Video: Michelle slams the mortgage bailout on Fox Business Channel Update: Stock traders cheer the Malkin Three-Point Plan!
posted at 3:13 pm on December 6, 2007 by Bryan
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President Bush announced his mortgage bailout plan earlier today, and it’s already drawing kneejerk leftish fire from Sen. Clinton. But here’s the more basic issue: Why should Americans who’ve made sound financial decisions have to pay for the mistakes of those who made lousy decisions? There is a first principle at stake in this proposed buyout, but so far Michelle is the only person who’s talking about that.
This clip is from Fox Business Channel earlier today, the first time we’ve have a clip from FBN on Hot Air. You’ll notice a slight video/audio sync issue. FBN is a new channel in the Red Lasso lineup, and they’re still working out a bug or two.
Update: Michelle’s plan finds support on the floor of the stock exchange.
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First the market isn’t based on fear and greed. The market is based on real values of real assets and is warped out of reality by fear and greed.
Buford on December 6, 2007 at 6:37 PM
The market is based 95% on fear/greed. just look at the dow last week it was at 12,800 today it finshed at at 13,600. Why? nothing fundemental has changed. It all moved due to fear and greed. Fundementals control the market long term( out 5 years). Fear/greed control it short term. the housing market has been controled by Fear for the last 6 months. C down 47%, CFC down what? 80%, homebuilders down more than 50% etc. Why? the earnings haven’t been that bad. It is fear of the future that causes the sell-off. If you let the fear win you have a major depression. Fear/greed causes all depressions and booms. the fundementals just give you reasons to check your emotions.
Now the government has stepped in to calm the fear. It is a good thing. FDR came to power because the “free markets” of the 1920’s and the early 1930’s didn’t think the government had any bussniess stepping into the market.
I don’t want another FDR/Clinton.
unseen on December 6, 2007 at 6:49 PM
Exactly how do we “reduce this wave”? The loans based on phantom value that is never going to exist have alreay been made, there is no way to reduce that. A huge amount of paper wealth is going to disappear from the economy in a very short period of time. Pretending the wealth is actually there is asking the rest of us to “ignore the man behind the curtain.”
Buford on December 6, 2007 at 6:50 PM
Buford on December 6, 2007 at 6:45 PM
You are seeing the wrong evidence from history. By the time FDR came to power the damage was already done. his policies prolonged the depression because he tried to get rid of the capital markets. By confisacting gold, public work projects, etc etc, increased tarrifs etc. If Hoover would have stepped in to prop up Wall Street and
free up credit we would never have had a depression to begin with. No depression no FDR, no FDR no SS, no big government.
unseen on December 6, 2007 at 6:52 PM
Buford on December 6, 2007 at 6:50 PM
we freeze the rate hikes for one. Keep homes occupied which decrease the supply of homes on the market which will over time raise home prices. the home can then be refied into long term fixed rates using the equity as part of the down payment.
5 years is alot of time to get a downpayment together to do a refi
We also can reduce taxes to give people more money to take home and save.
Wealth has always been created out of thin air. Apple invented an ipod out of thin air now its stocks has made many wealthy out of thin air. What you think you go to the mine to get wealth?. It’s called the creation of wealth. Not the finding of wealth.
unseen on December 6, 2007 at 6:57 PM
Well I would say its 100% greed lol. Thats why people invest in the market, to make money. But the market moves on news, earnings and as far as homebuilders, it all hinges on inventories. Where I live they are advertising selling at their cost.
No concerns here.
broker1 on December 6, 2007 at 7:00 PM
Let’s look at these two statements.
Wouldn’t that mean you were agreeing with my point? If long term the market reflects fundamentals, wouldn’t that make it fair to say it was based on them?
I would say greed causes the depressions, not fear. Fear only kicks in after it becomes obvious that greed has created a market that does not reflect reality. However, whenever greed causes the market to become disconnected from reality a downturn is inevitable.
The government has stepped in to increase its powers, any time you ascribe altruistic motives to the government it is time to stop and rethink. If the government was truly interested in helping the situation they would prevent lenders from putting depositors’ money at far more risk than the depositor reasonably expects. Additionally, they would require transparency of lenders’ lending policies. Don’t ever expect that to happen as they are large contributors.
Buford on December 6, 2007 at 7:09 PM
But the market moves on news, earnings and as far as homebuilders, it all hinges on inventories.
broker1 on December 6, 2007 at 7:00 PM
It moves on the emotion to the news,earnings, and inventories.
