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[James Quillian]

"Arrangements that confer all upside beneftis on private investors and all downside risk on the public are bound to stimulate great feats of entrepreneurial daring." Robert B. Reich

[zedor]

"Arrangements that confer all upside beneftis on private investors and all downside risk on the public are bound to sbig timulate great feats of entrepreneurial daring." Robert B. Reich

The other way this concept has been stated is that

"All gains are privatized and big losses socialized".

Take the much hooplad save the homeowner idea currently afloat. It will not save the homeowner only the big banks. But who could vote aginst "saving the homeowner" while no one could vote for "save the banks act of 2007"

Here is how,

Currently banks hold sub-prime mortgages on which the value of the collateral is less than the mortgage -- ahead of what Alan Greenspan says is a double digit decline in housing prices yet to come.

The so called "save the homeowners" proposals would actually refi these bad loans (saving the banks) via the FHA which means the new loan is guaranteed by the US Government ie you and I as tax payers guaranteeing the loan.

The homeowner thus is still on the hook for the full price of the house (bubble price - as AG again admitted that we were in a bubble - saying "frothy" is just many bubbles) the original mortgage issuer gets out of the equation whole and the Tax Payer is on the hook for when these homeowner eventually, down the line throws in the towel on the refinanced loan.

Edited by zedor, 24 September 2007 - 04:33 AM.