The politicians can bail out banks, big business, and make sure that their campaign contributors are all taken care of. They can provide 3 billion dollars for the Cash for Clunkers Program and help bail out the automakers. They can send out checks to American families through the form of tax rebates. They can debate the irresponsibility of a second stimulus package. However, they are failing miserably by not taking care of our senior citizens who depend on Social Security benefit checks.

According to Social Security, seniors will not get a cost of living allowance increase for this year and likely not for the following year. Annual cost of living increases started in 1975 and for the past 33 years, Social Security recipients have always received a benefit increase. This will be the first year since the program started that the benefit increase will not happen.

To add insult to injury, the premium for the Medicare prescription drug program will increase. By law, Social Security benefits are never supposed to decrease. Since those prescription drug premiums come out of Social Security payments, we will see a decrease, which the law never intended to happen.

Is it ironic that the new healthcare proposals seem to devalue life during the later stages of life and Congress sits still as our seniors struggle with Social Security? They can print money for all of their earmarks and irresponsibility that makes up the stimulus package. However, they cannot do the right thing and take care of our seniors. Just more of the same out of Washington.

Tags: automakers, Bob Brooks, cash for clunkers, Congress, Deceptive Money, healthcare, Medicare, politicians, Prudent Money, Social Security, Stimulus package, tax rebates

Can you just imagine the Government trying to run something as complicated as a health system? If they cannot run something as simple as the cash for clunkers program, they certainly aren’t qualified to run something complicated.

It appears that the CARS program is in real trouble. So far the Government has received 412,000 applications for roughly 1.7 billion dollars and has only processed a fraction of that money. That leaves car dealers being owed a lot of money. US News and World Reports stated that some car dealers are waiting for as much as $200,000 in payments. Thus far 80% of the rebates have been rejected. There is the Federal Government at work trying to do the car industry a favor.

The Government originally hired a little over 200 people to process all of the applications. They are in the process of hiring nearly 1,000 more people to speed up the process. Of course, that is after the delay of the hiring and training process occurs.

Then you have the Honorable Politician Barney Frank who was shown on television in a Town Hall meeting belittling and insulting the very people who unfortunately put him in office. Hopefully, this country will wake up and get rid of all of these politicians that are up for re-election. Barney Frank has nothing to do with the CARS story. However, like most in Washington, he kind of has something to do with ineptitude. The good news is that we don’t have to put up with these politicians as long as we are still allowed to vote.

Tags: Barney Frank, Bob Brooks, car dealers, car industry, CARS Program, Cash for Clunkers Program, Deceptive Money, Government, politicians, Prudent Money, Town Hall, US News, Washington

The plan keeps changing.  First, the bail-out was designed to buy troubled assets off of the books of banks.  That achieves two objectives.  First, it is a step towards making the banking system healthy.  Second, it would enable banks to loan money again.  I never agreed with their reasoning for this first bail-out plan.

Now, Paulson says that the Treasury will not be buying those troubled assets after all.  Instead, they will continue to pump money into these banks and troubled companies and take ownership positions in these companies (read: socialism) .

As a result, the market is selling off today (again) because he just changed the initial intent of the bail-out package which the market originally liked. 

Then he refuses to help GM with a bail-out (which I agreed with).  Today he says that the bail-out package was not designed to help a company like GM.  Secretary Paulson, I have a simple question for you.

What was the bail-out package designed for?  If you don’t bail-out GM, hundreds of thousands of people potentially lose their jobs and then 8% of the corporate bond market is threatened because of bonds from the auto industry.

Since the announcement of your historic intervention, the stock market is lower, the economy is much worse, and the credit markets are in extremely bad shape. 

Paulson’s reasoning for wanting to change the bail-out package was to get the money out there into the banking system quicker and for companies to loan money.  The problem is that they cannot loan money because they are trying to survive.  They are trying to survive because they have all of these bad assets on their books that the Government was suppose to remove through this bail-out plan.  Finally, all of that bail-out money is not getting put to use.  It is going toward absorbing losses and keeping bad businesses a float.

