Posted by: The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

16 responses to “Poll: Bailouts / “stimulus” / rule changes…”

  1. DaveyDave

    Tim, could you define “Bailouts/ ‘stimulus’ / rule changes” ?

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  2. Shameer

    It will delay and lessen the severity of the contraction in the medium term (2-5 years). We may never know how bad it would have been without government action, but the loss of confidence last fall was huge and the uncertainty it triggered would have resulted in much larger job cuts than we’ve seen, as hard as that is to believe.

    Over the long term (10+ years) the effect will be close to zero. There will be a slight positive effect because we are shifting needed infrastructure spending to a period when labor is readily available, making it cheaper than doing it in the middle of an employment boom. This will be more or less cancelled by the inefficiencies (compared to the market) of government allocating capital.

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  3. Scotsman

    Just like the american consumer, all these new government “purchases ” will allow folks to think the good life continues as we ride into the sunset. But when the bill comes due, the carrying costs for trillions of additional debt will body slam the economy to the ground.

    Math’s a bit*h.

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  4. Romwo

    I think the only way to get things going is really print the money and start doing money drops on a regular basis. Or some govt scheme. If you buy a house the govt buys you a new car of your choice.

    In Germany they give about 3.5K for a junk car if you buy a new car. Bam. The market is exploding.

    So we need some permanent govt scheme.

    The issue is say – what if you keep changing shacks? Do you get a car everytime you move?

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  5. Kary L. Krismer

    RE: Shameer @ 2 – I would tend to agree with this, and say that none of the poll choices really fit that. I was looking more for a soften the landing sort of answer.

    That said, I’m concerned that not all of the bailout actions are good, mainly because I dislike Congress and think highly of their ability to screw up anything they touch.

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  6. David Losh

    The bail out was another bad idea that George W Bush put in place while he scurried out of his presidency. He made a mess of things. I blame him because everything he touched turned out badly.

    His response to an attack on our country was cowardly. When we talk about disasters we can see that the twin towers are not rebuilt and the owner spent years fussing about the insurance payments. A step George should have taken was to ensure that a monument was erected quickly. Concrete action says a lot.

    George instead busied himself with an invasion of Iraq that his father botched. Addressing terrorism with black op sci fi voodoo and a concentration camp would have been an absolute joke if not so tragic. Let’s not forget troops who had no body armor were being killed daily by a rag tag bombed out militia.

    In George’s second term he let lose the financial genie that had private investors passing out money. I think the bail out was to pay them back for making George’s economy look good.

    Will the bail out help? Heck no. There is absolutely no economic reasoning for our government to hand out money to private enterprise. If Obama takes over the auto industry and health care it may all be worth it. If the government makes a profit from our severely corrupt banking system that would be good.

    My only hope is that if there are profits that they will be spent correcting the social injustice our banks and health care systems have created.

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  7. Ray Pepper

    Mtg Cramdown WILL work for many people. It is the DEAL of a lifetime for these homeowners. Nearly every other plan I have heard delays the inevitable short sale or foreclosure. 0% or 4% it DOES NOT matter. If they are selling in the next 10 years the Lender will either bite it now or later.

    People are NOT stupid and they WILL walk in record numbers if they continue to remain upside down 50-150k+.

    Bank on it!

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  8. Scotsman

    BILL MOYERS: Yeah. Are you saying that Timothy Geithner, the Secretary of the Treasury, and others in the administration, with the banks, are engaged in a cover up to keep us from knowing what went wrong?

    WILLIAM K. BLACK: Absolutely.

    BILL MOYERS: You are.

    WILLIAM K. BLACK: Absolutely, because they are scared to death. All right? They’re scared to death of a collapse. They’re afraid that if they admit the truth, that many of the large banks are insolvent. They think Americans are a bunch of cowards, and that we’ll run screaming to the exits.

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  9. Mike2

    With regard to the housing stimulus bill (first time buyer credit) and increased purchase of MBS aimed at dropping 30 year mortgage rates specifically – It seems more than coincidental that the foreclosure moratorium ended and the GSE’s are starting to liquidate their inventory immediately after these two stimuli became available.

    My thought is that the above stimuli are specifically aimed at easing the backlog of foreclosures, mostly for the GSE’s. I’m not sure yet whether the increase in the buyer pool is sufficient to absorb the backlog. My gut says probably not.

