It’s a darn shame. Those foolish, foolish people.

“People who think that should happen have no idea at all how much of the foundation of our economy is wrapped up in those companies and they don’t want to know, they’d rather just shout out ‘let them fail, where’s my bailout?’”

I cannot, however, understand the rationale of supporting a mortgage lender who would grant a $720k loan to a family of five making $600 during harvest times. And as I also mentioned in the above comments, in this particular case, it wasn’t one of the big guys. Sorry.

BUT on that note – why do you think that lender thought it could get away with doing this loan? My bet is because it was sold immediately, then packaged with a bunch of other subprime loans and sold with a AAA credit rating as an investment. When you say that the people who created these CDOs should be held responsible, you do know that you are including the very same banks that both you and I don’t think should be allowed to fail, and that the bank’s involvement and indeed the creation of this crazy system that allows those products to be created and traded is the result of deregulation of the banking and securities industry?

I only bring this up because on this blog, I seem to be in the minority when it comes to government actually taking a role in the financial markets. I get the impression, and I could be wrong, that most believe that the markets are king and should be allowed to operate without interference. Well, look around.

And as to the stimulus – Reagan’s tax cuts were combined with extreme deficit spending. Which one really produced results?

In terms of banks’ that should go under, do you realize that a)the large bank’s going under will have a huge ripple effect on the economy, credit availability (for businesses) and jobs? b) a bank is not a single person; bank’s going under means tens even hundred of thousand people losing their jobs where most of these people had nothing to do with lending. It also means stock and bond holders’ losing money including all of us who have banks as part of our 401K funds.
It actually annoys me when people think about banks as individual people. A bank is not a person, and most of bank employees had absolutely nothing to do with lending or CDOs.

Back to the subject of stimulus – I think some, but not all provisions may indeed stimulate the economy, and as someone working for a technology company, it might even benefit me. But from what I heard, most of the money will not even be spent this year when this year is what is important. Also, Pelosi and Co. keep saying how republican ideas like tax cuts for businesses don’t work when in fact they worked very well during the Reagan era after Carter left the country with a recession and double-digit inflation.

I am also worried that this huge deficit spending by most countries is going to lead to our creditors losing appetite for our treasuries and bonds. This may lead to higher interest rates and high inflation at the time that we cannot afford it.

http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2007/04/13/carollloyd.DTL

… But the couple says they were assured them it was possible. “The monthly payment was supposed to be $4,800, but then after we bought it, it went up to $5,378,” says Rosa, speaking of their zero-down mortgage with a one-month “teaser rate.” “Our agent told us that once we refinanced, we could get the payments down to $3,000 or less.” For a number of months Avila, who arranged for the loan with New Century Mortgage, paid the difference between what the buyers had said they could afford — $3,000 — and the actual loan payment. According to the buyers, this arrangement was supposed to carry them over until the group refinanced.

The money-saving refinance failed to materialize, and eventually, Avila stopped subsidizing their current mortgage. (According to my analysis of interest rates during the period, hitting the $3,000 number would have been virtually impossible under any circumstances. An interest-only $720,000 loan at a 5 percent interest rate [15-year fixed] yields a $3,000 mortgage, but such mortgage rates weren’t available to anyone, much less a laborer with low income, no down payment and no other assets. Plus, that doesn’t count another $750 a month in taxes and insurance.) The two families continued to make the payments, sometimes sacrificing basic necessities, other times borrowing more. “It was very difficult,” Rosa says. “Sometimes we would eat less, and we took out personal loans from Bank of America.”

(Maria Avila and Rancho Grande Real Estate declined to comment. Earlier this month, New Century Mortgage, the nation’s second largest subprime mortgage lender, filed for bankruptcy. It’s also facing a federal criminal probe.)

……………………….. In other words, they were conned, the real estate agent should lose her license, and New Century Mortgage isn’t Citi, BofA or JPMorgan.

But I would also be really shocked if one of those guys actually provided that particular loan. I’m going to have to look up the story.