It makes you question the original intent behind this massive Government intervention.  I have this nagging feeling in the back of my mind that socialism is what this Government ultimately wants.  These are smart individuals making some pretty chaotic decisions.  They should know better and their intellect is not matching their actions.

Tags: bail-out, Banking System, Bob Brooks, Deceptive Money, GM, Prudent Money, Stock Market, treasury

Well, lets see – since the Government initiated their enormous infusion of cash in the form of bail-out money, not much has happened.  The Stock Market is still in the hole.  The credit markets by some accounts are worse today than before all of this Government intervention.

Just recently, Hank Paulson said that they were going to take part of that 700 billion dollar bail-out package and help out other companies besides banks and insurance companies.  Old Hank played a great game – get the money first and then change the rules accordingly.  This bail-out package does not look anything close to the original intent.

The Government is also batting around the idea of using some of that bail-out money to help banks cover from losses when troubled mortgage loans are re-structured.  This is the latest invention of the Federal Government in their effort to stop foreclosures.  It appears that troubled borrowers in bad loans are about to get the ultimate gift from the federal government – part of their debt forgiven. 

Now AIG who the Federal Government loaned $ 85 Billion dollars on credit is begging the Government to re-structure the loan because the terms are tough on the company right now.  Didn’t AIG CEO Edward Liddy say something in the effect that they would probably pay that loan off early?  Maybe he was confused after going on a golf outing and resort weekend paid for by you and I.

That mere 86 Billion dollars borrowed by AIG morphed into 123 billion dollars.  Yes, they went back to the Government and the Government gave them some more of our money.  Now, they are about in agreement that the 123 billion will turn into 150 billion in a restructured deal. 

Does anyone think that this has the potential to end real bad?  The Federal Government shouldn’t be in the business of managing anything.

Tags: AIG, Bail-out Program, Bob Brooks, Deceptive Money, federal government, Hank Paulson, Prudent Money

Well, the passing and signing of the most dramatic Government Bail-out is complete.  Now the trickiest part of the whole sitaution is upon us.  Will this government bail-out work in the short-term?  The credit markets are in crisis.

Upon the passing of the bill, the credit markets didn’t improve even the slightest.  There was no improvement at all.  There in lies the problem.  How long will it take for the credit markets to get out of crisis mode?  Is this package to late to help the current crisis situation?

I had a friend of mine called me yesterday and asked about my rationale for wanting this bill passed.  He said that he couldn’t believe I would be for something that was going to be a huge tax burden on Americans.

I don’t like government intervention.  I don’t like socialistic policy (this type of bail-out reeks of socialism).  Normally, I would be dead set against this type of action.   The problem is that the Government should have  stopped intervening a long time ago.  Instead, they kept pushing the problem further out in the future by constantly manipulating and intervening.  Now, that future problem is staring us in the face and it is HUGE. 

They had no other choice but to pass this bill. 

I still think that a major stock market meltdown could occur.  I don’t think that the passing of this bill removes us from that possibility.  As I write, the stock market gave up a huge return and has fallen ever since the bill was passed.  Currently, it is negative for the day and selling is dramatically picking up at the end of the trading.  I do not like this type of movement by the market given the earlier drops in the week and the fact that we are heading into the weekend.  If nothin goes wrong this weekend with either a bank or a major company, it will be the first weekend in weeks that nothing has occurred.   

Everything should be reacting a little better.  The fact that it is not creates a huge concern.  The markets don’t have a good feel to them at all. 

So, here is the tought for Monday.  Anything around a 5% decline would be reasonable.  I have had 1050 on the S&P 500 as my target for a (not THE) bottom.  However, if the market were to fall further, we would probably have a real problem on our hands.

