Bloggers' lobby: Stopthehousingbailout.com

Recently I had a conversation with a fellow journalist about government efforts to ease the mortgage crisis. I was explaining to this person that mainstream media accounts of the issue very often ignore the anti-bailout sentiment that dominates blogs like this one. The journalist was confused. Opposition to a bailout? Here in liberal L.A.? On a blog on the L.A. Times website? "Your readers must be rich," she told me.

If I had been drinking coffee, I would have spit it out. I explained that, no, as far as I know, that's not the case. In fact, many of them can't afford to buy a house in Los Angeles, and they're upset (not the word I used) at government efforts to support inflated housing prices in one of the nation's least-affordable housing markets.

With that conversation in mind, I pass along an e-mail I received this morning:

"Along with NationalBubble.com and Patrick.net, I invite you to join our efforts to stop the planned government bailout of the housing industry. We believe that it is not the government's role (i.e., not the taxpayer's burden) to bailout irresponsible lenders, brokers, and borrowers.

"Accordingly, we have created a website www.StopTheHousingBailout.com (currently hosted on NationalBubble) that is designed to be a clearinghouse of information for a movement against the bailout. The website is in its infancy, but currently consists of a statement why the bailout is wrong and several links to efforts to stop the bailout (e.g., a petition, a pledge, anti-bailout apparel, links to contact political representatives, etc.).

"We ask that you consider joining forces with us to stop the bailout. A band of bloggers against the bailout can be a powerful political weapon. Moreover, a united front will present a newsworthy story for the media. By banding together against this ill-advised bailout, we can be heard beyond the readership of our collective pages and make a difference. Together, we can present a stronger message than the sum of our individual voices."

Your thoughts? Comment? E-mail story tips to peter.viles@latimes.com

Comments

[jdj]

Yes, please. Enough of these people who claim we must take the bailout bullet (while smiling) to avoid Great Depression II. That's a great economic policy -- blackmail: bail me out or I'll take the economy out.

As a country we don't negotiate with political terrorists why the hell should we negotiate with housing speculators who are economic terrorists.

[Bode]

NoWayInLA,

The fed is acting as if no lending can happen with the GSEs. Guess what? They're right:

http://media.mcclatchydc.com/smedia/2008
/03/27/14/Hall-Nothaft-032708.source.prod_affiliate.
91.pdf

Look at the fourth page, the one that says more than 90% of all MBS in Dec, 2007 was GSE. Compare to March, 2007, where it was 54%. You think the balance sheets at regulated banks are so awesome as to handle the risk associated with making loans today? Did you ever watch "It's a wonderful life?"

If you want to ponder a bailout, think about what happens when one of the GSEs goes under. Right now they are not the lender of last resort, they are the lender of only resort.

I understand everyone is upset, and I am too. But it's ignorant to minimize the importance of wall street in lubricating the engine of commerce. Bear Stearns fails and a trillion dollars of synthetic transaction defaults, outcome unknown but absolutely not good.

Fact of the matter is, some bailout is going to happen. The commenter who said you can't sound angry when contacting your congressman is right: this forum, and the froth, have no part in the rational debate about what to do. No one in our government is going to say, "well, life sucked before, the great depression can't be any worse." That's the previous commenter talking his book -- life isn't good, so let's bring the country down to the lowest common denominator.

My suggestion is that you accept the fact that it is not in the interest of our elected official to go into a deep recession. With that in mind, try to comment objectively on the proposals, and hope that nothing really stupid happens. Get angry when the CEO of Wells Fargo asks for a sweet handout like JP Morgen got, but don't get angry when Bear Stearns is backstopped by the Fed.

Oh, and one last thing -- Bank of America holds ten percent of the insured deposits in the United States of America. That's 400 billion dollars insured by you, the taxpayers, full faith and credit of the United States of America. Before you start rattling off how it'd be great, fine, no problem if an institute like that failed, ponder what THAT bailout would mean. It'd put to shame what's being proposed, that's for sure.

[Terry]

It IS remarkable how so many media people are out of touch, on many topics, with what the average guy on the street thinks. One reason this blog gets a lot of traffic is probably that Peter doesn't come across as a typical irritating journalist type. He seems actually to be a likable, normal guy.

[starter homeowner]

There was a post here here a little while ago, to the effect that the bailout is already underway, it is incremental and occurring every time the Fed takes action to prop up another bank like Bear Stearns. The debate (bailout or no bailout, consumers vs. banks) is basically settled when you consider that the banking lobby now owns Congress on both sides of the aisle. Congress is not going to hold hearings and interfere with the Fed while it is taking action to bail out large financial institutions, even if the authority for their action is dubious.

Where are all the Free Marketeers, who most typically fall within the upper income bracket? Keeping mum, trying to prop up their investments with some love from the Fed. In practice, Free Market ideology only applies to the poor, so the only the middle- and lower-income bracket homeowners are going to be refused a pull on the teat of the Nanny State.

[Jacinto]

Thanks Bode. You’re a person of wisdom.

Shall we consider the two alternatives available:

1. Bailout (insert definition here ________).

2. Economic malaise.

Item 1 hurts my sense of self-importance, i.e. “I behaved responsibly therefore I deserve to feel superior.”

But item 2 hurts my wallet. In most cases I’d be smarter to protect my wallet.

Yes, a “bailout” may involve taxpayer money, which affects my wallet. But in even in the highly unlikely event that 1% of the federal budget may be used for a “bailout,” it would cause a far smaller economic impact than a 1% decline in GDP. Don’t take my word for it. These facts are easy to confirm.

[NoWayinLA]

Bode: Rather off topic, don't you think? Last time I looked, Bear Stearns was not a GSE. Neither was BofA.

