Why Wall Street loves the bailout

This was the article on Monday with the super jump. Guess I missed the article on Tuesday when it plummeted that was titled “Where’s the love?” I guess it is true that you can’t time the market, and that includes writing articles on how we’ve turned the corner, formed a bottom, etc, etc, etc. Keep saying it and eventually it will come true.

To: C.E. Mendenhall,

What color is the sky on your planet? We’ve turned the corner? Which corner is that?

Yes, commodity prices are correcting. Crashing…I don’t think so. You obviously don’t know bubbles when you see them. Commodity prices had been rising because market speculators started piling in once the word got out that commodities were HOT. Now they correct for a little while while everybody piles out and moves to the next “big” thing. What that is, is anybody’s guess at this point. But mark my words, once the speculators get trapped in their own wrong way bets, they will once again pile into commodities as a value play. Gold, Oil, foodstuffs, etc will skyrocket yet again. This is classic “bear market” gyration activity. The actions of the Federal government have clearly shown that the financial markets are severely broken. What else would explain the constant interventions necessary to “save the day”? Folks, we are in for a long world of hurt BECAUSE the government is interfering with the necessary processes that NEED to happen to clear out all the bad financial decisions that have been made over the last decade. This mess isn’t going to get cleaned up overnight. Look at the stock market activity, it’s literally STUPID, UP 200 points one day, DOWN 200 points the next. This is not a sign of a turned the corner economy. The market desperately needs to be purged of all the bad debts that are still sitting out there buried in the balance sheets of banks, hedge funds, investment houses, etc. All the buried bodies have not been found yet. My guess is that 50% of the bad $$$ has been exposed, that leaves the other 50% still to come into the daylight. NOBODY wants to see it, much less acknowledge that it’s still out there but it is. The financial industry has grossly overlevergered itself and all those CDO’s, derivatives, etc, etc need to still be purged. It is going to hurt, and hurt bad, but there is never GAIN without PAIN. Why is the government stepping in so heavy handedly?, because they KNOW what’s out there and it scares the living SH-T out of them. They are also running out of magic silver bullets to kill the werewolves too.

It a’int going to be pretty here for the next 1/2 dozen years going forward. Foreclosurs will continue to rise, wages and incomes will continue to shrink, which will exascerbate the housing turmoil (who is lining up to buy overpriced houses anymore), food prices will continue to rise, energy prices will continue to rise. Inflation and deflation have both found comfortable niches in the US economy and until prices adjust to wage income, the system will remain out of whack.

Turned the corner…I don’t think so. Not yet, anyway.

Bailout are needed to sheild the rest of us investors from a market melt downs. However the boards and management of firms bailed out need to be held liable for mis-management. These people earn incredible incomes and bonuses when times are good. They need to feel the pain with the rest of us. They need to loose there jets, houses and any other form of net worth. As a small business owner when I make a mistake it goes straight to my bottom line. There need to be the same direct results for public corporations who hole them self out to be the expert.

Hit bottom? Geeze Paul, I want some of the drugs you must be taking. The ONLY question that stands unanswered is which State will start talking secession first – if Washington can’t rein in their spending and corrupt deceitful ways of doing business then we don’t need them!

WOW! What a devious way to transfer the hard work and the investment savings of the middle-class small investor to the “poor”. Our current tax system does that pretty efficiently ,but this is faster and easier. In one day people like me lost thousands of dollars that were invested in preferred shares of Freddie Mac as well as Fannie and . Not only that, but the rating agencies had these shares rated A-/B+, well above investment grade.It is very painful to see our own government in conspiracy against its own people.

If I mishandle my funds and investments, I have to cover my losses by selling my car, my tv, my house, declare bankruptcy and lose all my credit rating- how come these Fanni Mae guys and Countryside execs, etc., who gave to green light to literally loan money for a down payment to hundreds of thousands of unqualified homebuyers aren’t going to jail for fraud and misrepresentation? or worse losing all their fatcat homes and cars and finding out what it’s like to live in the stinking real world of Safeway and Target and pump your own gas into your 14yr old car on the way to a minimum wage job you have to take because they’ve hired the world to take away yours! No, they are going to walk away with millions in severence, while MY tax dollar is going to bail out everyone who was on assistance, yet managed to get wined and dined into a home that no way I could have ever afforded!

will it help…yes but the thing most of the comments are missing is that energy is down crude is at $104 from $145, natural gas is $7 not $14, motor gas is down around .60 a gallon, gold, wheat and other commodities are crashing…prices have peaked and more money is ending up in peoples pockets. Stop looking in the rearview mirrors. We have turned the corner.

