The Coalition of the Swilling

(insert long string of Yosemite-Sam-like expletives here).

This is why we need a line-item veto. And this is why these people need to be voted out of office.

"Not less than 20 percent of any profit realized on the sale of each troubled asset..."

What about the troubled assets sold at a loss? This sounds like they get to re-direct 20 percent of any profits but don't have to net out the losses. I guess we the taxpayers get 100 percent of those.

"I guess we the taxpayers get 100 percent of those."

I'm shocked you would make such a statement!

The guy didn't get enough of Fannie's and Freddie's money already? I really hope that this kills the bailout plan. A pox on them.

A line item veto doesn't work when you have a president who has never met a federal power grab that he didn't lust for.

But I'm not catching the connection to ACORN et al.

That would be a "Not just no, FLOCK NO!" you hear erupting from casa de major dad.

skyler: look here for some info on how these funds get to these groups.

I'm praying for a case of gridlock so tight that it kills any notion of a bailout.

I'm also praying for all members of Congress to become permanently stuck in time and space.

Lenders created loan programs knowing that the people who bought them could never afford to pay them back.

Don, lenders do not have any actual interest in writing bad loans: in fact, exactly the opposite. They have an interest in originating them only if they can sell the promissory notes ASAP and not be left holding the bag when the borrower defaults. The reason subprime loans ever got written in the first place goes back to the Community Reinvestment Act: bankers HAD to write these loans for fear of discrimination lawsuits and bad PR about "redlining."

The people with an actual financial incentive to see bad loans written aren't the lenders: they're the realtors and the mortgage brokers, because once the closing's done, they take their commissions and walk away with nothing left to worry about. They're the ones who talked the commercial banks into making these loans, backed up with the argument that Fannie and Freddie would guarantee them so there was no downside.

Well, that's true, don. But the key reason is why? That certainly makes no business sense, does it? I mean, the last thing in the world the mortgage company wants is your house. Houses are a pain in the ass and cost money to maintain and are not as 'liquid' an asset as a financial company wants. No, they want the easy simple route of the checks coming in. Clean and sweet.

So why did they make the loans? Because while one of the things companies like most of all is a good profit, the thing that companies, and frankly all of us, really like is a guaranteed profit, and that's what this was. I'll explain in a second, but first, here's the general theory: In spite of what you hear coming out of Washington, this crisis is not a "Failure of a Free market" but in fact was created by Government regulation and interference in the free market.

How so? Well, I will give them the benefit of the doubt and say that the road to our hell was paved with good intentions. I think they meant well in effectively forcing/encouraging Fannie Mac and Mae to lower their standards for mortgages they'd buy. And when the regular mortgage companies saw that they could offload junk to them, they got greedy and lowered their standards, partly out of pure greed (because they knew they could offload the crappy loans to the gov't) and partly out of fear that if they didn't make these loans they would be tarred with the racist brush. So, since they were no longer planning on holding the loans themselves but rather laying them off as soon as possible they decided to offer much more credit than they normally would, as their income would not come from the monthly mortgage payments but rather the fees and points assessed when the mortgage was first issued; so the larger amount they 'lent' the higher their fees.

The third leg of this blame falls squarely on middle class America. People who had never earned enough to qualify for a traditional mortgage suddenly were being offered money, and lots of it. And when they saw that the lenders were not being so careful in vetting the applications as they had in the past people took advantage. They put down extremely rosy projections of their future earnings, they outright lied about their present and past earnings, and they dove headlong through the opening that Congress had opened and they converted the real estate market into a speculative venture, buying houses not as long-term places to live but rather short term investments that they would flip in a few years for a hefty profit. And the banks and the government actively encouraged it. No money down mortgages. Interest only mortgages. Insane from a rational, fiscally prudent point of view but perfectly reasonable in the system that had been set up.

So there's plenty of blame to go around, and the lenders certainly deserve a fair share of it, but it all stems from poorly thought out regulations in Congress, it seems to me. If the lender's profit depended on the performance of the borrower, as would be the case in a free market, I can assure you we would not be where we are now.