Housing Bubble Caused Bigger Burst Than Expected

Alexis could this unigue housing bubble have created an action of unattended consequences? Freddie and Frannie could've started this housing bubble along with developers. But if there's a real root it appears to go back to the 90s with the Clinton Administration. Which no one in the press hasn't really touched but some have like a reporter from Village Voice. Now give out bad mortgages on this issue so everyone can have house sounded well and good at the time. But it appears when this economic policy wasn't thought out. Nor the conesquences down the long road to the present considered. When congressionals like Rep Franks,Senator Dodd,Senator Obama turn blind eye to something that could've been averted. Dig more into this. Limbaugh has revealed that your former firm Goldman Sachs wanted Obama to benefit from yesterday which backfired. Now none of the left don't want touch the problem on the radio where their party is responsbile. But this housing bubble is the real root to what has happened on Wall Street. My theory is coming fact. I can't believe it.

Perhaps it should have been noted that not only was house pricing increasing all those years, but it was also regularly exceeding income increases. It should be obvious that if the average price increases faster than the average income, sooner or later you will reach the point where the average income cannot afford the average house. The only doubt is the timing.

How could you possibly be surprised by this "burst" look at the demographics, the birth rate. There simply are more homes than people and this won't improve for many, many years. Even if you bring in massive immigration the "credit requirements" will completely shut many out of the market. The number of live births in the 80's didn't approach the live births in the 50's or the 60's. As baby boomers retire they will dump their first home and second homes and leave them on the market where the number of potential buyers is probably smaller than say any given year in the 60's or 70's. My guess is declining prices for 3 to 7 years, then flat prices or at least another decade after that. Not a big surpise at all. But it is an opportunity for a "late baby boomer" like myself. The employment opportunities for a skilled worker like and cheap real estate opportunities are great. Especially when you have stellar credit like I do. What economic problems, kill the bailout it doesn't help me at all.

I'm against the $85,000,000,000.00 bailout of AIG. Instead, I'm in favor of giving $85,000,000,000 to America in a We Deserve It Dividend. To make the math simple, let's assume there are 200,000,000 bonafide U.S. Citizens 18+. Our population is about 301,000,000 +/- counting every man, woman and child. So 200,000,000 might be a fair stab at adults 18 and up.. So divide 200 million adults 18+ into $85 billion that equals $425,000.00. My plan is to give $425,000 to every person 18+ as a We Deserve It Dividend. Of course, it would NOT be tax free. So let's assume a tax rate of 30%. Every individual 18+ has to pay $127,500.00 in taxes. That sends $25,500,000,000 right back to Uncle Sam. But it means that every adult 18+ has $297,500.00 in their pocket. A husband and wife has $595,000.00. What would you do with $297,500.00 to $595,000.00 in your family? Pay off your mortgage - housing crisis solved. Repay college loans - what a great boost to new grads Put away money for college - it'll be there Save in a bank - create money to loan to entrepreneurs. Buy a new car - create jobs Invest in the market - capital drives growth Pay for your parent's medical insurance - health care improves Enable Deadbeat Dads to come clean - or else Remember this is for every adult U S Citizen 18+ including the folks who lost their jobs at Lehman Brothers and every other company that is cutting back. And of course, for those serving in our Armed Forces. If we're going to re-distribute wealth let's really do it...instead of trickling out a puny $1000.00 ( 'vote buy' ) economic incentive that is being proposed by one of our candidates for President. If we're going to do an $85 billion bailout, let's bail out every adult U S Citizen 18+! As for AIG - liquidate it. Sell off its parts. Let American General go back to being American General. Sell off the real estate. Let the private sector bargain hunters cut it up and clean it up. Here's my rationale. We deserve it and AIG doesn't. Sure it's a crazy idea that can 'never work.' But can you imagine the Coast-To-Coast Block Party! How do you spell Economic Boom? I trust my fellow adult Americans to know how to use the $85 Billion We Deserve It Dividend more than I do the geniuses at AIG or in Washington DC And remember, This plan only really costs $59.5 Billion because $25.5 Billion is returned instantly in taxes to Uncle Sam

I agree the housing did it, I would hope most do - except we always skim over WHY the housing did it. Not to mention the craziness of house prices after the turn of the millennium. "lending is the lifeblood of capitalism" - double edged sword, because it's also the demise of capitalism. Good guest, such a contrast in people lol. Oh and P.S. all of this is not a surprise - many people were explaining exactly what is going on now years ago.