$400B in assets for BofA? Pocket change. Some estimates indicate the housing market is overvalued by the trillions. And that's just the houses. Multiply by the number of layers of CDOs and credit swaps to find the true cost of this meltdown. The Fed has already loaned out well more than $400B in exchange for this worthless collateral.

You are correctly concerned about the fate of GSEs, as am I. Yet the government has chosen to increase their exposure to the credit crisis by lifting their lending caps and pleading with them to buy more worthless Countrywide loans.

Fed lending and GSE increased activity are having the dual result of transferring risk from the corporations that made this mess to the taxpayer. And each bailout move so far has gone only to exacerbate the situation. Better that BofA founder at a $400B loss (less recovered assets through liquidation) than to put the taxpayers on the hook for trillions. By the numbers alone, the bailout is a disaster waiting to happen.

The bailout has the additional consequence of extending the slowdown for new business. It slows the price correction, forcing interested buyers to sit on the sidelines for that much longer, while watching the value of their savings erode via inflation. Everybody loses.

By the way... that guy who said you can't be angry when you contact Congress was me.

[Laker]

It all comes to the law of unintended consequences.
If a bailout will occur, the overshoot in pricing will be deeper and longer. The longer part is the problem here, since a recovery follows every recession, and interfering with the market will just prolong the mess.

On top of it, the government or the FED do not have the money to bailout the lenders. Since the over valuation is in the 3-8 Trillion $, (T like 1000 billion), there is simply no cash.
1) If the FED attempts to print the 3-8 Trillion $, that will inflate the money supply by 3, That means everything will pretty much cost 3 times more...the dollar will stop from being world currency and we will become a 3rd world country.
2) The money if indeed payed to lenders will need to come from TAXES. And by the numbers alone, a LOT OF TAXES...something like a 10% federal sales tax...for couple of years. Or an increase in income tax brackets by 10%.
Will you support that?

[Michael Snyder]

Gallop
If you're gonna whine, go sit in the truck.

bode,
If the principle of "a rose by any other name" applies I count at least two "bail out" plans placing taxpayer funds at risk as we speak. This week http://www.bloomberg.com posted "Taxpayers May Be Liable From Bear, Mortgage Rescue (Update3)" detailing the risks to taxpayer funds posed by the Treasury's guaranteeing JP Morgan's offer. Talk about a "no load" transaction that would make Ted Turner proud!
Add to that the Fed's offer to accept a "broad range of collateral" in their opening of the discount window to a whole range of largely unregulated players. Players who's over leveraged paper is only being propped up by massive infusions of capital into Moody's and the entire bond rating/insurance community. Paper that will collapse on the first margin call that reveals just how insanely it's been leveraged, just like the Carlyle Fund did last week.
So, who in your world will be left holding the proverbial bag when the air whooshes out of the dollar in 180 days when the Fed finds they've just laundered at least $200 billion in junk bonds and converted it back to AAA paper with a Treasury seal? BTW that loan interval used to be 28 days max.

[HolyCow!]

Aren't we screwed no matter what? Remember financial institutions see nothing wrong with charging us 20 or 30 percent interest on credit card debt. Potential home buyers probably have funded their downpayments with market investments not local bank savings accounts. Anyone not planning to retire on just their social security check has money in the market. Market drops and we all pay the price. Take the hit now or later, it's a win-loose. Someones going to benefit and it ain't you. Iraq is projected to cost us 3 trillion dollars or $30,000 for every man, woman and child. There's your down payment on an entry level home or condo in Sun City.

[lakanino]

a year ago, in one of many blogs/postings like these, i posted that real estate prices will drop to 2002-2003 prices. this translates to about (i believe) 20 to 30% drop in prices. a blogger who is also a potential buyer waiting for this ,arket to tank at that time said it should be more like 50%. i mentioned that if that happens - i would worry about the economy as a whole than house prices. and the funny enough that blogger said "nah... the FEDS wouldnt let that spill over the economy". you just cant have it both ways. i like this downturn/correction but you have to be concerned about the overall economy too...

[msmn]

Hope you like the publicity for your group. Let's spread the word!

[smrr]

3 months ago the pro-housing-inflationists were assassinating the pro-deflationists when the pro-deflationists were forecasting economic catastrophe.

now, the inflationists, are arguing that we'd better have a bailout or they'll be an economic catasrophe.

remember the quaint days of 'buy now or be priced out forever!'

[Honest HomeOwner, Paying Off Mortgage]

I must turn down ,(With Spouse's help.) 5 chances per week to "Lower Your Credit Card Debt", and 3 per month to Re-Finance my mortgage, at a better rate. On Thursday, 9-25-08, I hung up on an Urgent "Absolutely Last day to Lower Your Interest rate" wondering as I did, if some financial institution isn't making ONE LAST CHANCE TO GET ALL THE BAD DEBT THEY CAN, FOR THE FEDERAL GOVERNMENT TO BUY!!!
Has anyone noticed that Andrew Cuomo has started an investigation of manipulation of these failed banks' stocks, by short selling, etc. I can't help but wonder if this wasn't all politically timed so that someone could either, be perceived as a "Master Economist", or a group of others, hide a bunch of evidence, just in case they aren't re-elected and somebody is inclined to check into what really happened. After a Bail-out, the paperwork is going to be too massive to decipher.
Just for the record go to http://www.johnboehner.house.gov/ and read the GOP Conservatives "Economic Rescue Principles". They stay within the traditions which kept this nation the Economic Power House that it was for the first 200 years of it's existence. {Does anyone remember the Headlines in 1976, that NO government had ever survived more than 200 years. I wonder if it was intentional sabotage that someone convinced President Carter to lay the Groundwork for the financial institutions that would eventually leave us in these dire straits?}