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Posted 2008-10-01, 10:29 AM
in reply to Medieval Bob's post starting "From the Chatbox:
10:25] Medieval..."
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From the Chatbox:
10:25] Medieval Bob: The whole reason for this mess is that the housing market didn't increase in value like it historically has. Banks gave loans to people intending to only pay interest and then sell the houses for a profit. The property values went down, and the investors bailed on their mortgages. That left banks stuck with properties that they paid X for and now are only worth 1/2 X. Banks didn't want to sell their houses at 1/2 X because they expected to make 3X through interest payments.
[10:28] Medieval Bob: This bailout will buy the houses (and other bad investments) from banks at say... .8X, so that housing market will stay where it is, and banks can get some of their money back. Then America will expect the housing market to continue on its merry way doubling every 7 years. The problem is that the market has become overinflated and WON'T double again that quickly. It'll try to drop again, so banks will AGAIN be stuck with property worth 1/2 X and will need a bailout. In the end, we'll all be
[10:29] Medieval Bob: paying more for houses and more for taxes to pretend that our houses are worth more than they are. If we DON'T do the bailout, the housing market will crash, lots of people will be laid off, and bigger banks will buy smaller banks. A year will go buy, and people will have jobs again, banks will split, and the housing market will resume doubling like it's supposed to.
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That is all just speculation.
 
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