It's kinda ironic considering some spent a lot of time claiming the Bush administration never listened to the Majority and yet here we are with not only the Bush Administration but the House and the Senate ignoring the Majority yet again. I say we whther the storm. It may actually not only fix the economy in the long run but may also bring people together by having the need to depend on each other for support and more during the hard years that will follow.

Better to fall, get back up and learn a lesson rather than never hit the floor due to a cushion and get up to expect to be cusioned again next time around.

Yes....Just watch the market. The big investors are waiting on the sidelines because they know how much safer their investments will be if this bill goes thru. Once is does you will not only see the financials rise but you will also see the big investors willing to infuse large sums of capital into these institutions in the form of new initial offerings. These are those that don't buy current shares but buy new shares with warrants and options. If it doesnt go through many businesses that use short terms loans to make payrolls or buy the goods that they resell will go down very quickly. Many small businesses that do this have already closed their doors in the last 2 weeks because of this.  It is short term lending credit which is frozen. Once the mbs' are swapped for treasuries it in affect opens the banks/financial institutions/companies books.  They then have treasuries which are easily valued and easily traded so they will be able to not only have the liquidity they need to offer/receive short term loans but also have better transparency so that the big investors will be more willing to infuse new capital into them.

Face the facts...we will be seeing a recession even if this goes through. The next decade is not going to be good, but if this bill doesnt pass(or some version of it) it won't be a soft landing but instead a very hard one.

All the banks fail and America is turned into a dystopian land a la Road Warriors.  After we craft crude armor from football gear at sporting goods stores and stock up on swords, guns and ammunition we will fight each other becoming a savage tribal like society.

~Zoo

Dome, sorry

Seriously, what might happen in the worst case senario is a crude and brutal stop of the lending on the part of the banks, because they don't have the assets anymore to back those lending. Which means investment will stop, since you usually need to borrow money to start a business, buy a car, buy a house. People won't be able to do major purchases, and the economy will slow down to a near-stopping point.

No new business will be created until the banks will allow new lending, but that won't happen anytime soon, since the bankruptcy of banks creates a domino effect since they all have interests in each other. When bank X hits the dirt, all of the assets people put in it are scrap. So if Bank Y put a few million in assets in Bank X, Bank Y might also bankrupt. But then, Bank Z who had put assets in both Bank X and Y, who could have survive with only Bank X's bankruptcy, now is in deep trouble, and will probably die too.

People won't trust the banking system anymore, and will try to take all their saving into hard cash. But that will create a strong inflation movement, as liquid cash will be over-present in the market. We are looking - in the worst case - in a new major depression. People who loose their jobs know they won't be able to have a new one anytime soon, since no new business will be created. It's a big vicious cycle that might take 10 years to get out of.

the "Majority" isn't right in that case. Even if people don't want to save the banks and the financial system, they just don't understand what not saving them will do to their economy. Populists are using words to scare the majority and anger them into not saving the financial sector, and worst of all, we are in the middle of a major election!! So you see people on both sides either trying to win political points or trying to save their political asses, and that might cost America a lot. I said America? I meant the world.

But what you aren't seeing is that this entire problem has a relatively simple solution that doesn't involve a big government bailout (and notice I said relatively simple not just simple).  The banks that made the bad sub-prime loans need to sit down with the people either in foreclosure or close to it and restructure the loans.  They need to make these loans easier for people to pay, make them affordable even if it means extending the term of the loan 80-100 years.  If they do that then the banks will once again have money coming in that they can count on and use to make other loans.  Yes the payments won't be as high as they had originally anticipated but having a little money coming in is better than none at all and/or a house that you can't sell.

This should have been done a year ago but the banks were too stubborn or unwilling to deal with the complexity of restructuring the loans.  I'm not saying that it'll be easy but it would solve the problem with as little pain as possible and no burden on the tax payer for a bailout.

That is totally seperate from the bailout issue. The problem is that these mbs's are sliced and diced pieces of revenue streams from various mortgages so they are seperate from the mortgages themselves. So even if you fix peoples mortgages you still have a bunch of banks and companies that are sitting on illiquid mbs's.

Theres many different problems going on......Many of the foreclosures were situations where people simply walked away. Some of the mortages have very high early payment penaltys, etc. But as I said above the credit crunch is due to the mbs's which cannot be solved by renegotiating mortgages.

What happens to MBS's when the mortgages they are based on are paid off?  They increase in value to what they were originally supposed to be right?  So if the people in foreclosure or close to it are allowed to refinance their loans that pays off the bad loan that they currently have and sets up a new loan that is affordable to them which guarantees an income stream to the bank (less than they wanted but it's still there).  Sounds like it fixes the problem of the illiquid mbs's to me.

And why did the people walk away?  Because they couldn't afford the mortgage when the rate reset.  If the banks refinanced the loans the people could have gotten loans that they could afford, like I said the terms of the loans would have to be extended a good bit but it could be worked out if the banks really wanted a solution to the problem.  As for the pre-payment penalties the banks doing the refinancing could either waive those or roll them into the new loan.  There is nothing here that was unworkable if the banks would just suck it up and work with people rather than expecting the government to come around and bail them out.  The banks have the power to resolve this situation themselves they are just unwilling to do it because they would rather uncle sam just cut them a check.

Now keep in mind I'm not saying that all the investors here will recoup all their money or turn a profit, they are still going to take a loss but that is the risk they assumed when they invested in these mbs's in the first place.  Getting some of the money back is a much better situation than not getting anything.

I think el-duderino has an interesting idea. Why not simply find a way to let homeowners pay off what they owe rather than lose it all? And for those who did screw up with this lose some of the money? I mean, like he said, they took a risk looking for more money and like people at the horse track some win some lose.

I just personally don't like the idea of people buying a ton of cool stuff on credit cards and then expecting someone else to pay the bill for them. (this is just an example).

Yes it will be.  But not to hear the rest of the world say so.  Still, my point is that this is different.  It is not the same, nor is it in any way like the 30s.  But dont tell that to the sheeple.  We are all doomed.

This is much worse than what was happening in 87. The problem is that one party or the other is always saying the sky is falling during election season so the public really does know what to think sometimes. The derivatives market is the difference between 87 and now so if you really want to understand what is going on do some research not only on mbs's but also on CDS's Credit Default Swaps.