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Responsible taxpayers shouldn't have to pay for bad lenders, greedy suits and the idiots who over extended their credit and couldn't pay it back. It's an American problem, not solely a Republican one... wake the fuck up.


While I'm sure you've very impassioned on the subject, consider the following:

1. The taxpayer bears blame too. I didn't hear anyone complaining that an unemployed plumber could get a mortgage with interest-only payments for 5 years, and he didn't have to ever talk about his income or his FICO score. Nor did I hear anyone complaining about the idiots who took out 2nds to pay off their credit cards, then ran them right back up. Nor did anyone complain about people with no construction experience who suddnely because bigwig property flippers.

So yeah, the taxpayer certainly benefited from this deregulated climate.

2. We have financial socialism every morning at 9:00 a.m. ET when the Federal Reserve Bank of New York buys and sells Treasury Securites on the open market in order to influence interest rates. **Every morning** You don't think the federal government insuring deposits on banks they have no stake in is capitalism??? How about the RTC? the SIPC? GSEs like Fannie Mae or the Small Business Administration?

3. I don't think you understand that this is no longer a problem of "bad mortgage lending." It's a severe contraction in the ability for lenders to obtain funding for any credit--good or bad. The money for a loan has to come from somewhere, and those somewhere's (like insolvent investment banks) aren't there any more. I'd be happy to give you the phone number of my client who told me last week his bank was "looking for reasons not to extend credit any further." I know at least one bank in SoCal who restricted their maximum leverage ratios for business loans back to 3:1...where they were in the mid-1980s.

4. The Repubs can't have it both ways, they want an "insurance fund" vs a "RTC model," but they also want to eliminate mark-to-market accounting. In that scenario, they will wind up enriching banks further and costing the taxpayer the exact same amount of money.

Here's how it works:

Scenario 1:Insurance-fund scenario:

Bank A is holding a $500M mortgage. Because of MTM accounting, they must value that asset (loans are assets for banks, deposits are liabilities) at the value the market would pay for it. Let's just pretend the underlying value is 50% of what it used to be, or $250M. So currently Bank A will have to write down the value of that asset by 1/2 and book the loss on its income statement.

Bank A gets to file an insurance "claim" with the government of $500M, the face value of the asset (remember, the Repubs want to eliminate MTM rules). This means not only that the asset is taken off Bank A's balance sheet, they actually get the face value for that asset, or $500M. Upshot: (i) Bank A just made $250M more that they ever anticipated, and it's a cash profit (ii) the government just assumed an asset that it will have to sell at some discount in the future, not only meaning that they overpaid for the asset, they will have to come back to the taxpayer later for the difference in the purchase price and sale prices, i.e., they lost more money.

Scenario 2: RTC bailout

Same bank, same mortgage. Under the Dem plan, MTM accounting still applies.

Government buys the mortgage at the current value assigned to it by the Bank (remember, it's $250M in this case). Bank A is now made whole on the asset: they don't make any money, but they also won't lose any more money, and the deposits and other core capital funding that mortgage is now freed up to do other things. Government obviously has to pay less for the asset because they're still using MTM rules, the flip side is that they don't recapitalize Bank A to the point where they started, but it's a start. When the government resells this mortgage asset, they will either make or lose money depending on the sale price, I think you can reason that one out.

5. Yes, Pelosi was stupid for enraging anyone on such a touchy issue, they need to find a better Speaker.

6. BTW, I own about $45M in bank stocks, does that make me some "fat cat?" Lots of other people own finanical stocks via retirement accounts, pension funds, etc. So please scrape together whatever you got an send it to me, because I lost 11% on my investment in JPMorgan. Don't hate me beucase I invested in U.S. Bank and not U.S. Steel.

The whole point of placing limitations on compensation was to prevent the enrichment of executives who participate in either the insurance bailout or the RTC bailout; everyone agreed on that before the final bill was ever drafted.

7. Adding another $1T of national debt wouldn't be such a big problem if our Republican Executive wasn't spending $1T per year on a war in the Middle East. Nor would the Treasury be so depleted if they didn't keep sending $500 checks to people every time there's a small blip in the economy. The last "tax rebate" just got spent on beer and smokes, the national savings rate didn't go up one iota.

Plenty of blame to go around for everyone.