Loan, Default, Bailout, Repeat

From the Washington Post

Program Targets Consumer Spending, Mortgage Rates

The Federal Reserve and Treasury moved today to boost consumer spending and lower home mortgage rates, committing up to $800 billion to make it easier for households to borrow money for cars, tuition bills and new homes as part of a broad effort to rekindle economic growth. …..

the Fed said it would provide up to $200 billion to investors who put the money towards consumer loans in the form of credit cards, auto loans and student loans, as well as some forms of small business lending.

The one-year, non-recourse loans are available only for newly-issued consumer debt, and are meant to ensure that banks and other institutions remain willing to lend to creditworthy consumers……………
………………..
A crash in household spending is threatening to further depress a slowing economy

People are worried about being able to pay for what they already have and pay off their debt since they can see that prices are going up faster than their income and we are being told by all the “experts” that the future is even worse than the past or the present.

The “experts” solution: loan more money to banks on a 1 year loan under the condition that they loan it to people to buy stuff on their credit cards, a car or student loans.

Let’s make sense of this latest stab in the dark for the light switch by these “experts”.

1) Auto loans take 4 to 7 years to pay off
2) Student loans are made on future promises of starting to pay back in 4 to 7 years over a 10 to 20 year team.
3) Credit card debt is unsecured debt, “creditworthy consumers” are the one’s who have not ran up huge credit card debt, why would they start now?

How will the bank get the money to pay off the FED loan in 1 year when they will have very little if any of money coming is as payments over the next 12 months.
This is another dumb idea.

more Bailout Fallout – America is in deep trouble

Bush defends government rescue of Citigroup

Let’s see what the bailout has gotten America.

The financial commitments of the taxpayers:
Current lawful debt ceiling is $10 trillion (not counting money “borrowed” from social security), outside of the lawful debt the FED has committed to backing up to $7.4 trillion in additional securities.

The US GDP in 2007 was ~ $11.5 Trillion dollars.

Think about this, the US has committed to repay of 150% of one years GDP and these are our financial leaders who know how to make things better. No sane person would be allowed to carry 150% of a years salary as debt. Well I guess that is what got the banks into this mess, thinking there was sane people in control and not loading money to people which has no chance of being paid back.

So the great plan of Bernake, Paulson, Bush to be continued by the Obama administration as he states in his press conference.

President-elect Barack Obama pledged Monday to honor the commitments the outgoing Bush administration has made to rescue financial markets and urged the new, incoming Congress to pass a major stimulus package “right away” to restore growth and create jobs. ….
….
President-elect Barack Obama tapped New York Federal Reserve President Tim Geithner as his treasury secretary on Monday
….

Tim Geithner is part of the FED which has committed the US taxpayer to bail out everyone under the sun that needs money due to their bad business practices and stupidity.

The Obama solution to the US financial problems

He declined to say how big a spending package he wants to revive the economy, but he said, “It’s going to be costly.” Some Democratic lawmakers are speculating about a two-year measure as large as $700 billion.

Just another 3/4 trillion dollars. I guess when you are so far in debt that there is no hope to ever pay off your bills, keep borrowing (printing money that will turn out to be worthless) as long as people are stupid enough to loan it to you.

Currently
17.4 trillion dollars in commitments, 300 million people = $58000 per person.
Average US salary in 2008 = $44900
Every US person that is alive owes more money that they earn by 30% of a years salary.

If Obama and the democrats have a $700 billion stimulus, the per person average goes to $60333. I am sure everyone salary will go up enough to cover this increase.

One of the best lines I have read to date is from (Bloomberg news)

Requiring the Fed to disclose loan recipients might set off panic, said David Tobin, principal of New York-based loan-sale consultants and investment bank Mission Capital Advisors LLC.
‘Mark to Market’
“If you mark to market today, the banking system is bankrupt,” Tobin said. “So what do you do? You try to keep it going as best you can.”

Translation, the America People are to stupid to be told the truth since we (government and bankers that caused the problem) know better than them what to do with their money.

The American people will be paying for this stupid spending spree for a long time or the country will go so far down that there will be no America left.

Someone in government stop the insanity,one can’t spend or borrow your way out of debt.