For instance Cisco reported great earnings, raised the expected earnings for the next three months but the stock sold off about 25% because the CEO said sales where lumpy to the banks. This statment also dropped Google, Apple, Rimm and the rest of technology shares 20% in a day. No that is pure emotion trading off of news and/or earnings. Goog loses 20% over a statment form another CEO that sales to banks are lumpy.
And these are the people the board what’s to handle the problem? Please.
unseen on December 6, 2007 at 7:09 PM
I agree that many individual investors I know alternate between fear and greed all day long. Regarding C, there are very fundamental reasons for the downturn. First, Chuck Prince should never have been CEO; Second, Bob Rubin stuck by Prince too long; Third, they didn’t do risk management as well as Goldman or Lehman–though somewhat better than Merrill; Fourth, investors are legitimately “fearful” that Citi hasn’t figured out exactly how many billions it has lost; Fifth, they don’t currently have a CEO in place.
Their dividend got to around 7% but still a lot of analysts continued to rate it a sell for fairly logical reasons.
dedalus on December 6, 2007 at 7:10 PM
Wouldn’t that mean you were agreeing with my point? If long term the market reflects fundamentals, wouldn’t that make it fair to say it was based on them
Buford on December 6, 2007 at 7:09 PM
Well if you want to wait 5 years in the soup line for the fundementals of the market to kick in have fun. The government is out to protect itself. It’s power. there is no altruitic motive here. It is pure survival mode. I’m happy that at least in this crisis unlike past ones the government gets it. It seems from most posts here that the american citizen does not.
unseen on December 6, 2007 at 7:15 PM
dedalus on December 6, 2007 at 7:10 PM
all is true but does that mean that C is worth 40% less than it was a month ago? Even with the losses at C it is still making money. Now will it make money next month? Not sure my guess would be yes. So fear has brought C down 40% it has nothing to do with economic fundementals but investors emotions. That is why it is so hard to predict a bottom in a stock. You can not guage how much fear is too much. When fear is in control there is no bottom until the fear is passed.
yet “the free market” people want to give their entire economic futre over to that emotion to work its way out of this crisis.. Their 401k’s, their IRa’s, their pensions all can be left to the human emotion of fear. People this is why we have a government. this is why a government is a necassary evil. To protect our economy, our country.
unseen on December 6, 2007 at 7:23 PM
I guess my posts went unread. Depositors money is NOT at risk and never was and never will be. Depositors deposit their money with their banks, these are not major lenders. Local banks keep their loans and service them, hence they have strict underwriting guidelines. They never had exotic subprime mortgages or 100% financing for the most part. They are what is called “portfolio lenders”, they lend and keep the loans.
This crisis has nothing to do with local banks. Nothing. It is with the large “servicers”, Chase, Countrywide, Wells Fargo that sold their loans in bulk to Fannie Mae Freddie Mac and Investors in Hedge Funds with excess capital. Depositors money was never at risk.
Even if you deposit your money in a local Countrywide branch, it wont be used on mortgages.
broker1 on December 6, 2007 at 7:33 PM
broker1 on December 6, 2007 at 7:33 PM
add to that the Pension funds that bought these loans, the money moarket funds that bought them, the major european banks like USB, Northern Rock, Credit suisse and the Asian banks in Japan, Austrila, Singapore etc . Also the government funds like the one down in florida that invested tax dollars into these loans. You can also add the finance arms of major corps like GM, CAT, F. Then lump the insurance companies in there as well esp the home loan insurance companies. These junk loans are in every faucet of our economy and will impact every thing if they become worhtless. Including raising interest rates to the 1970’s level because the risk is too great. Money and credit will become very hard to come by.
unseen on December 6, 2007 at 7:40 PM
So fear has brought C down 40% it has nothing to do with economic fundementals but investors emotions. That is why it is so hard to predict a bottom in a stock. You can not guage how much fear is too much. When fear is in control there is no bottom until the fear is passed.
yet “the free market” people want to give their entire economic futre over to that emotion to work its way out of this crisis.. Their 401k’s, their IRa’s, their pensions all can be left to the human emotion of fear. People this is why we have a government. this is why a government is a necassary evil. To protect our economy, our country.