Chuck... It looks like you're talking about the Community Reinvestment Act from 1977. It was revised in 1995 under Clinton, but it didn't contribute all that much to the current mess. What everyone blaming the CRA is ignoring is that it applied only to banks backed by the FDIC (banks with deposits from a community were forced to also give loans to the same community). Set aside whether or not that's a good idea for a moment, and look at how much it affected lending: 20% of subprimes were originated from CRA regulated banks as a result of the CRA. 50% of subprimes were originated from independant lenders who were NOT regulated by the CRA. the remaining 30% were originated by institutions which were only peripherally involved in CRA regulation. Furthermore, towards the end of the bubble non-CRA institutions were originating subprimes at TWICE the rate of CRA banks. This could have had an effect, but it's not the real root. It also completely ignores derivatives like credit-default swaps, which are one of the key building blocks of the wall-street mortgage-backed-securities pyramid scheme. P.S. Fannie and Freddie aren't the root cause either. The vast majority of the mortgages they bought and repackaged as mortgage-backed securities are conforming "prime" mortgages. At the close of 2007 Fannie owned about $2.5 Trillion in prime, $350 billion in Alt-A, and a only $54 billion in subprime.

Alexis, Why isn't there any fingerpointing at who caused this housing mess, the liberal democrats! With their typical welfare mentality, Barney Frank and Chris Dodd relentlessly pushed easy mortgages for those without means to service these debts! The republicans in their usual spineless mode, are afraid to step up and call things as they really are. What good is this bailout plan if nothing is included to jumpstart the economy? The republicans shpuld offer concrete plans to restart the economy and if the democrats don't like it, let them pass the bailout plan themselves. After all they have the votes and then let the voters decide who was right! Mike

ALEXIS, Do you have a public e-mail I can corespond with? Thanks, Mike

A SOLID ALTERNATIVE BAILOUT WALL STREET & END FORECLOSURES This letter to all politicians was generated by posting numerous ideas on the Web and carefully reading and analyzing all responses. Let it be known that some postings, I was accused of being crazy. This was great because it set boundaries to build a new idea. I now have an excellent understanding why 2/3 of the population is strongly opposed to the bailout being rammed thru congress. One interesting comment posted for the Democrats and Obama “Don’t be BUSHANIZED and let’s have real change”. “The moral responsibility of any government is to its citizens first period” I think we all can agree this severe down turn in the economy and financial nightmare we all face is a product of mortgage industry and foreclosures. This real estate down turn has affected everyone, those who were prudent and bought within their means and those who overspent. Most people purchase a home as their largest investment and it also becomes a vehicle for retirement. I ask those who were prudent, a year or two into this down turn, where’s your investment now? Hank Paulson indicated in June, 2007 foreclosures were a problem of speculators, crooks, and thieves and it would not affect the overall economy, what a complete misconstrued opinion. Most the foreclosures have been served on families and families with children period. The major problem was people buying more than they could afford, lenders not doing an effective qualification on the borrower, and exuberant mortgage conditions. The damage is done and lies in the past; we need a strong well designed game plan to end foreclosures now. Ben Bernanke in late 2007 indicated that lenders should rewrite mortgages and stem foreclosures to include lowering principles to fare market value. Great Idea why did it not happen? No laws or regulation and most businesses hate government intervention, no rewards, and or gains for lenders. Most lenders realized in June 2007 there was going to be a major problem. When major financial problems are left to happen by chance nothing happens. Our President Mr. Bush and advisor’s pushed the program “HOPE” as being the ultimate savior and 92% of home owners who were directly involved with the program found it to be a complete failure. The program had no authority and absolutely nothing in gratuities to offer lenders. Now all three individuals want to steal from Main Street and give to Wall Street 700 billion dollars, what’s-up with this. The most important part of any bill must be to stop foreclosures now and be fair equitable to all society including the financial institutions. The note holders and or deed holders would be offered the following conditions to improve profitability, increase credit flow, and end foreclosures. 1. Advice Lenders: take none performing loans(no money coming in) rewrite the loans at an interest rate of 5 to 6% for 30 to 40 years fixed and reduce the principle to fare market value determined by local real estate markets and or agents. A government appraisal group as check and balance, which would create badly needed jobs. 2. This program could be started slowly and styled like Hudzones, were the most depressed areas are serviced first. Lenders all have black list of zip codes, which would be very helpful. 3. The individual home owner would be obligated to give 75% of any profit to the government over the next ten years. This would eliminate speculators and encourage home improvement. 4. This would generate badly needed cash flow for all financial institutions. 5. There must be Rewards for lenders, allow them to borrow funds at a very low interest rate equal to the principle write-down on the original loan from the treasury department. This would be a magnificent approach, which would revitalize the overall economy 6. Within two months the credit crunch would be resolved, and the financial institutions would be profitable, just think lenders could borrow funds at an extremely low rate and lend out at a very profitable margin. 7. This would only help Main Street, no tax burden, put a bottom on real estate down turn, truly help end foreclosures, and do wonders for employment. 8. The government would see a positive profit and also benefit over the long term. I would strongly recommend a completely different approach to the financial crisis be considered and this could be a starting point. Thank You: Allen Morgan

