When FDR got the government to stick it’s nose in a recession, we got the Great Depression, and only got out of it because of WW II. I see the same thing happening, thanks to the less-than-conservative,politicing George Bush and the rest of the beltway elitist socialists. If my taxes are going to be wasted this way and if the government buys at a low price, then I expect a fire sale for investors so that profits can be made and the money made back. This should only be a one-time-only deal, and those(democrats)responsible for this need to be taken to task.

Caitlyn you have an amazing knack for only reading the cover of the book. To state that small investors were the reason for the run-up in RE values is not just oversimplification but really very ignorant. On the one hand small investors like my neighbor who bought three over valued properties as investments then ended up losing them to forclosure were certainly part of the problem but the forces behind her decisions were the true culprit. It was absolutely ridiculous that a single mother and small business owner of modest means was able to get damn near a million bucks in loans on houses that needed work. It was also criminal in my opinion how she was essentially tricked into believing that everything would work out fine once she rented the properties to cover the mortgages which were all arms that reset in 2 years . She believed like many new homeowners that prices would continue to go up indefinately and she would be able to refinance because thats what her broker told her. There were other factors involved but the bottom line is that if it wasnt for the unscrupulous lending practices that became the norm a few years ago she would have been turned away at the bank because she just couldnt afford it. Lending to everybody and anybody that could sign their name was what caused the run-up not small investors .

I think that Bryan and his readers all should be commended for insightful coverage and discourse of this lamentable situation.
Bravo/a.

While I too am fundamentally opposed to the bailouts, (many of which, if we’re totally honest, would more aptly be called “takeovers,”" it doesn’t seem to me that in the eleventh hour of the crisis, there was much alternative.

While the earlier post about FDR’s approach to economic crisis in his presidency was insightful, Hoover’s initial, laissez-faire approach to the crash is widely thought to have made a bad situation worse — and not just for the bankers and speculators — but for the entire nation.

At the time, FDR was called a socialist for his reforms, but in retrospect, do we regard him as such? Doesn’t the socialist model require redistribution of profits as well as risks and losses? Does anyone see the taxpayers — or the masses — receiving any sort of redistribution of wealth as a result of this crisis? In terms of historic paradigms, this falls closer to the definition of fascism to me.

Given our protections under the U.S. Constitution, I lack confidence that some of these seemingly arbitrary, last-ditch efforts on the part of the Fed to stem Wall Street’s bleeding are legal because they appear to exceed the Fed’s Constitutional authority, however “necessary.”

Where was the Fed before last week? Sleeping off a regulatory coma? How can we expect meaningful reforms when the rules and regs we have, however antiquated they may be, aren’t enforced?

By taking over these businesses, the Fed is becoming a player in fields it knows nothing about. Once the Fed warehouses all the bad paper, its attempts to sell off trillions in debt likely will be so mired in red tape that it’ll take a financial eternity to get it all sorted out. And what will happen to the dollar in the meantime? As the dollar declines, consumer prices rise and the job markets shrink, it seems likely that foreclosures could continue at a disruptive pace.

I’ve followed many of the recent developments in state legislative policy that are designed to curtail the businesses of real estate investors. Some of the changes are reasonable, but others seem to target us as scapegoats for the crisis. In the wake of all this economic hardship, state and federal legislators, who clearly lack a solid understanding of how this business works, are likely to proffer even more restrictions at a time when the nation and the economy really need us most to expedite the recovery process.

At the same time, who’s going to get the leading role in squeezing some liquid out of this financial dung heap?

No one can yet say for certain. But on March 24, I blogged about an interesting development we’ve heard little about since the initial press release announcement. Here is a :

“Money management firm BlackRock Inc., and hedge fund Highfields Capital Management are backing a new firm that will buy up distressed mortgages, betting that investors are ready to snap up bargains in the beaten down sector.

“The new company, Private National Mortgage Acceptance Company, which will be known as PennyMac, plans to raise capital from private investors and will help borrowers restructure loans to avoid foreclosure. Penny Mac will star Stanford Kurland, who spent 27 years at mortgage giant Countrywide Financial Corp., as its chief executive officer and Morgan Stanley global residential mortgage veteran David Spector as its chief investment officer.”

The next update on Penny Mac came from Housing wire and a blurb in the Wall Street Journal I covered on July 9:

“Penny Mac currently has $2 billion in its “war chest” to buy discounted, distressed mortgages, and will fund its own in-house servicing platform. in May, Penny Mac backer Black Rock reportedly negotiated a deal to buy $15 billion in subprime mortgage exposure from UBS, the Swiss bank that has been floundering since its boom-time tango with Countrywide Financial and other problematic U.S. lenders.”

It’ll be interesting, to see what role Penny Mac plays in the migation of losses its leaders worked so hard to generate before either loosing their jobs or moving on their own volition to even greener pastures.

As FDR said, “All we have to fear is fear itself.” Indeed.