unseen on December 6, 2007 at 7:23 PM
I disagree to an extent. I think perhaps you are mistaking fear with prudence. Fund managers, hedge fund managers, pension plan heads dont get to where they are by operating out of fear. Make no mistake, this is where most market moves come from. Joe Schmoe may operate out of fear of losing the 1000 investment he made in Intel and dump it. These managers take market swings very well. They look at numbers, market caps, cash reserves and they dont panic. Any moves they make is prudent. Having said that, once these big players make a big move to get out of a sector, the smaller players follow suit for sure. Again, not out of emotion but out of prudence. I believe people in the market to be more optimistic than fearful.
broker1 on December 6, 2007 at 7:45 PM
Michelle, that was just plain, old Great! Right on target again. Impact player? Heck yeah. Your points were as clear as a bell. And Wall Street cheered. Wow.
It’s great to see the TV appearance blitz once again. The next time, let us know in advance so we can thaw the steaks and do the “traditional” Michelle TV night cook out. (Well, not night but you know…)
Zorro on December 6, 2007 at 7:48 PM
broker1 on December 6, 2007 at 7:45 PM
Look at the volume on massive selloff days. that is not the little guy selling, that is big funds dumping shares. Look at 1987 crash that was very large investors dumping shares at all cost, look at the 9/11 selloff that was massive fund selling out of fear. Funds may start off prudent during a downturn but by the time the bottom is reached fear has gripped all the major funds. Those people jumping out of windows in 1929 where not the little investors but big investors who lost everything. Granted computer programs has taken some of the emotion out of the equation but when you have billions at stake fear will always come into play. Usally the funds wait too long and sell at the bottom.
unseen on December 6, 2007 at 7:53 PM
I also want to say thanks to Bryan for hooking me up with an account so I could contribute to this issue that I am passionate about. I enjoyed the conversation here with everyone.
broker1 on December 6, 2007 at 7:54 PM
Glad you joined. Your comments are well-informed and much appreciated.
dedalus on December 6, 2007 at 8:11 PM
Too few homes will be saved. The initiative is too narrow to do anything constructive for the real estate market. When you take into consideration the fact that this bailout will destroy the very engine that provides mortgages (securitization), the trade off is no where near being worth it. It’s a very big net loss.
For an understanding of just how small a percentage of homeowners that will be helped, check out this post on the Common Sense Forecaster.
You are in a dream world. 100% financing has been severely scaled back. There is some available but nowhere near what it used to be. In fact, in my shop we did just about every type of loan available. My product shelf overall has seen an 80% reduction.
Don’t kid yourself, recession is coming and it’s going to be a bad one. In fact, a depression on the scale of the 1930’s is a real possibility. Look at the parallels drawn in this post on The Mortgage Guy Blog (shameless self promotion). That post and many like it, will prove that “the biggest problem” has not been solved.
The Fed doesn’t reduce the prime rate. Banks control the prime rate. The Fed, when it normally takes action, reduces or raises or leaves alone the “Federal Funds Rate”.
I also take exception with many of the “generalities” you make about interest rates in other posts you have made.
They didn’t listen to this guy. I give people choices. The spread between adjustables and fixed were 1%. So if they decided on let’s say 7.5% adjustable, I gave them the choice of also taking a 8.5% fixed.
Your statement that originators, whether they be lenders or brokers, get paid any differently on adjustables than they do on fixed rate loans, is an absolute falsehood.
Now this I can agree with.
If we don’t fix the debt markets, all of them because consumer debt (credit cards and installment loans) is becoming polluted by the mortgage meltdown, we will go into a depression. The lack of liquidity will cause it. Since when does the government get anything right. They certainly are missing the target on this issue. Saving a few homes at the expense of destroying our debt markets is totally irresponsible.
Sounds good on paper but in reality it isn’t happening and won’t happen to the extent necessary. Stated income and no doc loans are pretty much gone with some exceptions. But it’s the declining home values that will prohibit a large scale refi to fixed scenario. That and severely limited product offerings. I am seeing this firsthand on Main Street, USA and from the blogs and forums I frequent, I am far from the only one.
Talk of depression is totally warranted based on the outlook for the loss of liquidity that credit provides. Add to that massive amounts of wealth lost in the real estate market the probability just grows. Wiki Great Depression and you will see what I am talking about.
Furthermore, what we’ve seen in foreclosures to date will be nothing compared to what we see in the next couple of years. So your statement that foreclosures won’t increase is absurd and another inaccuracy.