Congratulations Paul!!
You finally wrote an article from the Bear’s perspective on our multiple bubble problems and even on the perfect day – stock indexes down about enough to wipe out yesterday’s silly move up.

Although the Fed has the prime lending rate down to the 2% rate it is currently at, no one seems to be seeing the money in the form of credit being extended to actually help the economy. Is it possible and probable that at least some of the Financials have figured out how to borrow the cheaper Fed money on existing BAD Loans to help offset some of their already known Bad Debt Write-offs, and lessen their own financial liability? I suspect that if there is a way for them to accomplish this through not so tight government regulations on borrowing that this is where the cheap money is going, instead of to the consumers (both business and personals) that it is suppose to be helping.

The Government take over of the GSEs was just another predictable step in the painful collapse of the first major debt bubble since the great depression. It took 2-3 years to hit bottom then and it is likely to take as long this time. Regardless of which party wins the White House, I’m looking for total market capitulation in 2009.

Does this “takeover” put any new money into the pockets of the people? … No, or at least my check hasn’t arrived yet.

Does this “takeover” put any additional money into the hands of failing mortgage holders? … No. Mortgage failures and foreclosures are still red hot and going to get hotter.

Does this “takeover” really stabilize the mortgage markets? No. Houses are still grossly overpriced compared to the ability of the common man to be able to comfortably afford, so until the price to earnings ratio of the common man gets back into alignment, the mortgage machine (and industry) will continue to remain broken.

Will this “takeover” be kind to the holders of the common stock of Freddie and Fannie…Nope, they’ll get wiped out. The regional banks holding the stocks will be hit hard too.

This action will have a decimating effect to our economy for a long time. Hank Paulson has openly shown that the US Government is BANKRUPT (morally and ethically) and took this action strictly to guarantee our debt to foreign nations (lest they dump our Treasury bonds and very suddenly sink our feeble economy into a DEPRESSION level economy). Remember, the US Government has NO MONEY whatsoever, the government TAKES money from it’s citizenry, and/or creates (with the printing press) money out of thin air (which destroys our dollars value BTW), so in effect the government is mortgaging our nations future (our children’s future) with their bull headed actions of today. We are in for a long period of economic malaise, unfortunately.

FYI: I am an optimist (more of a realist) and we will as a Nation ultimately recover, but it’s going to be a long slow period of recovery with many, many years of just muddling through. Sighhhhh!

It’s no fun at all watching my 401K drop 22K in value in the last 2 months. So much for the strong “performance” on Wall Street.

God help us all! I’m actually scared about our economoy for the first time in my life. How is borrowing money we don’t have to pay off other debt good? Is wall street mentally challenged or people just looking for any reason to raise prices to sell quickly for a buck?

I think the very fact that Wall Street likes this action makes it highly suspect.

Every way I look at this credit ‘crisis’, what is good for Wall Street is bad for the rest of us.

Paul, first, let me complement you for your level-headed coverage of this very controversial issue.

Second, in response to your question, yes, this event will probably put a floor under the equity and debt markets in the USA and may put a floor under the economy, too.

And, last, I want to ask for your help: try to educate other journalists to stop calling this event a ‘bailout’. With the way that media personalities throw around the terms ‘bailout’, ‘crisis’, ‘crunch’, ‘meltdown’, etc. you’d think there was an election in progress or something ;-} . This was a takeover (your word), takeout or takedown, but hardly a bailout. Both FNM and FRE closed today solidly below $1, just a stop on their way to 0.

Congratulations to James Lockhart and Hank Paulson for having the guts to go in, kick ass, and clean house. They had to kill a little bit of disfunctional capitalism to save the rest of it while the system is still barely alive. But, based on what I’ve read so far, we the people the taxpayers will probably make money on this deal.

We have a great country, but the next president and congress are going to be very busy trying to rehabilitate the barely-alive US capitalist system.

Wow, I can’t believe this article was published on CNN! I seriously thought it was satire. When I heard about the bail out, I thought I would get sick because it was even more evidence that the US is in MAJOR trouble… major! Why on earth would the government think that adding more to our already HUGE economic debt would be good? Maybe they know something I don’t know but like another writer said this sounds like welfare for corporations and not people…

What are you thinking Paul? The bottom of the market? This takeover signals the capitulation of the unfettered US capitalist system on which the entire stock market is based. The transition to a saner system may end up being as painful for the US as the transition from radical Marxism was for the former Soviet republics.

