Biden becoming a socialist like Trump trying to cancel student debt

[LarryStation]

The only reason I am ok with the loan forgiveness is because every time businesses and banks do this we bail them out. Although I really wish it was part of legislation to fix the problem with college costs, but a bill like that is basically impossible these days.

I was for the bank bailouts for two reasons:

1) Mark-to-Market Accounting rules
2) Taxpayers profited from those loans

Regarding PPP Loans and all the other Pandemic BS, I believe the government caused the recession with an unnecessary shutdown of the economy. private businesses should have stayed open and let the market determine the rest.

 

[Tfxchawk]

I believe that you believe you are correct regarding increased regulation.

You are correct regarding the bundling of bad mortgages that were rubber stamped by the rating agencies as AAA being one of the many issues uncovered during the GFC. It is not what led to why bank bailouts were needed.

It is exactly why bank bailouts were needed. Securitization of cash flows where they judges the risk incorrectly to price the securities higher than junk. Everyone piled into it and lending standards went away because the mortgages could be sold off their own books. Hairdressers getting balloon mortgages to buy 400k homes all so a banker could bundle it. Let me ask you since you are playing coy on seeking information. Who got bailed out on that financial crisis? The hairdresser or the people at the top that decided to ignore risk to make money? Which person lost their house?

 

[LarryStation]

It is exactly why bank bailouts were needed. Securitization of cash flows where they judges the risk incorrectly to price the securities higher than junk. Everyone piled into it and lending standards went away because the mortgages could be sold off their own books. Hairdressers getting balloon mortgages to buy 400k homes all so a banker could bundle it. Let me ask you since you are playing coy on seeking information. Who got bailed out on that financial crisis? The hairdresser or the people at the top that decided to ignore risk to make money? Which person lost their house?

It may come across as coy. I am wanting to understand how you got to your views. I may be missing something when I have formed my own opinions. I appreciate you being constructive and taking time to support your beliefs.

Here is my understanding of what caused the need for bailouts and why the bailouts are different than loan forgiveness.

1) Mark-to Mark Accounting

If you study economic history the Mark-to-Mark accounting standards that went into place 11/15/2007 forced banks to mark performing loans at pennies to the dollar. This led to bank balance sheets appearing insolvent.

Big Banks were forced to take TARP Loans from the Government and investors (taxpayers) received all of that money back at a rate of 5% interest. This helped stabilize the banks and the markets; temporarily. Within weeks, bank stocks and the equity markets began falling more fiercely.

On March 9th, congress repealed mark-to-market accounting. Banks stocks and equity markets took off. This is not a coincidence.

It is the mark-to-market accounting rule put into place through well intended, but bad regulation that brought the entire economy to its knees. If not for this poorly reasoned regulation, free markets would have prevailed.

2) Expansion of Mortgage Credit

Under the Clinton Administration, Fannie and Freddie were required to make sure 30% of their mortgage purchases Affordable Housing Loans, which put pressure on banks to make loans to unqualified borrowers.

This was well-intended, like most regulation, but it led to AAA rated Fannie and Freddie to purchase sub-prime loans. This gave way to greedy speculators, greedy banks, and greedy rating agencies to borrow and lend irresponsibly.

Even with the Sub-prime crisis, banks and capital markets would have been able to manage their way through this crisis if it not for Mark-to-Market accounting rules.

 

[LarryStation]

AIG. Kinda a big deal when they caused our entire economy to collapse but were too big to fail. Did you need other examples? More recent ones. Like through the pandemic for example?

I may be wrong, but I believe AIG paid back all of their loan and taxpayers made a great profit in the process.

I know AIG allowed a trader to get out of control, because they didn't understand how he was making so much money trading their own capital. However, I don't believe AIG losing their own capital would be the reason the entire economy was on the brink. I should probably change my belief to "I don't know if a rogue trader for one company could bring the entire economy to the brink."

 

[LarryStation]

It is exactly why bank bailouts were needed. Securitization of cash flows where they judges the risk incorrectly to price the securities higher than junk. Everyone piled into it and lending standards went away because the mortgages could be sold off their own books. Hairdressers getting balloon mortgages to buy 400k homes all so a banker could bundle it. Let me ask you since you are playing coy on seeking information. Who got bailed out on that financial crisis? The hairdresser or the people at the top that decided to ignore risk to make money? Which person lost their house?

To answer your questions to me more directly... I believe there are a lot of us who are responsible with our finances paid the price for many who were not. You have to look at how we got to a point where consumers who should not have been given a loan were given a loan. This is what set the stage for the mortgage crisis. Mark-to-Market accounting is what led to the GFC.

 

[West Dundee Hawkeye]

How long have you been cash? What do you anticipate will be the bottom?

I have been 100% cash since January. I anticipate the bottom no sooner than October. Historically, the thinking is "sell in May and go away" and the bottom is on average October 8.

 

[West Dundee Hawkeye]

I may be wrong, but I believe AIG paid back all of their loan and taxpayers made a great profit in the process.