Credit capacity is being lost everyday. Nothing is coming back. Guess what, your sector is my sector is his sector. Everything filters down to the debt markets and they are broken for everyone.
I believe Will Rogers said he would rather have a return of principal than a return on principal. If you are faced with undo risk, as is the situation now, no investment is attractive. That is why people invest rather than go to a casino.
People will not always want to buy homes. If that were the case, we wouldn’t be in this mess now. People aren’t buying homes that is why prices are declining. Who wants to buy something today that will be cheaper tomorrow?
It’s always cheaper to be a renter when real estate prices are falling precipitously.
Now this is a very true statement.
People we are in very big trouble here. As usual the MSM is asleep at the wheel. It’s not “feel good news” talking about the mortgage and real estate meltdown or recessions or depressions. So like with illegal immigration, the general public is kept in the dark. The MSM will let you know what you need to know on an “as needed” basis. Yeah right.
voiceofreason on December 6, 2007 at 9:16 PM
I love how the guy in the interview talks about the realities of politics: implying that not supporting a bailout is suicide.
But just 10 seconds earlier the other journalist said that 94% of people said they felt cheated by the bailout.
So support by 94% of the people is political suicide?
DavidM on December 6, 2007 at 9:49 PM
In response to failures of Collateralized Debt Obligations and Tranches with the associated losses in mortgage insurances the Fed is lowering interest rates and pumping money in to balance and offset.
Meddling has always carried unintended consequences.
Perhaps letting the market right itself is pretty good idea.
Speakup on December 6, 2007 at 11:38 PM
Got out of an adjustable mortageg (it had gone up to 8.9%, which seemed ridiculously high to me) two Summers back, when this mess seemed to be looming, and into a decent fixed rate.
Those who waited until credit tightened are now paying for their gamble.
But, to keep the economy from taking a hit for the greed of bad lenders and naive buyers, this “fix” seems no worse than the “Savings and Loan” deal.
But the rules for irresponsible (crooked) lenders need to be fixed.
A fool may want to borrow idiotically, but only an enabling sleazeball gives them the money.
profitsbeard on December 7, 2007 at 12:57 AM
I have read that the ARM resets in the first six months of 2008 will equal all of 2007. I think that means a lot more foreclosures.
Everyone can talk tough now about doing something to mitigate the credit crunch, this mess is far beyond the mortgage markets, but they will change their minds when they lose their jobs. The tightening of credit which we have only just begun to see has the potential to be a Great Depression type event. This period of time is very delicate. I hate the idea of bailing out stupid people but the truth is that the gov’t has a role in creating stability in the financial sector and that is what they need to do now.
We can argue about getting tough on lenders who ignore risk after this cycle is over. Not providing liquidity to strategic areas of our economy right now is cutting of our nose to spite our face. Also, let’s lay the blame for the housing bubble and the internet bubble at the feet of the man who ignored the signs: Alan “Easy Al” Greenspan.
Bill C on December 7, 2007 at 2:26 AM
One more thing. This “workout” probably won’t workout. We can avoid the worst case but we will still have a serious recession. We have about 1 to 2 million more homes than are needed and it will take some time before the population grows enough to absorb the supply.
Bill C on December 7, 2007 at 2:30 AM
Why doesn’t Michelle run for POTUS? We could have an attractive female candidate who is an actual conservative who also happens to come with brains and common sense!
sabbott on December 7, 2007 at 8:55 AM
MM is right on, emphasizing the message-you are responsible for your actions and government is not your rich uncle who is going to bail you out every time you make a stupid decision.
The financing acronym ARM was an apt moniker. Lenders response to your request for lienency probably sounds something like this.
“If you do not pay up, we are going to break your ARM and maybe cut the legs right out from under you, and nobody can do anything to save you. Got that!”
MSGTAS on December 7, 2007 at 9:05 AM
I know the darn problem. Big screen HDTVs. People want instead of need. Rather than saving and paying for a big screen when they can afford it, they charge it so they can have the good life now.
Same with a home. If you haven’t saved a down and you can’t afford your own house,but you find/get a loan you know in your heart you can’t keep making payments on…your greed has made you stupid.
Just because bartenders serve alcohol it doesn’t mean you should drink, if you have a problem.
Just because some banks wave enticing loan offers under your nose doesn’t mean you should sign up. Know when to say when.
Doug on December 7, 2007 at 12:05 PM
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