Quote:
Originally Posted by DaemonSeid
here is the quote:
"But you know, one of the real catalysts, really the match that lit this fire was Fannie Mae and Freddie Mac. I'll bet you, you may never even have heard of them before this crisis."
and from the way it appeared...he was addressing HIM when he said it....
again...it looked all kinds of wrong and condescending.
and can someone explain to me McCain wanting to plan another buy out?
'I would order the secretary of the treasury to immediately buy up the bad home loan mortgages in America and renegotiate at the new value of those homes -- at the diminished value of those homes and let people be able to make those -- be able to make those payments and stay in their homes.'
uhhh then what just happened last week?
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Maybe it's just that I'm not looking to get offended, but I took it to mean that most people (particularly younger people who may not be home-owners yet, that looked like a college kid to me) didn't have a clue what the mortgage situation was or how the mortgage market was structured until it boiled over. That's how I interpreted it and I would guess what McCain meant, but if you want to be upset about it, be my guest.
And on the mortgage bailout, you're not catching the difference between mortgage-backed securities (what the government is about to start buying) and mortgages (what McCain proposed they buy).
A mortgage-backed security is essentially an investment device that pays dividends to holders (investors) using the interest income that the mortgages which back it bring in. It's a way for a mortgage holder to lower their risk in issuing or holding a mortgage because he can sell the right to some of the interest to a third-party. Because of that it was a popular way for issuers of sub-prime ARMs (which are at a high risk of default because of who they are being made to) to pass along some of their risk and make it relatively safer to issue sub-prime mortgages. Now that people aren't paying their mortgages and going into default, the security isn't receiving an interest payment, so they are losing money. Further, no one else wants to buy a junk security that isn't paying, so they can't sell them to anyone and have lost their entire investment. The government is buying these securities up to give money back to the investment houses which held them and take the "toxic debt" out of the market to let it die (or hopefully make some of the money back when the housing market turns around).
McCain's plan on the other hand is to buy the mortgages themself and let the government take the loss of converting the ARM's to fixed rate mortgages which should hopefully allow people to have lower payments which they could then afford to make. I assume the government would then sell the revised mortgages back onto the market. People paying their mortgage gives banks cash to lend out, so then banks can start making loans again and the credit market unfreezes.
I'm not an expert on hybrid-securities, but that's the way I understand it and hopefully it should help clear some things up.
Hybrid Mode