Tags: Bob Brooks, credit markets, crisis, Deceptive Money, Government Bail-out, Prudent Money, socialistic policy, Stock Market

I was having a rather lively discussion yesterday with a friend of mine who also manages money.  We typically see eye to eye on things…until yesterday’s discussion.  We were discussing the failed vote on the 700 billion dollar bail-out.  My friend was adamant that the last thing in the world that needs to happen is for the Government to intervene and bail-out the markets.  

I responded that the Government has no choice at this juncture.  Well he couldn’t believe that a person who was adamantly against any form of Government intervention would want to see this bail-out go through.  His take was that the problem has been Government intervention and for once the Government needs to step aside and let nature take its course.  This would get all of the bad things out of the system.  

I am the first to vote against Government intervention.  At the same time, I think that John Kenneth Galbraith sums it up brilliantly.

Politics is not the art of the possible.  It consists in choosing between the disastrous and the unpalatable. – John Kenneth Galbraith

Out of control politics has forced us into this situation.  It is a choice between the disastrous and the unpalatable.  Intervention should have stopped a long time ago.  However, you intervene to the point of no return.

The consequences of not intervening would be horrific.  We don’t have the luxury of letting the system fail…and that is what we could be looking at in the event the politicians don’t do something.  Monday’s drop in the market was just a taste of what could happen.  It isn’t even the stock market that I would be concerned about in the event that this fails.  We are in a bear market that I feel will ultimately see the same type of losses experienced between 2000 and 2002.  Thus, I think that will occur regardless.

It is the explosion of the credit markets that no one wants to see.  So, something has to be done.  There is no question about it.  We will have to take our medicine the least evasive way possible.  

So what good will come of this?  I hope it is change.  I hope that we don’t go through all of this for nothing or a return to business as usual. It is time to fight for change, not only in the industries that have created the problem, but in the system that allowed it to happen.  

Americans need to open their eyes and tell Washington that enough is enough.  No more self-serving politicians.  No more political contributions from companies that you are supposed to be regulating.  Remove the self-conflict.  Further, set term limits.  There should be no such thing as a career politician.

Some great things could come of the ugliness that faces America.  However, it only occurs when Americans say enough is enough. 

Tags: bail-out, Bob Brooks, Deceptive Money, Government, markets, Prudent Money, Stock Market

Please know that I am not a big advocate of this bail-out. At the same time, I do appreciate how urgent of a matter that we are facing.  Therefore, passing this bill today in Congress was extremely important.

There is no good answer to the bursting of the greatest debt bubble in history.  Ultimately, the burden will fall on the tax payers.  This will be a difficult process for the stock market and the economy to work through.

I want to make sure you understand the significance of this statement.  Politicians allowed this debt bubble to occur and politicians just allowed this after-effect of the debt bubble to get much worse.  The even sadder part of the whole matter is that none of this, including today’s events, should have happened.

Today, the House vote for the bail-out plan did not pass.  In an unbelievable display of politics, a very important, although admittedly irresponsible, bill was just voted down by out politicians. 

Today represents what is wrong with America and the political system that governs this great country.  For years, politicians voted with their pocketbooks when it came to passing legislation and regulating this country.  It is the job of Congress to regulate, make laws, and protect the citizens of this country.  Today was a disturbing example of how politics is failing this country.

I would be the first person to agree with every politician that voted down this bill today as to the reasons for placing a no vote.  First, this type of thing should be carefully thought out and not rushed.  Second, passing a bill that will end up being paid for by taxpayers is hugely irresponsible. 

However, members of Congress, you didn’t have a choice but to pass this bill.  You helped allow this horrific situation to occur in the first place.

Fannie Mae and Freddie Mac were the poster children of the mortgage crisis.  However, they were allowed to get that way because Democrats voted along the party lines to shelve a bill that would have reformed Freddie Mac and Fannie Mae.  Had this bill been allowed to pass, this mortgage crisis would never have been created in the first place. 

These two companies desperately needed to be regulated.  Weren’t the accounting scandals during 2004 enough to signal there was a problem?