Paul,

You are a doofus. You have no concept of economic principles and should stop writing about anything financial.

Have you ever considered writing comic books?

Henry has just declared that Fannie and Freddie are both BANKRUPT, that the US has just absorbed that debt (doubling our National Debt in one fell swoop) and you think that that is a Good thing? Dumb!

Oh Goody !!! Once again, The Federal government is just changing the rules day by day, making it up as they go along, as the U.S. Taxpayer is on the hook for hundreds of billions of dollars of bad loans, yet again. And what part of the U.S. Constitution authorized THIS present action ??

What can we all expect when we have the most fraudulent banking system on planet Earth – namely fractional reserve banking of fiat paper money, with the evil Federal Reserve at the head of this Beast?

This may be the beginning of the end for THIS little “crisis,” but hang on to your hats when the Federal government eventually stops being able to borrow money to buy votes, and gets exposed as the $60 Trillion debtor it really is !

I think everyone should claim 20+ dependents on their W-4’s for the rest of the year. WooHoo! That will get someone’s attention quickly.

Absolutely not – the FNMA / FHLMC bailout is completely unrelated to the current heap of bad loans that remain on lenders’ books. While we may have bottomed out in terms of true subprime loans, we have hardly started to deal with the much bigger (middle class issue of) nontraditional loans that are going to reset in 2009 and 2010. This will be when the real fun begins – defaults on houses valued from $435 to $1MM. Add in the fact that lenders are doing everything they can to keep people in their houses, including engaging in stated-income loan modifications – a “remedy” that is doomed to fail in the long term. Throw into this the new HOEPA regulations that essentially prohibit more aggressive loans as of September of 2009, and there will be no way to sell the ever-increasing inventory of homes.

There is no way I am buying now – not when there is so much more depreciation coming our way as the supply continues to trump demand.

“The takeover of Fannie and Freddie removes a huge cloud over the markets and could be a sign that the economic pain is closer to the end than beginning.”

What’s in that cup Paul, moonshine?

“the takeover of Fannie Mae and Freddie Mac is a sign that the markets and economy have hit bottom?”

HAHAHAHAHAHHAAHAHHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA

Mr. LaMonica:
I cannot believe the outlook you have on this. It is irresponsible. You must work directly for Wall Street to write this garbage. Start selling off now while this rally raises prices. I have read almost all of your articles for the last year, but this is the last. At least though, your opinion is consistent, consistently nuts!
This country and its people have been on a spending spree and it’s almost over. So what if housing rates come down a point, won’t make a bit of difference. Approximately $220,000 for a median price is insane for the average person! And people have been willing to pay that! NO MORE THOUGH!
Enough…

Yes sticking the taxpayers with TRILLIONS of dollars in risk that knowingly WILL fail is great for some in the market, who risked their money, lost and do not want to lose their money they chose to risk. I speak for all taxpayers everywhere that I am only too glad to help you keep your money by providing mine.

Now that that is said, can you please remove the gun from my family’s head? We have agreed to your extortion. The least you could do is not gloat!

I for one welcome our new Big-Banking Overlords.
The circle is now complete so that Congress and all Americans now exist to serve the needs of Wall Street and Lobbyists and not the other way around. In hindsight, maybe my being so offended by George’s actions that trampled the Constitution and bill of rights was not needed. Who needs them anymore? Money -and not people- are all that matters anymore.

An old phrase from long ago comes to mind…”Taxation without Representation”. Hmmmm?

I don’t think the bailout of Fannie & Freddie is going to be the silver bullet for the economy. Consumers are still tapped out, wages are lagging and trillions of equity has vanished into thin air. We will still have tough credit markets and lending standards to contend with.

Good Lord. It is getting hard to read Mr. LaMonica’s work without sighing in disappointment. I just cannot understand how anyone can believe that this full admission (i.e., the FNM and FE bailout) that our credit system is broken will lead to some equity market turnaround in the near future. The credit markets cannot handle the current deleveraging that has engulfed the economy; they are stressed to the point where the Feds believe it is worth doubling the national debt to save them; this with the acknowledgement that regional banks may fail due to FNM/FNA losses; and finally, a Treasury that admits no one knows for sure how or what the GSE’s will look like down the road. This is a stop gap move to try and stay the tide; we are in for a long, bumpy road over the next few years. Get used to it, and people should stop deluding themselves into thinking that we have “the last thing we’ll need for the markets to move forward.” If I wish upon a star……

I disagree with Paul. This is a sign that we are in deeper trouble than we have realized. It highlights that having an ideological administration maybe be fun for a short while, but very harmful for the long run. I wish people wake up this time and don’t let Palin hot rhetoric disguise and serious trouble we need to deal with.

