Government can MAKE money with the bailout

[JimBob2232]

Here me out here...

 

if the government plays its cards right, there is a strong possibility the government can actually MAKE money with the bailout. (not that the government should be in the business of making money...but I digress)

 

The notes the government is going to buy are headed for default. What they hopefully will not do is pay dollar for dollar for the notes. i.e. if the note is worth 100k at 7% interest, hopefully the government only buys that note for 50k or so.

 

The government buys all the notes secured by the mortgage, and then re-negotiates the mortgage with the consumer. They defaulting homeowner now has a lower interest rate which is economically feasible for them. The government can then re-sell this security back to the private sector for MORE than the 50k it bought it for.

 

The homeowner however would not get a free-ride. As part of this agreement, they must pay the government back the complete cost of the reduced interest rate upon sale or transfer of the property.

 

The lender buying the debt in the first place would not get a free ride, as they will still take a 50% loss on the security (which is better than 100% loss).

 

Thoughts? I see potential here to both help out this economy, AND help out the revenue stream a bit. One might ask "isnt this the role of the private sector and not the government?" I would tend to agree, but we need a system set up QUICKLY, and as sad as it is to say it, the government is the fastest way to get this rolling.

[meazza]

Here me out here...

 

if the government plays its cards right, there is a strong possibility the government can actually MAKE money with the bailout. (not that the government should be in the business of making money...but I digress)

 

The notes the government is going to buy are headed for default. What they hopefully will not do is pay dollar for dollar for the notes. i.e. if the note is worth 100k at 7% interest, hopefully the government only buys that note for 50k or so.

 

The government buys all the notes secured by the mortgage, and then re-negotiates the mortgage with the consumer. They defaulting homeowner now has a lower interest rate which is economically feasible for them. The government can then re-sell this security back to the private sector for MORE than the 50k it bought it for.

 

The homeowner however would not get a free-ride. As part of this agreement, they must pay the government back the complete cost of the reduced interest rate upon sale or transfer of the property.

 

The lender buying the debt in the first place would not get a free ride, as they will still take a 50% loss on the security (which is better than 100% loss).

 

Thoughts? I see potential here to both help out this economy, AND help out the revenue stream a bit. One might ask "isnt this the role of the private sector and not the government?" I would tend to agree, but we need a system set up QUICKLY, and as sad as it is to say it, the government is the fastest way to get this rolling.

 

I believe DC Tom and bills_fan already said this in a few other threads.

[JimBob2232]

I believe DC Tom and bills_fan already said this in a few other threads.

 

hm...good minds think alike apparently! i havent read ppp in a while....hopefully folks in Washington are thinking this as well.

[/dev/null]

Thoughts? I see potential here to both help out this economy, AND help out the revenue stream a bit.

 

My biggest concern with the "revenue stream" idea is that the Congress Critters will find some way to spend it, the same way that state legislatures found a way to spend the "revenue stream" generated by the tobacco lawsuits of the 90s

 

The stream will eventually run dry but we'll still be footing the bill for some new programs

[DC Tom]

hm...good minds think alike apparently! i havent read ppp in a while....hopefully folks in Washington are thinking this as well.

 

Apparently.

 

Aren't you glad you blindly lucked in to agreeing with us?

[TPS]

My biggest concern with the "revenue stream" idea is that the Congress Critters will find some way to spend it, the same way that state legislatures found a way to spend the "revenue stream" generated by the tobacco lawsuits of the 90s

 

The stream will eventually run dry but we'll still be footing the bill for some new programs

Didn't you get your refund from the last time govt did this? Isn't that what happened when "the govt made money" on the last bail out?

[Simon]

I have two problems with your post:

 

#1

if the government plays its cards right

 

#2

the government is the fastest way

[DC Tom]

I have two problems with your post:

 

#1

if the government plays its cards right

 

#2

the government is the fastest way

 

#2 is probably right; no one else can come up with hundreds of billions to cover these bonds right now.