Of course, politicians have enjoyed all of the money that these two companies have donated to campaign re-elections.

Then there is Senator Richard Shelby who has been one of the biggest voices against the bill.  This was the same Senator who headed up the Senate Banking and Finance Committee when this mortgage crisis started. 

The bubble was created on his committee’s watch.  Where was the regulation?  Where was the oversight of the banking system?     

The politicians turned their backs as mortgage companies advertized zero down, low adjustable interest rates, and no income verification loans.  They then sat back and allowed Wall Street to take these horrible debts and turn them into securities. 

Anyone responsible who was charged with watching these problems unfold could have predicted what was coming down the pike.  There is no way that this could have a good ending. 

This same Senator voted against a bill that could have at least provided some stability for a very unstable market.   I don’t think that this is the long-term answer nor do I think it will solve the problem.  I do think that psychologically it was necessary. 

Unfortunately, the politicians don’t have a good understanding of that either. 

Going forward, we are going to have to get through the aftermath of the consequences of a debt bubble.  Most importantly, we need to look long and hard, not at how the banking system is regulated, but how the politicians are regulated.  There is no accountability.  As long as politicians are allowed to take money from the very people they are suppose to be regulating, we are going to continue to run into these conflicts of interest.

Yes, this credit crisis is the unfortunate result of conflicts of interest.      

Tags: bail-out, Bob Brooks, Congress, credit crisis, debt bubble, Deceptive Money, Democrats, economy, Fannie Mae, Freddie Mac, laws, mortgage crisis, Prudent Money, Senate Banking and Finance Committee, Senator Richard Shelby, Stock Market, Washington

Well, we finally have it.  The largest bank failure in history.  

Washington Mutual is now a bank failure.  Fortunately, JP Morgan has taken over the assets.  Thus, there shouldn’t be any change for customers. 

I talked on the radio show about fear today.  You can  listen here – Thursdays podcast . There is so much fear that has been created by the media and by the politicians.  Please know something – Yes, this is not a good thing long-term for this country.  It is one more step towards socialism.  However, this whole financial collapse opinion is way overdone.  The Government is willing to step in and that will fix the ultimate concern of financial collapse.  That is the difference between now and the Great Depression.  Below are some of my notes from todays show:

There is no question that the uncertain times that we face as a country is unsettling at the very least.  I would classify it more as disturbing when you think about how we got to this point and the fact that this could have been prevented had our politicians governed this country correctly. 

This is our new reality or another way to look at it – this is our new normal.  Our new normal is a Wall Street that is completely different than it was 2 weeks ago.  Our new normal is a potential taxpayer burden of enormous proportions.  Our new normal is a Government that had to step in to prevent a financial system from collapsing.  The new normal is one step closer to socialism.   

However, the point is that this is a historic and sad moment for this country.  Because of that, there is a tendency for the “sensationalists” to come out of the woodwork and stir up all types of panic which in turn creates bad decision making. 

Yes, there is the potential of financial failure.  At the same time, the Government has the ability to handle this.  Regarding the individuals in the media who are telling everybody to sell everything and go to gold or cash…. This is nothing more than irresponsible reporting.

No decision should be made based on panic.  Our Government is working to prevent financial collapse.  I have been notably bearish for the past 2 years.  I have spoken my mind about the grave situation we face.  At the same time, the dollar is not going to zero value and our financial system as we know it today is not just going to dissolve.  

Just remember something when it comes to these dires warnings.  There are many people who take these types of situations and use them as an opportunity to sell a product.     

Tags: bank failure, financial collapse, Govedrnment, Government Bail-out, Great Depression, JP Morgan, media, politicians, socialism, Wall Street, Washington Mutual

(excerpt from my client letter)

Hank Paulson is the most powerful man in the world.  When he speaks the earth moves and markets react.  Hank has spoken and everything is all right? 

