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• akabagel - Mar 27 2008 | government, congress, economy, dodd frank bill, federal reserve, recession, housing market

  Has anyone been reading about the Dodd-Frank bill? It sounds like a really bad idea.

  Quoted: Valliere said that the idea gaining the most support is a plan from Senate Banking Chairman Chris Dodd and House Financial Services Chairman Barney Frank. Both are Democrats.

  Quoted: The proposal, likely to be introduced soon after Congress returns from the Easter recess next week, would have the Federal Housing Administration guarantee hundreds of billions of new, lower-cost loans to troubled homeowners. Many borrowers would see their total principal on these new mortgages reduced under this program.

  Quoted: "I think there's a growing populist feeling that if you're going to bail out Bear Stearns you better bail out individuals," said Greg Valliere, political economist with the Stanford Group, a Washington think tank.

  And I don't understand why people think the Feds loan to JP Morgan to buy Bear Stearns is a 'bailout'. Why do people think this?

  • srainier - Mar 28 2008
    

    JP Morgan wouldn't have bought Bear Stearns had the Fed not provided insurance for the potential $30 Bil in losses. The deal has since been restructured so that JP Morgan has to take on the first billion in losses, then the Fed will take on everything after that, but it's the same principle. Bear Stearns likely would have filed for bankruptcy had the Fed not assisted in the purchase. That's a bailout.

  • akabagel - Mar 31 2008
    

    Yeah, good point. I guess in essesnce, the fed is doing for JP Morgan and Bear Stearns what it would be doing for Banks and individuals under the Dodd-Frank bill, and that is backing a loan to reduce risk.

    I guess they would both be 'bailouts'. The difference to me though is I easily see how allowing a purchase of Bear Stearns (vs. bankruptcy) is good for everyone by preventing further market instability, however I don't see how helping a bunch of individuals who are underwater (and in many cases the stupidest acting individuals) helps everyone. Especially when there are private charities who are already helping in this area (hope now).

  • srainier - Mar 31 2008
    

    I don't like the idea of bailing out firms or citizens. Unfortunately, it's probably a better option than letting a firm like Bear Stearns fail (which, conventional wisdom says, could precipitate more firms failing. I don't know enough to say one way or another, but it seems to be a common fear).

    I'd prefer that rules and regulations be put in place to guard against reaching these current conditions, but that doesn't do us a whole lot of good for the problem of the moment. In a way it's like the illegal immigration problem. Yes, we need tighter borders (and better enforcement), but that does nothing to deal with the 12-20 million illegals here now. Furthermore, we can't just deport them because so many labor-intensive industries (California agriculture) are dependent on the (plentiful) supply of low-cost labor. Yes, they're all criminals in that they're here illegally, but can we throw them all in jail or send them all home? It would likely cost us more in the long run. It's all an unfortunate situation that was reached by not dealing with the problem earlier.

  • akabagel - Mar 31 2008
    

    Well said. I think the Bear Sterns thing on the whole was probably necessary, though I wish they would have backed less then $29 of the $30 billion.

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