• Let's borrow $1 trillion to pay off bad mortgages!
    That doesn't make alot of sense

    The financial news these days certainly isn't boring. The article below talks about how the U.S. federal govt is going to use $1 trillion in debt to purchase toxic mortgages and get them off of the banks balance sheets.

    Why does this seem so wrong.. Isn't there a term for this? Kiting?!! Using debt to pay off debt?

    If consumers use debt to pay off debt, that will affect your credit score pretty badly. It tells the creditor that you're illiquid and that you don't have cash savings to pay your debt.

    Fundamentally using debt to pay off debt is just wrong. It may ease the pain for the short term, but ultimately it's going to cost everybody alot more. in real estate What they're doing is taking the burden off of the individual mortgage holders, and putting it onto the over all population. That's not right, and it's not fair.

    People need to be responsible for their own mortgages. If you can't afford to pay your mortgage, move to a lower cost situation.. The existing credit market is designed to work with these cases. It's not politically correct to let millions of people default on their loans and mortgages.. however there is a system to work this through. The mortgage companies and banks made piles of money at the beginning of this free-for-all mortgage bubble. Now they don't want to take the losses associated with their misdeeds.

    Accountability is what it's all about. The banks get bailed out, and the individual has to take it on the chin.


    Geithner Relies on Investors for $1 Trillion Plan

    By Rebecca Christie and Robert Schmidt

    March 23 (Bloomberg) -- The Obama administration unveiled its long-awaited plan to remove toxic assets from the books of the nation�s banks, betting that it can revive the U.S. financial system without resorting to outright nationalization.

    The plan is aimed at financing as much as $1 trillion in purchases of illiquid real-estate assets, using $75 billion to $100 billion of the Treasury�s remaining bank-rescue funds. The Public-Private Investment Program will also rely on Federal Reserve financing and Federal Deposit Insurance Corp. debt guarantees, the Treasury said in a statement in Washington.


 
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11 Comments
On Jun 5, 2011, BizzNess Said:
This topic makes my blood boil... still... after a few years... I can\'t believe that the government gets involved in these bad mortgages.... this is socialism at its best...

The Americans have proved once again that capitalism isn\'t all what it\'s supposed to be...

I think that the government should have just left the mortgage companies and banks declare bankruptcy...
On Apr 1, 2009, Monty Loree Said:
Agreed...
people and companies and governments need to pay down their debts... this is better in the long run, however, taking cash out of the system to put in savings will slow down the economy even further.
On Apr 1, 2009, joe economist Said:
we need to get out of our current debt trap, its crippling our economies and making us wildly affected by changes in interest rates! the subprime crisis started when interest rates went up in the US and increased payments on variable rate mortgages
On Mar 31, 2009, Invoice Finance Said:
I agree with 'History' that paying off bad debt with more borrowed money will not solve anything. There are actually other solutions, depending on your actual situation. I remember a friend (owner of a company) who managed to solve his cash flow and money problems with 'invoice financing'.
On Mar 30, 2009, Monty Loree Said:
Health care works nicely in Canada.

Example... my wife went in for cancer surgery just recently. It didn't cost us a cent.

I'm sure we pay for it through our taxes, however, it's nice not to have to worry about it.
On Mar 29, 2009, Pa Health Insurance Said:
Attaching health care reform to the budget is going to cause more harm then good. We need some reform, but not Government takeover of the system!
On Mar 29, 2009, Ed Harris Said:
Oddly, when all of this money needs to be paid back, Obama will be long gone. No doubt, someone else will be blamed.
On Mar 26, 2009, Personal Finance Said:
It is more like a blind leading the blind. Where would they end up? In the pit - of indebtedness, for sure.
On Mar 25, 2009, History Said:
Still cant get my head round this idea. Pay off bad debt with more borrowed money? seems crazy
On Mar 24, 2009, mark goldberg Said:
well... the harsh reality of home ownership is.. you need to be able to afford what you're living in. otherwise you're asking your creditor to be a function of social services

lenders are not in the business of giving handouts
On Mar 23, 2009, r j a boston Said:
i am a home owner. i really need that bailout. i've got 3 kids and i'm a single parent. i don't care what you say. it's going to help me and my family
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