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Bailout plan or Investment Plan ?

Invest in America !!!!!

I agree with Jim Cramer of Mad Money that the bailout plan is not so much a bailout plan, but an investment plan in our country !

The United States government would be buying assets and either working out loans or reselling the loans at some point in the future. It is not like they are just spending $700 billion dollars on some sort of government program and never see a return. Im not sure if people see that or not.

I am curious to know where the National Association of Realtors (NAR) stands on this issue.

I know the Government plays on fear - in this case our economy could fall into the next Great Depression without the plan. But I do know banks like Wachovia will probably fail without this plan. Without credit and without liquidity, our economy would suffer that much more and there would be an even increased and dramatic rise in foreclosures as there would be less workouts and a sharper decline in home prices. The Invest in America plan will stablize home prices and allow more opportunity for loan work-outs in addition to helping the credit stream for all Americans. And the best part is it that our Government could potentially make money on the whole deal !!! Kudos ! Let's hope for a swift resolution in the next day or two and stave off those next bank runs on our large banks and regional banks as well and let's focus on the return of the United States through the "Invest in America" plan !!

What is your opinion ?

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Posted by Christopher and Stephanie Somers - Realtors - Philadelphia Real Estate on 09/28/2008 09:13 AM

Comments (7)

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Originally posted at: The Philadelphia Real Estate Blog: Bailout plan or Investment Plan ?

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7 Comments on Bailout plan or Investment Plan ?

SEP

2008

Wachovia is already in discussions with Citi, Wells Fargo and another Banco so you can bet their fate will most likely be similar to WAMU. Bank assets were purchased, and then they filed on Friday for bankruptcy.

In the voluntary petition filed late Friday, the company listed assets of $32.9 billion, and debts of $8.2 billion, putting it in the top 10 largest U.S. bankruptcy cases ever filed.

To get my support(not that I'm waiting for a call from BB or HP) I want transparency, which here are a few of the suggestions for achieving it:

Post the interbank settlements related to any bailout transaction as a matter of public record on a public website. Let's see where the money is going.
Force the Federal Reserve to post all entity borrowings at the rates at which they were accepted on the same-day the transaction was completed (including any repos or other methods of lending such as the TSLF). Let's see who is really borrowing and where it is going.
Rescind legal tender laws and capital gains taxes on alternative monies so that ordinary citizens can protect the value of their savings, labor, and efforts for their families. Joe sixpack shouldn't be paying "capital gains" tax on alternative savings investments (like gold or other currencies) just to protect his savings, which are after-tax in the first place.
Force the Fed to unwind the massive leverage in the system and provide actual money (decrease leverage and increase money so that the net result isn't price inflationary). As a follow up, force the Federal Reserve to reduce paper or "electronic" money under the control of the Federal Reserve and replace it with gold, outside of the control of the Federal Reserve. Further, allow free market money so if there's a better alternative than gold, it can be used. That's freedom.
Amend the Fed's charter to have gold-as-money or any other free market money trade unrestricted. Get rid of all legal tender laws.
Have the FDIC require full disclosure by all banks of their loan portfolios, loan-by-loan: MSA geographic region, FICO, debt ratios, documentation type, loan reserves at inception, etc. including the performance of each loan. We'll get over the problems real fast as people find out which banks are good and which are bad (that information is intentionally hidden from the public).

I pray they make a fortune at this. The stakes couldn't be higher.

I believe it is a neccessary evil and hopefully is successful in calming the financial markets, but honestly .... I doubt $700 billion will be enough.

Sean Allen

Thank you for this post. I can't believe all of the posts that are saying we're just giving $700 billion to companies or the one that says we're giving $25 billion to the auto industry. It's comprised of buying assets and high interest loans to companies. While we may not recoup all of our investment in these assets and loans, there's a very good chance that the stabilization of the market will save us from much more losses and turmoil than we could lose in the $700 Billion investment in assets.

I'm copying your blog link and posting it in as comments for all of the uninformed posts out there...

Paige - thanks for your thoughts. Wachovia should be different than WAMU. This plan could really benefit the likes of Wachovia. The last thing we need is additional bank failures at this level. Healthy mergers would be okay though. I doubt Wachovia will have the same fate as WAMU but time will tell.

Randall - It does not have to be a fortune. Even a modest return would be great. That is the paradox though - this is not a spending plan, it is an investment plan !

Sean - It certainly seems like a good start... even if it ends up being more, it should be a good investment.

Jared,

You are welcome ! I too have seen many posts in Active Rain against this plan which suprises me a little bit. Believe me, I am okay and respect everyone's opinion, especially my fellow colleagues. But I would certainly think that being in our industry, this plan has the backbone to really stabilize the housing industry. And to see it as an investment plan instead of a spending plan. You are right - the money is just not given to companies - it is the purchase of assets at a bargain basement price. Freeing up the liquidity market and credit is pricelss for our economy to move foward... and to bounce back. Even with this, there will be pain. But without, it could be tragic !

SEP

2008

depending on how you look at it, it could be both. You always want to invest at the low points of the market, so this is a good time for that. But this is definetely also a time to educate ones-self on how to save money and the benefits of that. There's plenty of examples of what not to do in the news right now so for once sitting in front of the tv may be of benefit to society. This is unfortunately a sad day. A sad day because this could have been averted in the first place. Here's hoping some real regulations get put into place as to keep this from happening again. Great Article you guys!

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