Yesterday, I wrote a blog titled Will the housing rescue Bill work ?
Today, I woke up to the front page of an associate press story giving me (indirectly) their opinion where they discuss the Uses for $700 billion bailout money ever shifting
- First, the $700 billion rescue for the economy was about buying devalued mortgage assets to unclog frozen credit markets.
- Then it was about using $250 billion of it to buy stakes in banks.
The idea is simple. To offer banks cheap (Free) money so that banks would use the money to start making loans again.
But reports surfaced that bankers might instead use the money to
- buy other banks,
- pay dividends,
- give employees a raise
- executives a bonus,
- or just sit on it.
Just sit on it ????
Sen. Charles Schumer, D-N.Y whose constituents include Wall Street bankers, said he also fears that they might stuff the money "under the proverbial mattress" rather than make loans.
There is no language in the legislation that mandates that these banks lend any of the money that they are getting from the (Taxpayers) government.
It appears that it makes more sense to them to buy other banks for pennies on the dollar or just sit on it instead of lending it to distressed consumers.
Treasury Secretary Henry Paulson said the "The driver is to have our healthy banks be well-capitalized so that they can play the role they need to play for our country right now."
However, it does not appear now, after the money has started flowing, that the banks are going to take their new found wealth to lend to consumers.
AS Chris Dodd said, "The key to our nation's economic recovery is the recovery of the housing market," Dodd said. "And the key to recovery of the housing market is reducing foreclosures."
If consumers cannot refinance, modify loans or buy homes, we will not see price stabilization or a reduction in foreclosures.
I urge you to email your Congressman and tell them that the language of this bill needs to be amended to make sure banks can use that money to lend or not at all.
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Copyright © James Wexler, *Will the Housing Rescue Bill and Bank Bailout work ? *
Contact James Wexler (480) 221-8080 for all your Phoenix | Scottsdale Real Estate needs
james - bottom line, the banks have the money. they are saying that they dont want to lend it. That it can be used fore more lucrative things.
If they are not foreced to lend, then we will not see anything but a continued decline in housing as no one can buy unless you have 25% down (jumbo loans) and full documentation (which leaves out credit worthy buyers who may be business owners)
Jason - to your mouth to the congressional leaders ears.
This bailout is being funded by taxpayers for supporting housing market through strengthening banks so they can lend.
If the banks will not lend, then give us our money back
I trust the government is doing everything in their power to stimulate the economy and boost consumer confidence.
However, I am not happy about the fact that we are lending money to bank and they are not easing credit. The only one who benefits is the shareholders of these banks.
Barbara - thank you for the comments.
I was surprised that there was no legislation mandating the use of lending or at least no allowing it to be used at the banks discretion for other purposes.
Paying dividends is unacceptabe.!
I hate to be negative, however, I am also concerned that the so-called bank rescue plan has done nothing but rescue the banks, and is not having the desired affect of helping borrowers to stimulate the economy
Scott - we need more money for borrowers, we dont even need lower interest rates, there is just no money as you probably know even better than I do as a lender.
I really beleive that If programs do not come back and soon , we have a long road ahead for the recession.
I know a lot of people called this socialized banking.
However, it appears now that this is the government taking from the poor (taxpayers) and giving to the rich (the banks)
Creative - interesting way to look at it. the people are bailing out the rich.
The banks made the mistakes, shareholders made mistakes by investing and now the tax payers are bailing them out
the slap in the face is that they are not lending the money back to those who lend to them.