Where do I even start?  History has been made numerous times over the past week.  As usual, I have a lot of opinions on what is taking place.  There are many thoughts and feelings running through my mind right now.  Actually, none of which are a concern about the management of your money (which I will get to by the end of the letter).

It is a sad day in the history of this country.  From the perspective of someone who manages money, I see the government manipulation, the self-serving politics, and questionable decision making that takes place in our financial system.  I like to refer to it as the “dark side” of my daily experience.  If you manage money, you unfortunately are exposed to it.  Until today, nothing really surprised me.  The recent actions by the Government are disturbing to say the least. It makes me very concerned for the future of my children.

Let’s take a look at the bail out of America by the Federal Government.  They have stepped in and bailed out Freddie Mac and Fannie Mae, two companies that will never suffer for the irresponsibility that they have participated in through this mortgage crisis.

They have bailed out AIG.  We are up to now about 285 Billion of commented money. 

The Government announced that they would insure against any losses in the 2 trillion dollar money market system. 

Then, as if it couldn’t get any better, they stepped up to the plate yesterday and announced that they would bail out the entire banking system by taking all of those “toxic” loans off of their books.

Let’s see…..we are up to about roughly 750 billion to 1.5 trillion dollars of US government pledges.  As taxpayers, we will all pay for the irresponsibility and greed of the mortgage and financial services industry. 

This is not what upsets me the most.  I will get to that in a minute. 

I think that we all knew that was coming.  Whether Hank Paulson throws it in our face by riding in on the white horse during the Wall Street’s darkest hour or whether the government just slowly over time allows us to take on this enormous burden of debt, the fact that we, the taxpayer, will pick up the tab is no newsflash.

The problem is that this does nothing to help the American consumer. The problems are still there.  The Government will tell you that they are saving the financial system and doing this for the American consumer.  Don’t believe it!  Yes, the financial system would have been in a crisis situation.  At the same time, when are they going to allow the markets to work this out without intervention and manipulation?  It will work itself out somehow. The Government continues to increase the risk every time they step in.    

Now, the thing that disturbs me the most was the ban on short selling by the SEC.  They have just taken the free out of free markets.  With this ban, we no longer operate in a free market system.  The Government has gone way to far and over stepped their bounds.  These moves have socialism written all over them.     

Tags: AIG< Money Market System, America, bail-out, Fannie Mew, federal government, Freddie Mac, government manipulation, Hank Paulson, short selling, socialism, stock markets

The Federal Government has been busy pledging our money.  Last week, it was a pledge of $100 billion to both Freddie Mac and Fannie Mae.  Then today it was a $85 billion dollar “loan” to AIG. 

We can complain all we want about the Government and their practice of bailing out companies.  The harsh reality is that in all three cases it was critical.  Had there been no intervention with Freddie and Fannie, we would have faced dire circumstances in the mortgage markets.  Had they not bailed out AIG, the only word I would use would be “horrific.”  Trust me, you would not have wanted to see the state of our markets had AIG fallen apart.

AIG does business in almost every market all over the world and insures 88 billion dollars worth of assets including corporate loans and mortgages.

So, we the taxpayers are on the hook.  The reality is that we the taxpayers have always been on the hook.  It is just now becoming reality.  Eventually we will pick up the bill for everything.  Well, us and our kids and their kids.   

Just to think…it was only a few short days ago I wrote that the Federal Government was through bailing out companies.  Could there be another company out there too big to fail?

Tags: AIG, Bob Brooks, corporate loans, Deceptive Money, Fannie Mae, federal government, Freddie Mac, Mortgages, Prudent Money

This morning we are starting off in a tough position for the markets.  The pre-opening markets find the S&P opening at least 2% plus lower (at the time of this writing).  The foreign markets are getting hammered.

Goldman Sachs just posted a 70% drop in revenue.

Merrill Lynch shareholders filed a lawsuit against John Thane concerning the buyout by Bank of America.  They claim that the proposed $50 billion sale was “wrong, unfair and harmful to Merrill public stockholders.”   

