Our financial system is crumbling this week.

[jim]

I really think looking for blame first is almost uniquely American. I swear people would rather drown with the ship than save a person or two that didn't deserve it.

[BW23]

I really think looking for blame first is almost uniquely American. I swear people would rather drown with the ship than save a person or two that didn't deserve it.

++

[Hungary Jack]

I've already said that I don't really understand completely how we got here, so if someone wants to slam this idea (which isn't mine), then feel free. Won't hurt my feelings.

What if that $700 billion was taken and used to pay off mortgages? You know, pay them off. Where people have no home debt. Where they would in turn put that money into the economy.

What would that do to the current crisis? I'm asking because I really don't know.

It's a horrible idea because you are rewarding many people who speculated foolishly on rising home values and got burnt. You also reward the lenders that made loans to people who had no business getting loans.

Using taxpayer money to reward risky behavior of a relative few individuals is just hrribyly unfair. It's no different than buying out a homeowner who knowingly builds a house in a floodplain, refuses to buy flood insurance (available through a federal program), refuses to evacuate when the waters rise, and then demands that government bail him out.

[UK]

There should not be much doubt that we are experiencing the second huge correction in asset prices post bubble in a decade. The first was tech stocks. Now it is housing.

The housing boom was driven by incredibly lax monetary policy (by historical standards) post tech bubble / 911. In other words, cheap money prompted all types of investors to start bidding up property prices at unsustainable rates. There is evidence of this in every developed country.

So how will the economy fare in the wake of the housing price correction? It's hard to tell, but if debt-happy consumers were drawing on home equity to finance their consumption, we will have a bumpy ride for awhile. But increasing trade, investment in green technologies, and infrastructure spending could keep the economy float during these times.

This has to accompany the bailout as well as increased regulation, trade deficit equality etc. for anything positive to come from it.

[UK]

My grave concern is that without a bailout plan in effect, soon, small and moderate sized business are going to be frozen on their credit and will effectively be out of business. That's when this situation stops being abstract and starts the real pain for you and me.

Your concern is correct and something is already being experience as HJ already mentioned.

[UK]

I've already said that I don't really understand completely how we got here, so if someone wants to slam this idea (which isn't mine), then feel free. Won't hurt my feelings.

What if that $700 billion was taken and used to pay off mortgages? You know, pay them off. Where people have no home debt. Where they would in turn put that money into the economy.

What would that do to the current crisis? I'm asking because I really don't know.

So when businesses need a line of credit, college students need to pay for college, etc. they should go to homeowners for a loan?

That 700 billion isn't going to pay for every loan needed or every home in foreclosure or about to be in foreclosure.

It is meant to ignite the lending industry, not supply it.

[UK]

In this economy, people are looking to borrow more than they have in many years b/c they're making the same but expenses have increased, unemployment is high, and people had been living beyond their means.

Shoulden't we refrain from doing this anyway?

Of course we should practice living within our means regardless of economic situation, it is a huge part of the problem hopefully people are now starting to realize it.

[Arthur Dent]

It's a horrible idea because you are rewarding many people who speculated foolishly on rising home values and got burnt. You also reward the lenders that made loans to people who had no business getting loans.

Doesn't the Paulson plan already do this? It calls for the government to overpay to buy bad loans thereby subsidizing the rich bankers who made these bad investments.

[BW23]

I've already said that I don't really understand completely how we got here, so if someone wants to slam this idea (which isn't mine), then feel free. Won't hurt my feelings.

What if that $700 billion was taken and used to pay off mortgages? You know, pay them off. Where people have no home debt. Where they would in turn put that money into the economy.

What would that do to the current crisis? I'm asking because I really don't know.

So when businesses need a line of credit, college students need to pay for college, etc. they should go to homeowners for a loan?

That 700 billion isn't going to pay for every loan needed or every home in foreclosure or about to be in foreclosure.

It is meant to ignite the lending industry, not supply it.

So after they do this plan, instead of something I suggested, then they need to provide more regulations, right?

[BW23]

It's a horrible idea because you are rewarding many people who speculated foolishly on rising home values and got burnt. You also reward the lenders that made loans to people who had no business getting loans.

Doesn't the Paulson plan already do this? It calls for the government to overpay to buy bad loans thereby subsidizing the rich bankers who made these bad investments.

I was thinking that, too.