Are you kidding me?

[SLCPUNK]

Gross: Bush needs to rescue homeowners
Thursday August 23, 3:04 pm ET

Famed bond fund manager Bill Gross said the White House should bail out the millions of American homeowners who face the dreaded prospect of foreclosure this year.

"If we can bail out Chrysler, why can't we support the American homeowner?" Gross wrote in his monthly investment outlook on PIMCO's Web site.

With nearly 2 million homeowners at risk of losing their homes this year and with housing prices rapidly receding, Gross said President Bush, not the Federal Reserve, is the best hope for "almost homeless homeowners."

"This rescue, which admittedly might bail out speculators who deserve much worse, would support millions of hard-working Americans whose recent hours have become ones of frantic desperation," said Gross, a founder of the fixed-income investment firm PIMCO and a columnist for Fortune.

"Write some checks, bail 'em out, prevent a destructive housing deflation that (Fed Chairman) Ben Bernanke is unable to do. After all 'W', you're 'the Decider,' aren't you?" Gross wrote.

Many have called on the Federal Reserve for help with the worsening state of the housing market, including cutting short-term interest rates. While the central bank has been reluctant to do so, Gross warned that such a move would not necessarily guarantee that adjustable-rate mortgages would not keep climbing or that mortgage lenders would relax their lending standards.

More and more troubling news has emerged from the already battered housing market recently as foreclosures nearly doubled during the month of July from last year, RealtyTrac reported earlier this week.

Home prices have also been hard hit recently, falling 1.5 percent during the second quarter, according to the National Association of Realtors. While falling home prices "might be healthy," the decline could represent an asset depreciation not seen since the Great Depression, warned Gross.

The bond manager noted a homeowner bailout wouldn't be the first time the U.S. government has come to the rescue when the economy has faced a crisis.

In the 1990s, the government rescued the savings and loan industry by absorbing its bad debt and late in that decade the Federal Reserve stepped in to restore calm after the collapse of a hedge fund, Long Term Capital Management.

Gross made a handful of policy recommendations for the White House, including creating an agency to coordinate bailouts or aid for homeowners and making adjustments in the government's Federal Housing Authority program.

He argued that action by the White House would not only help homeowners who might lose their home. Wall Street, which created, marketed and invested in complex securities backed by subprime mortgages over the years, could benefit as well.

"Your stocks and risk-oriented levered investments will spring to life like the wild flowers in Death Valley after a flash flood," Gross wrote.

In a later televised interview, Gross warned that the commercial paper market may never recover from the recent credit crisis.

"Certain portions of the commercial paper market will probably never come back," Gross told CNBC, adding that his firm has no exposure whatsoever to the high-risk mortgage loans that have sparked the crisis.

The latest data from the Federal Reserve showed total commercial paper outstanding shrinking more than $90 billion for a second week running - effectively wiping out 8.2 percent of the more than $2 trillion market.

[Timothy]

That is very interesting to read. Will I think it would be something good if it were to happen , I think that in the long run it would set up a not so great trend.

[COMAMOTIVE]

I've now seen the epitomy of a crackhouse in American Politics

[JMack]

How was Chrysler bailed out?  I thought that the 2 companies MB and Chrysler seperated and that someone took over Chysler through stock?  Was there a bailout from the govt.? Like in the airline industry who now are showing in the black but still charging insanely high airfare for regular vacationers.  I'm serious I didn't hear of a bail out.

[fuckin crazy]

How was Chrysler bailed out?

Back when Ronald Ray-gun was pres., the Congress gave Chrysler 2 or 4 billion. I don't remember how much, but I'm pretty sure it was one of those two. It was the early 80's.

That reminded me of my favorite song about the RR from the Byrds? Drug Store Truck Drivin Man If you have never heard it, check it out. Funny as hell.

[stolat]

Yeh, Mopars are great cars! Hey Charger! 

[polluxlm]

Yeah right, the Fed would be very interested in letting go of all that property soon to be theirs.

[stolat]

I think it was Nader that tried to bring down Chrysler. Slow news day....

[pilferk]

Yeah right, the Fed would be very interested in letting go of all that property soon to be theirs.