 

#1...I've been caveating with that all along. The government could turn a profit with a smart, well-managed program. I'm more likely to make money betting on a !@#$ed-up, grab-asstic government program being created, however. It'd make sense to give this program to Treasury, for example...so I bet they give it to DHS or something.

[GG]

#2 is probably right; no one else can come up with hundreds of billions to cover these bonds right now.

 

#1...I've been caveating with that all along. The government could turn a profit with a smart, well-managed program. I'm more likely to make money betting on a !@#$ed-up, grab-asstic government program being created, however. It'd make sense to give this program to Treasury, for example...so I bet they give it to DHS or something.

 

I'm guessing they'll create a new wing at Treasury and administer it outside the usual staffers, kind of like RTC with Wall Street veterans. (I can see the popularity of that proposal)

[DC Tom]

I'm guessing they'll create a new wing at Treasury and administer it outside the usual staffers, kind of like RTC with Wall Street veterans. (I can see the popularity of that proposal)

 

Democratic Congress won't go for it, the argument being a fox-guarding-the-henhouse type of argument. "We can't let Wall Street veterans run this, they created it! We can't have corprate welfare recipients administering the corporate welfare program!"

 

Running it with people who actually know the business under a department that knows the business makes just too much sense to be done.

[GG]

Democratic Congress won't go for it, the argument being a fox-guarding-the-henhouse type of argument. "We can't let Wall Street veterans run this, they created it! We can't have corprate welfare recipients administering the corporate welfare program!"

 

Running it with people who actually know the business under a department that knows the business makes just too much sense to be done.

 

There's only one man who can be trusted with that job. Bob Rubin.

[Simon]

There's only one man who can be trusted with that job. Bob Rubin.

Ladies and Gentlemen, Isaac Newton has just left the building.....

[blzrul]

It could, but any individual who really and truly thinks government will return any largesse to the taxpayer is a nitwit. We gots us a war, social security and all kinds of other sh-- to pay for.

[Booster4324]

It could, but any individual who really and truly thinks government will return any largesse to the taxpayer is a nitwit. We gots us a war, social security and all kinds of other sh-- to pay for.

 

Says the hardcore liberal.

[blzrul]

Says the hardcore liberal.

Your insistence upon labeling people just makes you look stupid. I've never said "put your trust in the government". What I've said is, "if you have to have government you ought to be able to trust it to do the right thing for the people it works for".

 

Not the same thing at all but if the label makes you happy, along with the personal attack, go for it.

[Booster4324]

Your insistence upon labeling people just makes you look stupid. I've never said "put your trust in the government". What I've said is, "if you have to have government you ought to be able to trust it to do the right thing for the people it works for".

 

Not the same thing at all but if the label makes you happy, along with the personal attack, go for it.

 

Your insistence on backing the Dems no matter what, is far more indicative. Seen plenty of personal attacks from you, and lord knows I am guilty, you punk ass liberal B word (note that I referred to you as a woman).

[DC Tom]

Your insistence upon labeling people just makes you look stupid. I've never said "put your trust in the government". What I've said is, "if you have to have government you ought to be able to trust it to do the right thing for the people it works for".

 

Then you're a bigger idiot than I ever gave you credit for. Bureaucracy works for itself, no one else.

[John Adams]

#2 is probably right; no one else can come up with hundreds of billions to cover these bonds right now.

 

#1...I've been caveating with that all along. The government could turn a profit with a smart, well-managed program. I'm more likely to make money betting on a !@#$ed-up, grab-asstic government program being created, however. It'd make sense to give this program to Treasury, for example...so I bet they give it to DHS or something.

 

 

The more important and likely point is that the government won't MAKE money, but the government won't lose 700 billion either. Once it spins off the loans, it will get paid for them. How much it loses on this deal remains to be seen but it won't be 700 billion unless the underlying properties go to zero value. If that happens, Dwight Drane will be here to tell us all he told us so.

[molson_golden2002]

Maybe the bailout won't work at all and the problem will get progressivly worse. Do you own a gun and have plenty of ammunition, have canned food stored up and fresh water?