You think you are having fun now? You will pay (we all will pay) big time in the future. Wake up!

Now that the Feds have admitted that captialism does not work, lets do something about the minimum wage and the grossly overpaid CEO’s who got us into a 5 trillion dollar mess in the first place.

Should they and their friends walk with trillions of our dollars as we socialize the markets?

I say tax them at 75 percent of their real estate wealth and then 120 percent of their income until they paid us back the 5 trillion they have stolen from us.

When the minimum wage was first introduced it was suppose to be at a level someone could live on. Hence the wording minimum wage.

As housing and car prices are now more than ten times what they were in 1960’s when the minimum wage was $1.25, minimum wage today should be at least $12.50 to $20.00 an hour.

We can not finance our national debt with people only making like $6.50 an hour. For that we need a minimum wage of about $25.00 an hour.

How about the Feds doing something that would really help America and push the minimum wage to $25 an hour. Instead of spending ten times that to bail out the investors who brought those bad loans Fannie and Freddie made.

And lets have a maximum wage which is ten times the minimum wage. After all we are now a socialist government.

Superman is dead, there is no Santa Clause and pay no attention to the man behind the curtain.

BEAR’S SUNDAY MAIN EVENT (BULL TRAP!) This is THE watershed event for the BEARS. There are no more magical bullets in the pockets of our leaders! Rate cuts are inflationary, jobs disappearing, and there are no more Fannie/Freddies out there! This is it. Ben, Hank, and all the plunge protection team members have officially screwed themselves now. I’m predicting an unbelievable drop in the next month or two like nothing I’ve (or you have) ever seen. The shorts have full run at it now with all the “long bulls” getting seriously burned from today’s pile in and then panic selling in just a few days/weeks. I’m not going to bet my life on it, but I’m sure betting all my finances on it! The Wall St choreographers have played this all so beautifully! Good luck to all.

What we really need is a couple good hackers to get into the three major credit reporting agencies and give us all a “stellar” score. Then we can borrow enough money (collectively) to buy the Federal Reserve and fire everyone.

It’s all a smokescreen and it doesn’t add up. Let’s say you have $100 and lose 50%. Then you have $50. If you now get raise of 50%, you only have $75, not your original $100. Plus, most of the people ranting and raving about a turn around are the ones that already have millions, not the average “Joe”. There is a lot of pain yet to be felt. Hold onto your cash and weather the storm (about 6 more months).

This is really terrible. Its an admission that our system doesnt work and that the country is broke. Also, one item of the plan that hasnt received any attention is the fact that Treasury can now but MBS on the open market. Query whether we will use taxpayer dollars to buy MBS at artifically high prices to “set the mark” higher so that Paulson’s Wall Street buddies can avoid all those nasty mark-to-market requirements????

This smells from every orifice….

I don’t think this will accomplish much of anything. The problems with the mortgage market were a result of a lack of liquidity due to tightening credit standards. Those credit standards will either remain tight and nothing will change or they will start to loosen and mortgages will once again be given to people that can’t afford them. The only difference is that now taxpayers are on the hook for those defaults…

Way to go Fed.

The only ones to benefit from this is Russia and China. Having a bankrupt US government bailout two bankrupt US home mortgage giants is nothing for the stock market to rally around.

This is the first death bell of the US economy. In the 1970’s I read a CIA report that said Russia would turn towards democracy and steal our technology and get us hooked on cheap oil then revert back to communism and jack up the price of oil and ruin our economy. The report did not mention that China would do this also nor did it mention that both Russia and China would slowly buy up US securities like home mortgaged from Fannie Mae and Freddie Mac and then dump them in the last two months to bankrupt them.

We have clearly lost the cold war’s first fight. We are now beyond bankrupt. Also Russia attacked Georgia because the Israelis were going to attack Iran from there. I am kinda surprised at this move as it means oil will not hit $500 a barrel. I am confused by this move of Russia. Unless they have given Iran the bomb and want to protect them.

