What about those people who are renting, saving and one day hoping to own a home? Because they didn’t take a 100% no-down stated-stated loan with a 2-year fixed option they’re forced to suffer by not owning a home?

While I agree with you that millions of homes stand perilously close to foreclosure, we need to be measured in any steps that are taken.

S Hallman – thanks for the compliments!

You are of course right. The capitalist system cannot place nice. It ceases being capitalistic as soon as that occurs. The only problem is that we’ve seen time after time after time that the government intervenes on behalf of the large corporation. The airlines, the S&Ls, the auto industry, heck we can get down to subsidies for farmers. Government intervention is everywhere.

So if we say the homeowner should not be bailed out we must demand that farmers stop receiving subsidies, correct? And if we say no this time we must say no every time hereinafter. We can’t say no to citizens and then turn around and say yes to the big wigs in some other industry a year or two from now.

If we do we’re capitalist for the little guy (watching his lunch eaten by the system) and socialist for the rich (by bailing out their massive failed enterprises).

I agree that people should not be bailed out by those that were smart, rational, responsible individuals whose tax payer money should be going to causes that actually improve their life and/or goes back in their pocket.

I am merely wrestling with the conflicting Samaritan feelings that I feel saying that in a public forum; because at heart I am a much more “hands off” and “small government” guy – although my thoughts above clearly betray that line of thinking.

When it comes down to it a bail out is incorrect; but letting the public fail and then turning around and bailing out some other industry or country would be worse, I think?

Finally I 100% agree that my utopian vision outlined above is completely unfeasible simply based on the complexities of the situation we are in. Further I 100% agree that there cannot be mercy on Wall Street or investment products (MBS, CLO, etc.) as that would undermine any remaining confidence in those securities.

Thanks for the engaging discussion I-Man.

You seem like such a nice guy + probably a great friend + neighbor. And if I was in the market for the mortgage, I would have total confidence you would give me great advice.

But,you want enough downard pressure on the r/e market to get pricing in line with fundamentals; yet, not to hurt those “responsible” people who fell for teaser rates, etc.

That is a nice ideal but c’mon, there cannot – and should not be — faith based lending or faith based MBS. Check out prosper.com to hear all the explanations of how people want to fix their credit etc + yet, default again to those faith based lenders.

Markets are non-discriminatory. I been on both the short end of the stick + the long end. Responsible people occasionally act irresponsibly (how many DUIs + accidents happen from responsible people acting irresponsibly?).

Friends, family, churches are there to support those who simply made a mistake + want to go right. But, that is not + should not be the job of govt or Wall St. Just think about all the unintended consequences of going down that path with all the political distortions that get introduced + hardwired into these programs. You know all the examples – none every work out – or cost – whatever the original plan called for.

I agree with your argument. The only thing I am not sure of is the argument that allowing people to stay in homes who can afford them at rates that aren’t explosive is bad for the economy. There is a huge mass of home inventory that will come on the market as tighter guidelines have eliminated options for those that truly can’t afford the payments. There are speculators that will lose properties, liar loan folks who won’t be able to refinance and then almost everyone who made a gamble in 05-06. That seems to me like it would put the right amount of downward pressure on pricing with out the need to kick every full doc responsible home owner out of their home who took the bait on a low rate adjustable.

We could give them a recourse that is sane, sound, and backed by sound underwriting while still bringing prices down to reality, right? I mean if the amount of people that fit a FHA program are really only about 30% of subprime then that still leaves a huge portion of people out which will do the trick with returning to fundamentals.

I am just rambling off the top of my head here – but isn’t there a way to bring down prices while still helping people that actually make for good borrowers who are currently in toxic loans?

Just let me reiterate that I am not for any type of full bail out, and am not even sold on adjustments to fannie/freddie or FHA so I just want to be clear on that.

Morgan, if we proceed with a bailout – or price supports thru F/F etc, then you are keeping the housing market artificially inflated + hurting thousands of responsible people who are locked out of the market bcs of these high prices (out of line to fundamentals).

Govt, if it is to get involved, should be there to help the greatest number of people – not those who gamed or took advantage of the system – or were just irresponsible. Of course, the obvious cases of fraud need prosecution but we all know, the vast marjority of people just took advantage of the easy loan money + “banked” on appreciation to bail them out (including Wall St).

To do the greatest amount of good for the greatest amount of people would be to let the markets work. The medicine will be very distasteful to some but in the long run, we will all be much healthier for it.

The reason I am intrigued by Fannie/Freddie is the following statement found on the about page of Fannie Mae:

http://www.fanniemae.com/aboutfm/index.jhtml;jsessionid=G4SKT3OMVFGWFJ2FQSISFGA?p=About+Fannie+Mae

Fannie Mae has a federal charter and operates in America’s secondary mortgage market to ensure that mortgage bankers and other lenders have enough funds to lend to home buyers at low rates. Our job is to help those who house America.

Fannie Mae was created in 1938, under President Franklin D. Roosevelt, at a time when millions of families could not become homeowners, or risked losing their homes, for lack of a consistent supply of mortgage funds across America.

The government established Fannie Mae in order to expand the flow of mortgage funds in all communities, at all times, under all economic conditions, and to help lower the costs to buy a home.

In 1968, Fannie Mae was rechartered by Congress as a shareholder-owned company, funded solely with private capital raised from investors on Wall Street and around the world.

Fannie Mae has a unique duty to the public it serves — and the private investors that fuel its service — to be a model company focused on service, reliability, and value.

As America continues to grow and change, Fannie Mae will be there to help meet its growing and changing housing needs.

I mean this says that the Fannie charter is to assist the American home owner when funds are not available from other sources. Which is clearly the case right now. If the GSE’s do nothing are they ignoring their original charters because people don’t think it’s “right” to bail out private entities and citizens got carried away?