Buffet's Perspective

#28
#28
BigPapaVol said:
I don't trust them if they change what the financial minds laid out.
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The will surely do that. This is all about demonizing big business and showing government as the rescuer. This scenario scares the hell out of me. People act like the government could profit off of this and that is a good thing? My ass. Why does government need one more cent than they already have?
 
#29
#29
Bottom line: Who is being held responsible and paying the price?

Joe Homeowner who bought a house 3 times what he could afford won't be able to get a loan for a washing machine at Sears, obviously.

But what about all the mortgage executives? Will the hammer fall on them, or will they walk away with a seven figure check from the government coffers as a severance?
 
#31
#31
There's nothing to stop this from happening again. Stop making loans to people who are high risk to default. The govt can't be expected to own every house in the country where the owner has defaulted, but apparently they do now.
 
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#33
#33
oklavol said:
There's nothing to stop this from happening again. Stop making loans to people who are high risk to default. The govt can't be expected to own every house in the country where the owner has defaulted, but apparently they do now.
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sure there is. Don't allow Fannie and Freddie to put there view of justice in the midst of the underwriting process. Force the market to underwrite as it would typically evaluate credit risk and many of the loans out there never happen.

Might also help to get rid of the independent mortgage broker, whose function undermines that of the underwriter.
 
#34
#34
BigPapaVol said:
sure there is. Don't allow Fannie and Freddie to put there view of justice in the midst of the underwriting process.
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But they aren't doing that. They aren't changing the rules from what I've read. It's just a bailout, the same scenario could happen all over.
 
#35
#35
oklavol said:
But they aren't doing that. They aren't changing the rules from what I've read. It's just a bailout, the same scenario could happen all over.
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After this fiasco I doubt one of the Clintons will call for these companies to lower their qualifications to lenders that don't have good credit. Or calling for home ownership for everyone, another failure that we let our government pull on us.
 
#36
#36
oklavol said:
But they aren't doing that. They aren't changing the rules from what I've read. It's just a bailout, the same scenario could happen all over.
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but we can't write underwriting standards into law. That's pure socialism and would totally undermine the lefties who say everyone should have a home.
 
#37
#37
volinbham said:
The distinction is that the assets are worthless now because no single buyer can stomach the risk and have the patience to wait for values or liquidity to return for these assets.

The government represents a buyer that can support the risk because of it's longer view and deeper pockets.
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But should the government be the one responsible for providing the long view?

These companies undertook all this risk knowing full well that the government would have no choice but to bail them out.

Isn't this a failure of the free market? What regulations, if any, should be enacted as a result of this mess?
 
#38
#38
jdsa said:
But should the government be the one responsible for providing the long view?

These companies undertook all this risk knowing full well that the government would have no choice but to bail them out.

Isn't this a failure of the free market? What regulations, if any, should be enacted as a result of this mess?
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I don't think you have it right about the foreknowledge of these guys. They didn't see all of this risk in the pooled securities that they were simply placing.

The strange gov't hand in this entire mess is the reason they should be responsible in ironing it out.
 
#43
#43
BigPapaVol said:
why? Just because this isn't a fix for the downtrodden?
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I wasn't going for a "gotcha." I was trying to understand exactly who would benefit most from this.

Simply put, if you don't own a home, how much is this going to affect you? If you're not an employee or director of a major financial institution that's directly affected by the housing situation, how is this going to affect you? If you don't have a lot of stock/ownership in one of these institutions being helped by this, how is it going to help you? If you don't have a risky mortgage, how is this going to affect you?
 
#44
#44
TennNC said:
I wasn't going for a "gotcha." I was trying to understand exactly who would benefit most from this.

Simply put, if you don't own a home, how much is this going to affect you? If you're not an employee or director of a major financial institution that's directly affected by the housing situation, how is this going to affect you? If you don't have a lot of stock/ownership in one of these institutions being helped by this, how is it going to help you? If you don't have a risky mortgage, how is this going to affect you?
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I think the bottom line is that everyone gets to avoid a total real estate market meltdown, which would impact us similarly to Japan's now decade long malaise. Recession isn't anywhere near a sharp enough term in talking about the ramifications.
 
#45
#45
MontereyVol said:
I tend to see it as not addressing the true problem and only seeking to put us back in the same place we were before.

From what I can tell they want to buy the distressed mortgages and hold them until such a time that they can get the value back. That means they take over the mortgage on a house in Salinas, CA that was sold for 800K for say 400K. Now they hold the mortgage until the market brings it back to around 800K. Thats all good and maybe they take a profit right? The problem is that house was never worth more than 300K how long would you hold that mortgage before that property actually equalled 800K assuming normal growth of around 5-6% per annum. Before this housing bubble it would take around 20-30 years for property to triple. By that time the house would become derelict, thus now you are waiting on the property alone to move the marketability.
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Exactly what I would be concerned about...
 
#47
#47
BigPapaVol said:
I don't think you have it right about the foreknowledge of these guys. They didn't see all of this risk in the pooled securities that they were simply placing.

The strange gov't hand in this entire mess is the reason they should be responsible in ironing it out.
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But shouldn't they still suffer the loss? If you or I invested in the market on something that we could not have possibly known would inevitably tank, we would have to eat the loss. It's part of the risk.

The only thing that makes them different is they have a bigger impact on the economy. They have to know the risk they take is hedged if enough money is put into it.
 
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#48
#48
rjd970 said:
But shouldn't they still suffer the loss? If you or I invested in the market on something that we could not have possibly known would inevitably tank, we would have to eat the loss. It's part of the risk.
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they weren't the ultimate buyer but they retained a portion of the risk as the market required. In the end, they were relying upon the seal from Fannie and Freddie, who were theoretically doing the underwriting, as worth something.

Yes, we are all to blame for taking even unknown risks, but I view this as a systemic failure initiated at the GSEs. I could be oversimplifying it, but not much.
 
#49
#49
BigPapaVol said:
I think the bottom line is that everyone gets to avoid a total real estate market meltdown, which would impact us similarly to Japan's now decade long malaise. Recession isn't anywhere near a sharp enough term in talking about the ramifications.
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Thank you. Makes sense and useful.
 
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