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  10. Everett_Tom

    RE: Scotsman @ 8

    Just an FYI. Both transcript and a video of this can be found linked from here: NPR Planet Money, links for William K Black interview .

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  11. patient

    By Scotsman @ 8:

    BILL MOYERS: Yeah. Are you saying that Timothy Geithner, the Secretary of the Treasury, and others in the administration, with the banks, are engaged in a cover up to keep us from knowing what went wrong?

    WILLIAM K. BLACK: Absolutely.

    BILL MOYERS: You are.

    WILLIAM K. BLACK: Absolutely, because they are scared to death. All right? They’re scared to death of a collapse. They’re afraid that if they admit the truth, that many of the large banks are insolvent. They think Americans are a bunch of cowards, and that we’ll run screaming to the exits.

    I definately think there is some truth in this. For a while there was so much talk about transparency, where is it now? It creates the feeling that when the transparency advocates got in charge and could take a closer look on the banks they got shocked to the core and now continue the policy of cover up that Bernanke and Paulson started. It only deepens distrust with the gov, the bailouts and the banks and makes things worse. Some well known bank analyst said today that the banks has only written down their loans to 98c on the dollar so far and see what crisis it has created already. It’s time to come clean.

    http://money.cnn.com/2009/04/06/news/economy/loan_losses/index.htm?postversion=2009040612

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  12. Kary L. Krismer

    RE: patient @ 11 – My complaint about Paulson was that he wasn’t a good politician. He scared the living hell out of people. I think it’s rather obvious what the risk is, but that doesn’t mean Obama et.al. need to constantly mention the threat of total economic collapse. That’s if anything counterproductive.

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  13. patient

    By Kary L. Krismer @ 12:

    RE: patient @ 11 – My complaint about Paulson was that he wasn’t a good politician. He scared the living hell out of people. I think it’s rather obvious what the risk is, but that doesn’t mean Obama et.al. need to constantly mention the threat of total economic collapse. That’s if anything counterproductive.

    I agree to an extent, better to put the facts on the table with full transparency and then let people decide instead of just saying that if we don’t do this and that we will have armageddon. I.e present data and analysis and let the congress and people draw their own conclusion if a program ahould be supported or not. Though if they are asked about their predicitons on the fallout they should of course say what they believe. We need more transparancy and honesty not less.

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  14. 98115_Renter

    I think this poll provides us with three false choices, and simplifies something extremely complex to dummy/soundbite/cable TV news website poll level.

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  15. Scotsman

    http://www.businessinsider.com/insolvent-banks-and-imaginary-fire-sales-2009-4

    – Many banks are now insolvent.”…many major US banks are now legitimately insolvent. This insolvency can no longer be viewed as an artifact of bank assets being marked to artificially depressed prices coming out of an illiquid market. It means that bank assets are being fairly priced at valuations that sum to less than bank liabilities.”

    – Supporting markets in toxic assets has no purpose other than transfering money from taxpayers to banks. “…any taxpayer dollars allocated to supporting these markets will simply transfer wealth to the current owners of these securities.”

    – We’re making it worse. “…policies that attempt to prevent a widespread mark-down in the value of credit-sensitive assets are likely to only delay – and perhaps even worsen – the day of reckoning.”

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  16. me

    The bailouts / stimulus will have an impact on delaying foreclosures for many. It may not eliminate foreclosures, but that may not be the goal — it shouldn’t be the goal.

    Foreclosures fall into 3 categories:
    1. Owner unable to pay by a large margin — no solution other than foreclosure. The person was in way too much house and they need to downsize via foreclosure/shortsale.
    2. Owner unable to pay temporarily or by only deficient by a small margin — bailout efforts may help here and this help is good for the system because it avoids the inefficiency of a foreclosure (costly for both banks and homeowner).
    3. Able to pay but underwater — if the bailout are successful to what I believe their true goal is, the bailouts will delay a large number of these foreclosures and prevent a significant portion of them. It won’t be able to prevent all of these foreclosures, but every year that these homeowners hold on, the lower the chance of them foreclosing. This is because they are incrementally paying down the principle each year, but also inflation will evenetually mean that they are not underwater based on the value of the home.

    RE: #3 — this is a justifiable goal and one which spreads the pain to both the parties that are responasable for this economic crash: the bank and the homebuyers who speculated by buying way more than they could afford. This is a much more balanced solution than something like cramdowns, which would be a subsidy to the speculators at the expense of both the banks and more importantly at the expense of the responsable homebuyers.

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