What's Riding On The Latest Bailout?

CBS Evening News: What The Toxic Assets Plan Means For Banks, Investors, Taxpayers And Homebuyers

(CBS)  There is a lot riding on the latest banks bailout - for banks and investors, taxpayers and homebuyers. CBS News correspondent Wyatt Andrews reports on what it means.

Wall Street cheered the toxic mortgage plan - because what it means for the investors who might buy the mortgages is one very sweet deal.

Despite record foreclosures, and slumping home prices, 85 percent of homeowners still pay their mortgages. That means even the worst of the so called toxic assets has a value - because good mortgages have been mixed in with bad - and Wall Street sees a chance to buy low.

"Some of these assets are definitely good buys because most Americans pay," says Curtis Arledge.

Arledge of the giant investment house Blackrock Inc., says his firm wants in on the program - in no small part because his clients can buy the toxic mortgages with government financing.

"The fact that the government is coming in with both equity capital and debt capital to finance the purchase of these assets is simply going to expand the universe of investors," Arledge says.

And in theory, expanding the universe of investors will create competition for mortgages, Andrews reports.

What that means for the banks is the chance to sell the toxic loans they want to unload as long as they get their price. And the sale of any mortgages could help unclog the credit markets, which would be very good news for the normal consumer because they would likely be able to access credit more easily.

The ultimate goal is to stabilize mortgages, stop the freefall in home prices, and end the fear of homebuyers like Suzers and George Sachs who worry they're still buying too high.

"We're in a situation where we have no choice," George says. "But we also want to know that the value of the home is not going to continue to be going down."

Meanwhile, what this means for taxpayers is the trickiest part of all. The plan, simply put, is a trillion dollar gamble, Andrews reports.

Everything about this plan that makes it a sweet deal for investors, starting with 80 percent government financing, makes it risky for taxpayers. So if the real estate market tanks worse than it has, taxpayers lose, if real estate turns around taxpayers make money.

[ccwasp]

We should all listen to Winston Churchill who said:
I contend that for a nation to try to tax (or spend -same thing) itself into prosperity is
like a man standing in a bucket and trying to lift himself up by the
handle ..
-- Winston Churchill

[ccwasp]

It is interesting that we are using socialism to save capitalism??? (pensacola8-2009)
Interesting concept.

I suspect that most of the people posting here have never run a business.

It will be very interesting when the federal government decides that every American should have the ability to have their own News organization. They will set up a quasi-government agency called NewsMac and NewsMae so that everyone can borrow money to set up their own broadcasting facility. Then they will MAKE banks loan to people to build new agencies that don't really have the money to pay it back.

Then they will claim there is no problem.

Then they will cause all the other news agencies (CBS, NBC, ABC, .......) to pay in to help those that can't make it.

Then when it all collapses they will say it was the greed of the news agencies that caused all this. Then they will "rescue" the news agencies by giving them more money to keep going when it is unsustainable. (of Course this money is coming from all of us who are paying for the governments irresponsibility in the first place.)

Then the people will praise the government for saving the capitalistic system. Then the government will tell the news agencies how much they can pay their executives and anchor people.

Let's see how that goes over with Katie and whoever runs CBS news.

[sjc_1]

The banks do not have to take the price offered, but they will be on the record not doing so. This is why Giethner is asking for more power, to take the banks over if they do not cooperate. There is too much at stake to let this fail. I hope he is given the power so the banks know he means business and I hope that he does not have to use that power.

[pensacola8-2009]

Federal Spending got the USA out the depression in the 1930's.

Federal Spending triggered the economic recovery in the 1980's.

Federal Spending will trigger the economic recovery in 2009.

A banking system failure is most serious threat to capitalism this country faces.

The 911 attack was a picnic compared to a banking system failure.

Many of us don't realize how close we came to seeing the end of capitalism over the banking crisis we are facing today.

We are very fortunate that we have the option of Federal Spending. Not all countries have that option when they face the same set of problems.

[skyk-2009]

Your childrens future is riding on it and communist dictator Obama of the socialist party is destroying it.
Posted by dongo3 at 2:30 AM : Mar 24, 2009


Man you need to trade those sheets you wear for some night courses!! In case you haven't noticed there IS a Crisis and OBAMA nor the Democrats created it! THEY are trying, very hard to get us OUT!

[skyk-2009]

Did anyone bother to learn who Black Rock, the largest investor" to Geithner's plan is? I will tell you. Black Rock is owned to the tune of 49% by Bank of America. Great, now BofA under the guise of Black Rock will buy their own toxic assets back at bargain basement prices and make a fortune while the taxpayers take all the risk and get hosed in the process. Wake up America this is just another Wall Street heist.
Posted by smb127 at 4:27 AM : Mar 24, 2009

What's the option? You ditto heads and your constant hope for the failure of Obama is tiring since you have NO plan except to return to the Failure of the Past... you know the Policies that GOT us into this mess! It's not hard to get IN, that's a fact. If it were hard the Republican's would have done better don't you think?

[smb127]

Did anyone bother to learn who Black Rock, the largest investor" to Geithner's plan is? I will tell you. Black Rock is owned to the tune of 49% by Bank of America. Great, now BofA under the guise of Black Rock will buy their own toxic assets back at bargain basement prices and make a fortune while the taxpayers take all the risk and get hosed in the process. Wake up America this is just another Wall Street heist.

[pensacola8-2009]

The answer to what is riding on the latest bailout can be stated in one word - Capitalism.

If the entire banking system fails, captialsm fails.

It is ironic how Republicans obstruct efforts to save capitailism much the same way that a child neglects to take medication when they are sick. Bailouts are not here to hurt us, but I will admit they do have their different side effects. Without bailouts, our capitalism has no way to recover itself from economic turmoil

The bailout culture is humbling, but so is the economic condition that we are in.

Getting things back on track with healthy vital signs is going to require bailouts and fiscal discipline in personal habits.

The nation will benefit for economic education about modern economics with explanations about derregulation in banking, mortgage and securities. No person making decisions about their 401K options is going to face easy choices or be pleased with strange or mixed results. Lately, nearly every citizen with a 401K has seen a 50% decline over the past 6 years and especially sharp since 2007.

Capitalism is being brought closer to every worker who saves and invests by offering them opportunity to be a lender, instead of a borrower.

[grabandgo]

The American people will never get out of debt from this one. The only ones being protected are the rich. Let Wall Street crumble, the greedy cockroaches are the problem.

[zaniacloclo]

Nothing but mixed signals are sent out by this administration. How can you fix anything when you do not know where you stand? Why did it take so long to put this program out there? How can anyone buy into it if you feel that governement is manipulating this for an agenda that is totally socialist. Honesty and Integrity are things of the past. Our politicians are nothing but empty words and promises.
The office of the Presidency has been degraded to late night comedy. Hipocrisy is rampant. A sense of false reality exists among those in power and the vision of what makes America Great is blurred by bail outs and hand outs as opposed to hard work.
People feel totally manipulated by those in power.
Government keep your handouts and stay out of our pockets.In the end you will be doing all of us a favor .