Dear Merrill Shareholders,

Be thankful you are not a Lehman shareholder who gets nothing.  Fortunately for you, Bank of America was insane enough to buy Merrill.  As far as Merrill CEO John Thane who said everything was fine and that they did not need raise capital, your CEO could walk away with $11,000,000 in cash.  Not a bad deal for being irresponsible. 

So, shareholders of Merrill, if you want to sue someone, sue Johnn Thane for being irresponsible for telling you everything was OK when it wasn’t OK.  Twenty something a share is better than the Lehman “no deal” per share and bankruptcy.

AIG is getting hammered in the pre-market.  Go figure, a company worth 8 billlion trying to raise 40 billion (as pointed out by Todd Harrison this morning at www.minyanville.com)

More to come…….

The above is not a recommendation to buy or sell securities.  This is purely commentary on the current events of the market.

Tags: AIG, Bank of America, Bob Brooks, Deceptive Money, Goldman Sachs, JOhn Thane, markets, Merrill Lynch, Prudent Money, S&P 500, stock markets

The events of this weekend reveals volumes about our environment going forward. 

Let’s take a look at the financial landscape prior to this weekend.  First, we knew that many companies are in trouble and trying to raise money.  Second, we also knew that the government has been there to bail-out these business prior to this weekend.  Finally, we knew that companies were having to pay big bucks just to raise capital.  

Following this weekend, we now know the following.  First, companies are still in trouble and needing to raise money to survive. Second, it is very clear that the Government is through bailing out companies following the take over of Freddie Mac and Fannie Mae.  Finally, investors are no longer willing to throw good money after bad.   The ability for these troubled companies to get money looks slim. 

It was only a matter of time when reality showed its’ ugly face.  What does that mean going forward?  Well let’s just take the words of Secretary of the Treasury Hank Paulson.  In his press conference he stated that things will get better with the problem in the credit markets when the “real estate markets stablize.”

Oh, is that it?  So, the real estate markets will not stablize until the foreclosure crisis stablizes.  (which created this mess in the first place)  Unfortunately, it might be a while for that takes place based on the latest statistics.   

In no way is any of the above a solicitation or advice to buy or sell securities.  It is only intended to be commentary on today’s current economic and market events.

Tags: bail-out, Bob Brooks, Deceptive Money, Fannie Mae, Foreclosure Crisis, Freddie Mac, Government, investors, Lehman, Paulson, Prudent Money, real estate markets

One of the key points that I made yesterday concerning the bail out of Freddie Mac and Fannie Mae was that the Federal Government did the bail-out in order to SAVE the financial system from a meltdown.  The effect on the mortgage markets would be minimal at best. 

The other point was that this could be the last bail-out that the Federal Government can pull-off.  There is only so much money that can be printed.  As we finish up the day, we see certain banks and investment banks unable to raise capital and finding themselves in trouble. 

IF we get another bank failure, the Federal Governement might just have to let it fail.  I doubt any of these foreign countries are going to step in front of this trainwreck. 

For those of you watching, the S&P 500 needs to stay above 1200.  Currently that is only 34 points away.  A close below that level has very negative implications for the stock market.

Tags: bail-out, banks, Bob Brooks, Deceptive Money, Fannie Mae, federal government, Freddie Mac, investment banks, mortgage markets, Prudent Money, S&P 500, Stock Market

The bailout of mortgage giants Freddie Mac and Fannie Mae was the news today.  This was a historic move designed to shore up the financial markets and improve the mortgage markets.  I talked about this today at length on my radio program. 

Unfortunately, this was necessary.  You wouldn’t have wanted to watch the complete meltdown of the US financial system in the event that these two companies went under.  Incidentally, if they weren’t insolvent, they were very close to being insolvent.

It did have a big impact on mortgage rates today.  Mortgage rates fell by 0.5%.  However, this deal has a bad side to it.  They are making the assumption that this foreclosure crisis is going to get better.  The two mortgage giants hold trillions of dollars of loans.  If a good percentage of those loans go bad, we as taxpayers are going to pick up the bill. 