SWELL ANOTHER BAILOUT… THIS IS MOST DEFINITELY THE ONE THAT WILL RIGHT ALL AND FIX EVERYTHING. OH. BUTS LET NOT FORGET THE BIG THREE AUTO MAKERS HEY THEY JUST WANT 50 BILLION MERE PEANUTS IN COMPARISON. I JUST WONDER WHAT OTHER MONSTERS ARE UNDER THE BED AHH. I’M SURE WE WILL ALL SOON SEE. MAYBE JOHN MCAIN CAN LEND “W” ONE OF HIS BUSSES.. HE COULD CALL IT THE BAILOUT EXPRESS.

Right on the money, with the corporate welfare statement! Corporate welfare is the worst form of mercantilism. Since 1913 and Woodrow Wilson, the United States has been slowly making the transition to a “progressive” socialist state. Both parties are inclined to do make the transition happen. The Republicans are in favor of corporate socialism and the Democrats are geared to a more populist approach to socialism (similar to communism). It all leads down the path to the US becoming a more totalitarian state. Socialism and collectivism are rampant in each party’s platform. Each party makes use of “crisis” to grab power (i.e. Freddy and Fannie) at the expense of the taxpayers and future taxpayers.
I’ve written and called my Senators, Representatives and the White House. All I received back was the canned responses. I guess my job is to just sit here, continue to produce for the State and watch everything go down the tubes. The most disheartening thing is that these guys all know what they are doing to us and just do not care.

I agree with Jim L, San DIego – this simply postpones the depths we need to plumb prior to a real recovery. This props up the house of cards that is our monetary system yet again, with the government taking on debt on ‘our’ behalf.

Markets may recover temporarily, until sober views prevail again. This is a chance for some investors to cash out of financial dogs before the real foreclosure crisis hits in full. It’s a slow-motion train wreck.

The only real way to fix this mess, and all of the other asset bubble-caused ‘crises’ is to reform our monetary system and base it on something other than privately-issued debt. As long as we are dependent on debt-based money, the FED and treasury will have to keep trying to convince us to borrow more and more each year in order to keep from sliding back into depression. For every dollar that exists today, there is a dollar of debt paying interest (or in the case of the mortgage industry, perhaps not paying, which causes a cascade of problems such as banks not lending, resulting in contraction of the money supply and dragging the economy down.)

When the banks solve their capital problems is when we will start to climb out of this current mess, assuming the commodity bubble is deflating (after all, who were the banks lending to over the last year other than hedge funds, to speculate in ‘hard’ assets?)

Paul, this is a catastrophe. This is a very sad day for capitalism, and American business. If August of 1971 was the death of the gold standard, where Nixon announced to the world we are broke, yesterday, nearly 37 years later, Bush announced to the world that CAPITALISM DOES NOT WORK. It does not work for investors who are willing to take risks. It works for the wealthy and powerful.

This is so bad, it’s almost incomprehensible. Jim Rogers said it best: “USA is more communist than China.” How can it be good that the american taxpayer is on the hook for the bad mortgages that no one else wants? How can it be good that Franklin Raines, former CEO of FRE can walk away with millions? How can it be good that Mudd can walk walk away with millions? And all because they lied about their financial situation, Paulson HAD TO ACT IMMEDIATELY. How can this be good?

How can it be good that americans will have to work harder and longer for overvalued properties? After all, if one believes in efficient markets, were houses efficient at $750K in California, or more efficient at $350K?? Instead of allowing homes to bottom out to a more natural rate, the Govt is ensuring a lifetime of wage slavery. Either slavery to pay off the bad loans that will inevitably go bad in the next few months. Or slavery to pay off homes that are incredibly overvalued. Since when is inflation good Paul!!??

The Reagan Revolution is dead. The small Govt, free market capitalism is dead. This is a very sad day for america. This will not solve the housing crisis. Only delay the inevitable.

I think the bail out is a blank check to to wall street say: Hey dudes,keep doing the speculation as you have done in the last several years and if you fail, we will bail you out anyways.

Also it sends the message: It’s a free market out there until we want to change the rule to make it not so free.

It would seem the commenters have this figured out better than the story’s author. Unfortunately, the masses will see the story and not the comments.

Why should I, as a taxpayer who purchased a house that I can afford and has been making my payments, be happy that my taxpayer dollars are bailing out imprudent borrowers and lenders?

Where’s the talk of moral hazard?
Where’s the talk of bubbles?

This is DISGUSTING and IMMORAL!!!!!

