts(truth) about the "toxic assets" allows one to realize that the "Bailout" will not accomplish what the American people have been led to believe the bailout was intended to do. In all the hype and threats that have been spread by our government, your ability to shed light in all this darkness, as always, is excellent. There is other information that I could provide, but what you have pointed out, with great clarity, is only the tip of the iceberg. Panic is never a solution and McCain/Obama worked diligently to harm the United States, by voting for and working to pass the bailout. I am a Republican, but I will not cast(waste) my vote on either of these two men, but will be voting 3rd party, Mr. Barr and company. I will also be voting out those in both houses of Congress who voted for this plan. To create socialism, as our? government is working toward, is very sad indeed and on principle I must stand. Freedom and Liberty, a Republic form of government promised by our founding fathers, our Constitution and the Declaration of Independence are all VERY dear to me!! Perhaps we can stop the loss of our representative form of government and retrieve it from the abyss of darkness??? Lord bless, Bob W.

This is exactly the idea proposed by McCain in yesterday's debate! He got a lot of flack that he was breaking the budget with another 300 billion. But it may be that he's MORE tuned into economic realities than Obama. Jeremy

Are you aware, by the way, that there is a popular editor used by programmers all over the world called "Emacs"?

How do you know 5.25% is the right rate. My first home mortgage in 1978 was 9%. The market must find its own level. Manipulation of interest rates is the problem not the solution.

Austrian economic theory says the real panic hasn't even started yet.

Great idea. Lets give those guys who bought a $400,000 home with a $30k yearly income a little breathing room. (30 years of breathing room) that way it will free up their money so they can go buy that big SUV that they can't afford, or put a few more thousand dollars on their credit cards buying all the worthless junk from Wal-mart, that will help us all out, get this economy moving again.... at least until the rest of us financially responsible folks have to kick out 3 trillion next time around to get them out of debt and "save our economy" from the next meltdown. YEAH, GREAT IDEA!!

This is my conclusion ...there are not that many defaults for the imapct that is happening across the world. In Columbus , Ohio the number this year jumped from 250 to about 1,100 currentley. Are you kidding me, if every income employed resident in Central Ohio increased tax withholdings to $220 each this coming year, we are bailed out, this assumes no value at all to an avergae priced home of $150,000. The crises is suspect...could we be in a techology driven finacial war? Short trading? By the way if we assume the average worker in Columbus (let' assume 250,000 with (k) had an average (k) account balance of $11,000. if each investor has lost 20% or $2,200. There has been a marekt loss to Columbus residents of $ 550,000,000. our $220 would had been better spent. My math may be wrong, my logic wrong, but my head tells me this is not about housing at all.

Elizabeth: This is not a panic. This is concientious decision-making by the average investor--whom by the way makes the markets tick. Remember, institutional investors tend to be consistent and conservative (which is good). Individuals, however, (even with their 401Ks) are making a statement. For me, the statement is simple: I no longer trust Wall Street or their Generation-X brokers. We are heading down a path of losses due to complete and utter stupidity and greed. We "invented" ways to make money that never really existed in the first place. The average investor is slowly turning away from Wall Street and looking at other investment opportunities: small businesses, durable goods, precious metals, cash, etc. Why should we trust anyone in New York City? Why? I really want to know one single reason why even one single investment firm can be trusted! There are no reasons. They hire the same people over and over again: The most greedy and intellectually deficient amongst us. End of story.

Susan B is close there. Sounds like John McCain wants to reward first the criminals who floated these loans by having the government get in bed with organized crime. Great idea McCain. I don't know, maybe you sleep around. Hey, why'd you leave your first wife again for that booby-hatch evil viper ? What's her name ? McCain ditched his first wife because she became disfigured. What a louse. This guys a phony. He probably whacked off every day when he was a prisoner of war... Yeah, let's then reward those that - awe gee, they spent too much at the amusement park and now their credit card bill is too high, awe gee, can't we just give em somethin' to help em along ? Golly gee folks... (Palin)... These people just bought things they couldn't afford, it's not like it's, ya know, their fault, let's give em that house, while the rest of you ? that do work hard and budget right ? Pay for it.

