patrick.net

Blue Swan says

But under Obama, it’s like each and every day!

Once again, I'll remind you that TARP was passed under Bush.

When someone blows out the bathroom, and renders it unusable.

My biggest complaint isn't the fatass who did it.

It's the smell he left behind.

You guys are distracted to damn easy. You're all fine damn Okey Dokes.

I have an interesting question. How much bad debt do banks hold vs solid debt? How many defaulters are there for every good loan? Even though the numbers are staggering right now for bad debt, it appears that total good debt far far exceeds bad debt.

If money is allowed to be printed because banks want it, all of the "good" debt becomes worth less to the bank, all of the people with a loan are now better off! If it was going to take you 30 years to pay off your home loan, but due to inflation it now only takes 5 years, who is better off, the bank or the house owner?

While bad debt will look better on their books, they are actually helping out the majority of the population with large loans and then followed up with inflation. The banks are the ones who will get hurt in this process. If they hold 10T in money now, and we had 100% inflation, then they're holding 5T essentially, while home owners are holding onto land worth the same amount.

Sure, banks will have larger deposits to play with, and larger loans to play with, but in essence, they were "wiped out" due to inflation, because they were holding the loans and the cash on hand.

pkennedy, I've heard that if the gov't wasn't propping up the big banks right now and letting them pretend that the loans are still worth 100%, many of them would go under because of their debt burden. So they are choosing to keep $5T instead of $0.

If that is the case, then many of these banks should be trying to dump *all* this debt quickly, and then to go on the offensive, pushing down housing prices until everything collapses around them. Something like wellsfargo buying up wamu for a huge discount.

There are many banks that are probably fairly well off - most likely the more conservative banks. They would be likely to profit handsomely if they could push housing prices down and force these other banks into bankruptcy faster.

pkennedy says

I have an interesting question. How much bad debt do banks hold vs solid debt?

Total household indebtedness was $10T in 3Q01 and peaked at $20T in 4Q08.

Wages haven't gone up since 3Q01 and if unemployment remains pegged nationwide:

I don't see wages rising any time soon.

Total market cap of the surviving banks is $800B or so. If 10% of the household debt taken on since 2001 is bad, that will wipe them out. 30% to 50% of the added $10T being unrepayable is not impossible. That's $3T to $5T.

If you're going to borrow, the money has to go towards capital investment -- earnings accretion -- not consumption. 42" plasmas were not capital investments, though boob jobs arguably were.

The national debt has risen from $3T in 2001 to $8T today. The FICA surplus is topping out and may go negative 6 years early unless wage earners get back to work.

tatupu70 says

Once again, I’ll remind you that TARP was passed under Bush.

Where do corporations like the ones in Silicon Valley keep their cash to pay their bills.

If you didnt have TARP where would you have received your payroll check from your employer or
your employer pay for their vendors bill ? How would your employers customer be able to pay for their
product purchase which generated revenue/cash for operations? Things to ponder on since bank accounts were impaired both personal and corporate... that is why every companies stock crashed when the first swing at passing TARP failed.

Troy says: If you’re going to borrow, the money has to go towards capital investment — earnings accretion — not consumption. 42″ plasmas were not capital investments, though boob jobs arguably were.

I believe the latter is considered an infrastructure improvement. ;o

Camping "gets it". You get a cookie, Camping!

Indeed, by changing the policy to helping people get out of their homes it benefits buyers by freeing up inventory AND lowering prices (the more short sales out there, the further push downward on prices) AND the greater availability of lower priced rentals which is a double push downward on prices overall.

The purpose of government policies is to benefit some particular group. They tend to favor owners/sellers because they're a bigger group to pander to (social democracy: two wolves and a sheep deciding what's for dinner) Perhaps they realize that since they can't stop prices going down and they can't "buy" votes that way, it's better to buy votes from the short sellers...

Hopey~Changey. Everyone enjoy the Hopey~Changey!

Paying people to leave their homes is really to increase inventory. Obama is squeezing every last drop out of the government support. You know it must be bad if even Obama wants to lock people into high debt before he withdraws government support. If everyone stays in their homes now, they will get foreclosed on when there is no government support, causing another crash then. This is all part of his exit strategy - to push everyone in before it collapses.

Obama has made it quite clear that his intent is to prop prices high since it's everyone's most expensive investment. You won't see anything from him helping buyers directly; only homeowners/sellers.