.
Lets see if I have this straight.
One of the reasons we are in this mess is because irrational mortgages (interest only, or no credit check) were made, mostly because of pressure on lenders from the Clinton administration. So we had a lot of people buying homes they could not afford under any kind of prudent lending policies.
These mortgages were repackaged at several levels into financial instruments that are now called "toxic." People cannot pay their mortgages which should not have been made to them in the first place. Houses go into foreclosure, thus depressing the entire housing market.
As a result, banks and other buyers of these derivative instruments, hold assets which they cannot sell at anywhere near the price they paid for them. Consequently, these institutions have to reserve money for "bad debt," thus reducing the amount of money they have available to lend for any reason (commercial loans for example).
The tie-up of liquidity in bad debt reserves causes at best a reduction in economic growth and at worst - since the institutions do not have sufficient funds for reserves - causes the failure of the bank.
So the solution being pushed by Democrats is to use taxpayer funds -- my money, your money -- to subsidize the payments (via interest rate subsidies) to these people who should not have been granted a loan in the first place.
Consequently, those of us who figure out how to live within our means must pay for those who do not or cannot prudently manage their personal finances.
This is a bad deal and a slap in the face by Democrats. It must be stopped.
Friday, February 13, 2009
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