We are in a welfare state. Oh no, not for the poor who need the help, but for the wealthy corporate millionaires because they fail to respect the basic laws of economics. If you invested in a mortgage vehicle that was loaning $500K to someone without a job to buy a house you DESERVE to loose your money. Everyone knew it was hapenning, but continued to drink the KoolAid. Now all us taxpayers, you know … the ones who actually are responsible for our finances … now get to pay for the mistakes of CEOs and executives who made 20X more than we did in the “boom town” of real estate markets of the last decade. What do you want to bet they get severance packages worth more than most people make in their life when they are asked to resign for their incompentance. Welfare for the poor is apparently a disgrace, but for corporations and millionaires it’s OK I guess. ’nuff said.

I totally agree with Sam. Home prices are currently four, five, six and some places 10 to 12 times income. The historical average is 3 times income. This is still a bubble, and it’s not sustainable. Prices eventually have to come back down (not good for homeowners and consumer spending but good for homebuyers and the long-term health of the economy) or wages have to increase to pay for higher mortgage payments (which fuels inflation and is bad for the long-term health of the economy). This takeover is definitely nothing but a delay tactic, both for political and investment gains, but not for the betterment of the housing market or the overall economy. Like Larry Kudlow says, nobody or nothing is ever allowed to fail anymore, it’s a non-fail society. All things in the universe have a natural state, and if things get out of whack from the natural state, things eventually correct…and sometimes the correction can be swift and devastating. I think when the euphoria of this bailout is past, people will realize that it’s done nothing more than make the eventual decline towards normal housing prices swift and devastating.

We haven’t yet seen the end of credit losses. Credit card losses have only started to be reported

While lack of credit available for mortgages is a large factor in the current “soft patch”, no one that I have heard thinks it is the only one. It isn’t even the only factor in the housing problem. Which is far from the only economic problem.

Housing is still over-built and the long lead-time in development housing starts means the building hasn’t even stopped yet. Nor is the rise in foreclosures over. And, as has already been pointed out here today, the prices are still higher then conventional wisdom says the market can support.

Housing isn’t going to be “back to normal” for a while yet.

And,

Americans are still in debt up to their eye balls and more money available for them to borrow isn’t going to make them able to afford more borrowing.

Jobs are still going away and wages are still going down.

Government debt is worse then ever. Heaven knows that this bailout didn’t help THAT problem.

Energy is still expensive (compared to two years ago, not compared to real value) and Americans are just now getting to understand that “stop wasting it, ‘use less’” is our only viable short term solution.

The economy hasn’t bottomed, and the stock market has a bottom quite a bit lower then it is now left in it. The value of the stock market is STILL a reflection of an assumption that the consumer will continue to INCREASE spending. Since BORROWING is the only path to increased spending while real wages are going down, this is so silly I shake my head every day the stock market goes up.

I can’t understand how making it even harder for everyone to get a mortgage now is supposed to ease our economic troubles. It seems backwards, like shooting yourself in the foot! I think its because nothing things are never done to help the “people”. Its always done at the urgency of big business and investors, to protect their capital! The sheeple always end up wearing the yoke!

The bottom for the economy has now been postponed, but we’re not anywhere close to it. The bailout of Freddie and Fannie was a politically-calculated move to make sure that Fannie and Freddie didn’t collapse just before election day. It’s also to keep housing from cratering even further, which demonstrate that Republican economic policies haven’t been good for the country. The economic bottom is yet to come, and this bailout ensures that it will be much worse. US Taxpayers have now taken on hundreds of Billions of debt, and as foreclosures send housing values spiraling down even further, millions more homeowners will decide that being upside-down on their home equity isn’t worth it, and walk away from their mortgage debt. US Taxpayers will then have cover at least hundreds of Billions of $ of mortgage-backed bonds, sinking the economy into depression. And notice that this bailout has caused Treasury notes to jump and get more expensive, increasing the Federal deficit even further as interest on the National debt is a huge part of Federal spending.

Believing that this will cause things to turn for the better is believing that keeping a bubble artificially inflated is good economic policy. Housing markets are still well in bubble territory and need to further correct downwards. Printing alot of new money to keep house prices at artificially elevated levels (that’s essentially what this bail-out is about) is not going to be a good thing in the long run. It will just delay the much needed economic corrections and cause alot of inflation in doing so. House prices being out of reach of ordinary Americans is not a good thing. More inflation is not a good thing either.

U R such a loser!

Every time I see an article of yours I just cringe.

Just wait – it will get FAR worse!!!! Housing market will continue to fall and thanks to this bailout taxpayers will be on the hook for billions. This was done not for the US citizens but for the foreign investors (China) who were getting ready to shut down the US IOU machine.