Not that I think it would happen, but....likely the Fed "bailout" would consist of low...or no....interest mortgages, forgiving any current payments due, and letting a homeowner get a "Fresh start" at a MUCH lower monthly payment.  The monthly payment would be somewhere in the neighborhood of 1/2 of what it likely is now if they were no interest 30 year mortgages.  A 1200 a month payment (approx payment on a 200,000 mortgage at current interest rates...nevermind some of the predatory rates being cited) would be AROUND 600.

Yes, you'd likely have some forclosures..which would get sold to banks hoping to curry fed favor. 

I'm not sure what the economic effects would be, long term (you'd have to look at the effect of removing that interest deduction on taxes, too), of course.  But I'd guess any real "bailout" (and the current programs being discussed in the media aren't a "bail out", really) would take the form of the above.

[polluxlm]

Yeah right, the Fed would be very interested in letting go of all that property soon to be theirs.

Not that I think it would happen, but....likely the Fed "bailout" would consist of low...or no....interest mortgages, forgiving any current payments due, and letting a homeowner get a "Fresh start" at a MUCH lower monthly payment.? The monthly payment would be somewhere in the neighborhood of 1/2 of what it likely is now if they were no interest 30 year mortgages.? A 1200 a month payment (approx payment on a 200,000 mortgage at current interest rates...nevermind some of the predatory rates being cited) would be AROUND 600.

Yes, you'd likely have some forclosures..which would get sold to banks hoping to curry fed favor.?

I'm not sure what the economic effects would be, long term (you'd have to look at the effect of removing that interest deduction on taxes, too), of course.? But I'd guess any real "bailout" (and the current programs being discussed in the media aren't a "bail out", really) would take the form of the above.

The Fed would never initiate any real bailout since they're the ones behind the current situation to begin with.

The government has borrowed alot of money to pay for the recent wars. Since The Fed just created this money out of nothing you're facing a very serious inflation when the money reaches ordinary circulation. This was stalled by putting the extra money in an increasingly inflated property market.

Now however the limit has been reached, and something's got to give. And I can promise you it won't be the big guys who end up paying for it. It'll be you and me, as usual.

Trade your stocks for put options now, that's what they are doing.

[pilferk]

The Fed would never initiate any real bailout since they're the ones behind the current situation to begin with.

Agreed.  My point was more of what a hypothetical "bailout" would entail.  As I said in my OP...it'll never happen though..especially with the current administration at the helm.  Besides the reasons you lay out...hell, they couldn't really help (and still haven't made good on some of the promises made to) people who's lives were upended by a natural disaster.

The government has borrowed alot of money to pay for the recent wars. Since The Fed just created this money out of nothing you're facing a very serious inflation when the money reaches ordinary circulation. This was stalled by putting the extra money in an increasingly inflated property market.

Mostly agreed.  I'm not sure on the inflation front just yet.  It's tough to gauge but most indicators are showing a slight bump right now.  What will happen going forward, i don't know, and the eoconmists seemt to be evenly split.  I will say, though, that I agree with much of your reasoning.  I just haven't QUITE arrived at the conclusion you have, yet.

Now however the limit has been reached, and something's got to give. And I can promise you it won't be the big guys who end up paying for it. It'll be you and me, as usual.

Agreed.  Well, not LITERALLY you and me, but yes..the figurative "you and me" meaning your average Joe.  I'm lucky in that I have a house I like, that works for my family, am paying a decent interest rate (below the current rates, actually), and FAR "out earn" my mortgage.  We've talked about "upgrading" to something bigger but more be cause we want it, not because we need it. We can wait 3, 5...heck, even 10 if we wanted, years for the market to rebound, and be perfectly happy living where we are and paying what we are. 

Now, if you're simply talking about being the victim of inflation (and not the housing market) then sure....but then everybody (even the guys at the top) pay for it because, lets face it, we all pay more for everything.  And the biggest ($ wise, not per capita dollar on income) consumers are usually the biggest earners.  Again, the middle class will likely feel more of the pinch....energy costs are already doing that...I'd certainly agree with that.

Trade your stocks for put options now, that's what they are doing.

I think you can ride the market a bit longer....but honestly, I have a very strange "investment habit" (which I'll not disclose here) and everything is about to come out of stocks and go into low risk stuff, anyway.