Oh come on... SERIOUSLY... What did they think was going to happen?? I'm no genius, but I was smart enough to take all my money out of the market in June, 2007. What did YOU think was going to happen? How could anyone who actually pays attention not see it coming? I mean I understand why people who don't pay attention didn't see it coming, but why didn't more people who do pay attention?

I believe we are being rushed into a financial disaster. #1. Just because prices go down doesn't mean that they will stay down. They may stay down just like stocks do and we just have to swallow but more than likely they will go up. So the U.S. has to bail them out. #2. If they bought and got mortgages for something they can't afford why aren't the lenders renegotiating...i.e., amortizing for a longer period of time, etc. #3. What makes this deal smell..(a)Acorn (b) Why doesn't Obama get involved..I think because he doesn't want to be tainted. (c) Credit card companies can be forced to re-negotiate or something. Why are these presidents and CEO's of companies getting these millions of dollars? It is appearing that this isn't really going to be dealt with. #4. Why is this being signed off with details to be finished at a later time. I think this smells....We survived Jimmy Carter with intrest rates at 21% we can survive George Sorros and the Democratic Party. Jan

The lowering of credit standards for all consumers for all purposes as pushed by every administration since 1977 is the root cause. Liberals giving the poor their piece of the American Dream was not a noble goal, it was an utter travesty and led directly to this unholy mess. Now those of us who objected all along to no avail are paying through loss of value in our homes and our stock-invested retirement accounts even though we lived prudently and "according to the rules." Alexis, when do you think the packaged consumer credit card receivables are going to start imploding? What's going to happen to credit default swaps? I fear the worst is not yet over by a long shot. Thanks, Fox Business, for being there for us.

Mon. 9/29/08 Now that we have detailed information on the bailout legislation we can see the true intent of the Administration. Bail out our "buddies" !!! Where is there anything for Main Street ? No incentives for the public to purchase the excess inventory of homes. No real help for people with problem debts. I personally believe that the "toxic" paper will never be sold above the price paid simply that what fool would buy it ? Let's get real and come up with some decent ways of correcting the problems.

To Buddy Gilmore: I love the thought however the math is way off. $85B divided by 200M is only $425. To get the numbers you are talking about would take $85 Trillion dollars. Sorry. That just isn't happening.

awe What Alexis ? Did Jesus make an accounting error ? The WORST hell would be to realize at ones last moment, that life was integrated, and you lived it alone, and completely MISSED OUT on the experienced. Sure glad I'm not you.

Dear Buddy Gilmore: Nice work. Only problem is, your fifth grade math teacher might be a bit embarrassed. $85 billion divided by 200 million is $425.

this is driving me crazy. Why do people insist on believing everything they read that circulates the internet??? In response to Buddy Gilmore's post, $85 Billion / 200million is only $425!!! I have received this email over and over and can't believe people continue to forward it!