The foreclosure crisis is not getting better and I would suggest that this bailout does very little in the way of fixing the problem.  Consider these stats:

The Mortgage Bankers Association reported that more than 4 million American homeowners with a mortgage, a record nine percent, were either behind on their payments or in foreclosure at the end of June.

Almost one-third of US homeowners who bought in the last five years now owe more on their mortgages than their properties are worth.  Second-quarter home prices fell 9.9 percent from a year earlier, giving 29 percent of owners negative equity.  For those who bought at the 2006 peak of the housing market, 45 percent are now underwater (meaning the homeowner owes more than it is worth).

– Bloomberg  

The New York Times has reported that “homeowners with good credit are falling behind on their payments in growing numbers, even as the problems with mortgages made to people with weak, or subprime, credit are showing their first, tentative signs of leveling off after two years of spiraling defaults.

“The percentage of mortgages in arrears in the category of loans one rung above subprime, so-called alternative-A mortgages, quadrupled to 12 percent in April from a year earlier.  Delinquencies among prime loans, which account for most of the $12 trillion market, doubled to 2.7 percent in that time.” – The New York Times

The problem is still there.  This should help a little and more importantly help keep us from a financial meltdown.  However, this should also act as the final major bailout performed by the Fed.  Thus, the banks and institutions that are as bad off as the two mortgage giants were are not going to be so lucky. 

Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.

Tags: creidt, Deceptive Money, Fannie Mae, Foreclosure Crisis, Freddie Mac, Government Bail-out. Bob Brooks, loans, mortgage, Mortgage Bankers Association, mortgage rates, negative equity, prime loans, Prudent Money, taxpayers, US financial system

Well our politicians are diligently trying to make voters believe that they are working to fix the foreclosure problem in America. There is a version of a bill making its way through the system right now.

Now, let’s assume that Congress is going to pass something that will actually help homeowners and help bail them out. Thus far everything that they have done has been somewhat of a joke. It has been all headline and little substance.

Let’s pretend that they are really going to do something that can bail out people in mass quantity. Do you think that is the right thing to do?

One argument says no! The taxpayers shouldn’t have to pay for a person’s decision to sign off on a loan that they knew going into it would be a problem some day and or a house they couldn’t afford. What about the people who have already gone through foreclosure?

One argument says yes! If the government doesn’t do something, this is going to hurt everyone. The consequences will be way too tough on the economy.

My opinion?

First, there is a subset of people involved in this problem that were dealt with fraudulently in the process of obtaining a loan. Although they still signed the dotted line and should have known what they were signing, they were treated in an unethical/fraudulent manner.

This problem has to work itself out without Congress intervention. It is the healthiest thing long-term for our country. Congress just makes a problem bigger in the future by continuing to try and intervene. The taxpayer in either case is going to get hit for this problem. The unintended consequences of this type of intervention could end up being as bad as letting the problem fix itself over time.

The best course of action for our future is to let this problem correct itself. Regardless, it is going to probably be a long time before any type of bill gets passed. By then, the problem will already be way past the point of intervention having a positive effect. We are currently experiencing the highest amount of mortgage resets. The problem will start to diminish towards the end of the year.

The problem is already here and facing millions of Americans. The Titanic is heading for the iceberg. The saddest part of the whole story is that our politicians let this happen on their watch. You could see this problem coming from a mile away. No, it is not hindsight. Loans that are written on 105% of the home, at interest rates that are going to adjust, low initial payments, no documentation closes, etc. have a high probability of crashing.

These were loans written for more than just people with bad credit making this much bigger than the advertised “sub-prime” problem.

What is your opinion?

Tags: bad credit, bail-out, Bob Brooks, Congress, Deceptive Money, Foreclosure, Government, Homeowners, loan, mortgage, politicians, Prudent Money, taxpayers