It's good to see some real numbers, finally. It appears that $700B was may have been a catastrophic number that was put forth. As in most things, those who proposed that number were probably expecting to get half as much as they asked for. Unfortunately, with all the rhetoric and spenders in the government, $700B was a STARTING point. It's ridiculous to solve 30-year problems with one big buyout, especially with other needs the country has right now. Its also crazy to burden the taxpayer with these problems, most of whom have followed the rules, worked hard, and paid their mortgages on time. Anyway, what would happen if everyone just kept their mortgage, and one percent of the existing rate on ALL MORTGAGES was diverted to a fund to offset or buy the bad mortgages? This fund would be used to buy or refinance current mortgages, and/or pay back the public for the government's initial outlay as the fund took time to grow. This would be applicable to all mortgages originated before July 2008. For example, if 15% of the mortgages need to be reworked or bought, taking 1% of a 7% mortgages would leave 14+% to offset the bad mortgages. Banks that have been and continue to profit from mortgages should have no problem paying into a fund which rescues them from all of their bad mortgages now, and let's them pay back the system over time, from a stream of income that is pretty much stable for foreseeable future (good loans). With the fed lowering borrowing costs, their earnings would not differ from that what was expected at the time the loan was originated. It basically turns a portion of the existing "good mortgages" into an annuity, which eliminates taxpayer risk, does not change the long-term earnings of the bank, and removes the current strain of the bad mortgages on the system. During this "draw down" of bad mortgages from the system, regulations could be revised to limit the banks that participate in the bailout from trying to add back the 1% into future mortgages, and restrict them from initiating more bad loans in the future. This could be done quickly. No mortgage payment would go up. The banks would trade off (a minimal amount of) future earnings for current loss avoidance, and the government systems would see a surplus after the amount in the "annuity" exceeded the amount paid to offset bad mortgages. As mortgages originated prior to July 2008 matured or were paid off, the surplus should go into the Social Security program. This would extend the solvency of the program and benefit those who had been depending on their homes to represent retirement savings who were adversely impacted by this mortgage-led meltdown. Comments welcome! Dave

Is the panic obverblown ! What kind of city crack are you smoking MacDonald. 20% IRA loss in 1.5 years ? 2 trillion gone ? And you think it's a panic. No, it's SANE to want to protect what your federal government failed to. I see, no Fed involvement to regulate, but after all the white collar crime, let's bring in the Fed to regulate ! We deserve the company we keep.

Here is a novel idea: why don't we let the idiots who bought a house they couldn't afford get kicked out and go into foreclosure. Maybe they'll learn that they can only buy stuff they can afford. The problem with our system is a complete lack of accountability. NO ONE is held accountable for their actions, the government just comes in and bails them out. What about all of us responsible folks who have been busting our tails all our life, paying our bills on time and working hard to make our lives better? I use credit responsibly. I know it sounds harsh, but I don't give a crap about the person being foreclosed on and getting evicted from a house they couldn't afford. Screw you and learn how to read the loan agreement next time. Because you wanted to keep up with the Jones', I'm bailing your sorry butt out. Enough is enough; if you want that nice house, work for it. If you want that big screen TV, save up money and pay cash for it. I'm sick and tired of this. Republican or Democrat, NO incumbent is getting my vote this time around.

Yeah, great idea....Once again, the people like my family who bought within our means, don't have any credit card debt, are trying to make ends meet with what we have are faced with paying for all those who just had to have the bigger house, the bigger ride, the bigger toys.....I'm soooo sick of paying for everyone else. What will I see from this bailout....nada....I'll see zero equity in my home while my neighbor, who gets bailed out sees his equity start to climb while I still can't sell my house for what I owe.....

Let's see how someone might respond to this situation. I didn't pay my mortgage, so someone gave me $200,000. Now what am I going to do with my new mortgage?

tmccray- is where i am, this is a push to something. a money or power grab.

I take issue with your assertion that the root cause of this mess is the housing crisis. The root cause is the socialized monetary system we have where the Fed gets to decide how much money to print. I wouldn't trust the government to manufacture anything, let alone money. Alan Greenspan reduced the fed rate to 1% after 9/11 and created the mess we're seeing. This flood of phony money caused businesses to act as if this money represented true savings when it really didn't. Housing was just the bandwagon upon which this money was loaded. Before this it was loaded onto the internet bandwagon. Fed phony money creates these boom and bust cycles as the free market adjusts prices to their true value in relation to the money supply. Simple stuff really. You can't be cheat economic reality by fiat.

I'm not a financial genius, but I've been screeming at all of the overstatements. This was an excellent report.

If money is your god you're in a whole world of trouble right now and your fear levels must be incredible. I don't mean to over spiritualize this situation, but hopefully God is your god and He can help you walk through this troubling time and find the peace you need to get to the other side.