I know AIG allowed a trader to get out of control, because they didn't understand how he was making so much money trading their own capital. However, I don't believe AIG losing their own capital would be the reason the entire economy was on the brink. I should probably change my belief to "I don't know if a rogue trader for one company could bring the entire economy to the brink."

Capitalism can lead to excesses and the beauty of a downturn is it hammers the over leveraged, which then in turn brings down prices and which then it turn makes the US more competitive in the global marketplace.

We have all become afraid of capitalism. Prior to WW2, deflation was a common as inflation in peace time. This kept prices low and the US competitive. Between TARP and QE, Bernanke was trying to provide liquidity to create the "wealth effect". This was trickle down economics on steroids. Liberals have a hard time with this because a about $2 Trillion of QE occurred while Obama was President.

 

[West Dundee Hawkeye]

How did companies cause our economy to almost collapse? Why did private companies receive loans during the pandemic? I need help understanding the thinking behind these beliefs.

I understand why some people believe corporate tax cuts are bad, but I believe they are good.

It may come across as coy. I am wanting to understand how you got to your views. I may be missing something when I have formed my own opinions. I appreciate you being constructive and taking time to support your beliefs.

Here is my understanding of what caused the need for bailouts and why the bailouts are different than loan forgiveness.

1) Mark-to Mark Accounting

If you study economic history the Mark-to-Mark accounting standards that went into place 11/15/2007 forced banks to mark performing loans at pennies to the dollar. This led to bank balance sheets appearing insolvent.

Big Banks were forced to take TARP Loans from the Government and investors (taxpayers) received all of that money back at a rate of 5% interest. This helped stabilize the banks and the markets; temporarily. Within weeks, bank stocks and the equity markets began falling more fiercely.

On March 9th, congress repealed mark-to-market accounting. Banks stocks and equity markets took off. This is not a coincidence.

It is the mark-to-market accounting rule put into place through well intended, but bad regulation that brought the entire economy to its knees. If not for this poorly reasoned regulation, free markets would have prevailed.

2) Expansion of Mortgage Credit

Under the Clinton Administration, Fannie and Freddie were required to make sure 30% of their mortgage purchases Affordable Housing Loans, which put pressure on banks to make loans to unqualified borrowers.

This was well-intended, like most regulation, but it led to AAA rated Fannie and Freddie to purchase sub-prime loans. This gave way to greedy speculators, greedy banks, and greedy rating agencies to borrow and lend irresponsibly.

Even with the Sub-prime crisis, banks and capital markets would have been able to manage their way through this crisis if it not for Mark-to-Market accounting rules.

I had forgot about Fannie and Freddie. More gov intrusion in the marketplace.

IMO, the gov should not be guaranteeing any mortgages except for Military Vets. This will drive up the cost of mortgages, which will bring down the price of houses.

Young kids today, can't afford to buy home because we keep pushing up the price. Trust the markets.

Trump lowered Corp Tax Rates in a Bill that was not revenue neutral so as a result it added to the budget deficit. As I recall he lowered taxes on the rich as well.

The working class has been destroyed in the US by reckless fiscal policy.

Savings-Investment=Exports-Imports

The best way to increase exports is to increase savings and the best way to do that is to balance the budget and pay down the national debt.

 

[alaskanseminole]

People who don't feel badly for all these students who were forced at gun point to accrue college debt are heartless!!

Seriously, though, why would we focus on the result not the cause? Fix the system, don't put the country in further debt. College is seriously over priced.

 

[Joes Place]

Thune, GOP senators push bill to ban Biden from canceling student debt, as president mulls 'executive action'

Senate Republicans are signaling that they will dig in their heels on any effort by President Biden to cancel federal student loan debt.

www.foxnews.com

Actually, folks should read the fine print on this one (if the last info I'd read is accurate).

Student loans are ONLY being "forgiven" for the accrued interest - the only forgiveness is for students who have already paid off the principal on their debt.
And that's probably not a bad thing, as many have high enough interest rates that they're paying way more than they should be. In fact, interest on student loan debt should be "secured" debt, not "unsecured" so that students can get ~10 year mortgage rates on their loans.

With the balances on those loans being underwritten by the institutions they attended, so that they can be "secured" debt. That change would make school a lot more affordable for many, and require institutions to graduate students capable of paying off the loans they take out, or the school has to pay them, itself. This would formally tie schools to the product they are providing, and give them an incentive to lower costs, or require them to underwrite larger student loans.

 

[TC Nole OX]

 

[Formerly Rockymtnole]

Poll numbers must be dismal.

 

[West Dundee Hawkeye]

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I thought all money Bills must start in the House. I did not think Executive Orders could do this. I don't think this is legal.

 

[Joes Place]

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They should be reforming the system; subsidizing lower interest rates for loans.

Not "loan forgiveness". Student loan rates are very high, as unsecured loans. Change the laws so that they are "secured" against the school's endowments and then students can get cheap "mortgage-like" rates. Have the government pay to knock points off so they are even lower interest if needed.

When schools are on the hook for loan defaults, they will be motivated to put out better education "product" and will understand that higher tuition means higher risk for their endowments.