Wow, I am really surprised by how much the Fox News staff is pushing for this bill and surprised that is failed. If you read the bill it is really empty in terms of how this bail-out is supposed to work, and has a lot of loopholes. All of the house members spoke about how this was supposed to limit executive pay of any business who paricipated, but there were a lot of holes, have to be more than $300,000,000 of assets sold, new CEO's hired, excluded mergers, etc. Also, it does really clearly explain how this will open the credit markets, there is nothing in the bill which requires any business that participates to use the funds aquired toward additional/new credit. What's the deal with that? If the housing market is the problem, this bill will not resolve that problem, only put a bandaid on the problem for the major banks and investment banks. The problems with the house market will still exists, a lot of people in mortgages where the property values are less than the mortgages, regardless if the person is sub-prime or not. How is this bill addressing those problems. It doesn't. Let the market clean itself, perhaps with some limited gov temp support, but if these investments are so good at a reduced price, I'm sure there are other investors who would love to buy them. If not, perhaps it's not a good investment. Fix the bill with some actual meat, do not include distributing profits to orgs like Acorn, and have a plan that will impact everyone, not just a few.

glick your pushing this bailout is incredibly stupid, you dont give the Goverment this much power. your not entitled to credit! youre a socialist pig pig shame on you. go invest in north korea you a**hole

The people do understand the consequences of not passing the rescue package, but in their minds is payback time, baby! Why? You can have perfect payment record but, if you are max-out in your credit cards, the banks will increase your percentage rate. Why? Banks are not here to serve you, but to suck you dry and Washington know it but allows it because they are in bed with corporate America. It is we the People of United States not we the banks or we the government. They think that the government is all crooked and the idea of helping the group on the top hoping that it will trickledown is a very self serving idea. The people are the real force! Without the working every day American, the rest do not exist. So…every time you guys said that the people don’t understand, they think that is you that not want to understand because is not in your very best interest.

In reading Bussy Gilmores post on 9-27 I have to say I could use the 425k. There is one slight glitch though. 85 billion divided by 200 million is only 425 each.Darn

alexis, there are many reasons the bailout bill deserved to fail, but the following is what's bothered me most so far (because i do agree w/todd of minyanville about the need for "something") the disguised options for the sec of treasury to accept any asset for any price from anyone anytime he or she sees fit, is a total disgrace the media and lawmakers telling us the taxpayers that protections are now in place should not only be ashamed, but held accountable for mis-representation i am truly hopeful that fox news will make this a major "sticking" point to discuss and bring out yes, the need for solutions is evident; in that i agree with both Todd Harrison and John Mauldin, both people i respect a great deal but the need for a giveaway of our rights and hard earned monies is not i don't feel it will restore confidence or have more than a momentary effect, while more lastingly lining the pockets of the people who helped cause this problem with overleverage and over reaching greed this "crisis" has been evident to middle and lower class working people far longer than the sudden need expressed by the president and sec of treasury the difference is now people with higher incomes are feeling what already been on main street for a long time thank you for listening; i look fwd to hearing you, cavuto, charles and others on foxbusiness yea money for breakfast! (and lunch, dinner, and snacks :-)

I watched yesterday while you and all the other analyst info-babes on Fox Business channel were blaming this bailout bill failure on Republicans. 95 DEMOCRATS VOTED AGAINST THIS BILL ! 95 DEMOCRATS VOTED AGAINST THIS BILL ! 95 DEMOCRATS VOTED AGAINST THIS BILL ! Why don't you interview one of them for a change and see why they voted against it??? It looks more and more like this was a setup by Pelosi to mail the bill fail so Republicans could be blamed. I have read she did not even lobby any of the Democrats to vote for it. Come on, she and the great Barney Frank could not get 11 or so DEMOCRATS to vote for this???

I believe it was you I saw on the Huckabee show talking about a housing act you researched that encouraged this housing loan problem. I did not write down the name of the act and have not been able to identify it since then from the myriad of other housing acts. Could I get the name of that act from you?

I think it is astonishing that Obama continues to blame the economic crisis on Bush, McCain, and all republicans, apparently thinking democrats had nothing to do with it when they had EVERYTHING to do with it starting with Clinton policys. President Bush attempted to bring the issue to light and was dismissed. McCain co-sponsored legislation to regulate and look into the housing issues and Fannie Mae but the democratic controlled congress blew it out of the water with some claiming it was racist to question low income mortgage loans. As late as summer 2008 Barney Franks claims everything is fine at Fannie Mae! People need to open their eyes and look at the truth and the dispicable politics of the democrats and their congressional "leader" Nancy Pelosi who is obviously deluded as to who is responsible for this mess.