"Instead of providing a massive headline-grabbing infusion of cash upfront, the government will provide quarterly subsidies to cover losses."

We're pretty much screwed, aren't we?

Argh, I hate this economy. Not only does it suck, but it keeps making me learn lots of economics to decide how panicked I should be!

How big a sign of the apocalypse is this?

WOO-HOO. Another business the government had to stick their noses into. YAY. We are one step closer to becoming "ameriKa".

Isn't the taxpayer always screwed?
What I find hilarious is that they overstated the capital assets in the case but they aren't going after the CEO. Why not? If it was one of us we'd already be in prison.

@Eyebrows McGee: I, myself, am waiting for the four white guys on horses.

@Eyebrows McGee: If it makes people actually start getting financial educations for themselves, maybe that's the silver lining.

ARFGHHHHHHHHSJKDHSKJDHSKLFHSLKJFHSLKFJHS!!!!!!!$@^%$@^%$!^%!#!

I worked hard not to get in debt, and now I get to bail out the assholes who were too stupid to only borrow what they could, not what they were TOLD they could. If any of you reading this are in hardship and not paying your mortgage, barring any job loss or family matters, I hope you rot in hell one day (period)

@lukobe: Personal finance, accounting, investment -- that stuff I get. Economics I avoided on purpose in college!

This will be good for PIMCO and the Chinese banks...large holders of the bonds. Tomorrow night here we can see how the Asian markets are doing (Monday am their time)

Living outside your means, supporting troops in 90% of all countries in the world, and fighting wars in 2 countries.

TO DO: Add bailout massive bank failures to the list.

Ron Paul 2008. Sad to have to say it again, but he called these events in his books.

Massive request:

Can somebody that knows what the hell they're talking about PM me about this? I don't have a lot of experience in these matters. My wife's grandmother has over $75K wrapped up in these assholes through Edward Jones. When things initially started looking bad, my wife and I advised her to contact EJ immediately to find the consequences of these events, and if necessary/possible, to pull her money out. It goes without saying that the EJ rep told her to "settle down" and "ride it out". "Everything will be fine." Now this happens, and they're saying the stockholders are screwed.

What are her options at this point? Even if every cent is still there, she's going to be penalized 25K for pulling out her money early, or whatever. Losing that 25K is obviously better than losing everything, but I don't know what to tell her now. Help?

@junkmail:

if your wife's gran had 75k worth of fannie and freddie common stock, it might not be worth diddly when the market opens monday morning. being an edward jones rep means never having to say you're sorry. as woody allen observed, a broker is someone who invests your money until it's all gone.

@MakGeek: Agreed.

So if they become profitable again do the taxpayers get the profits too? Thought not.

I'm so sick of this neoconservative approach of private profits and public losses. And yet, they talk about the "market" "capitalism" and all the other buzzwords to scare you into thinking that socialism is just around the corner. Socialism has been here for a while, just not in the way they've scared you into thinking. Our version of socialism just for the wealthy and "can't fail" corporations, so regular peopel get zero benefit from it like other countries do (e.g. healthcare, education, infrastructure, etc). So my opinion is that we either become partially socialist a la Canada, UK, etc. or we become more capitalist and let shitty businesses fail.

/rant

@MakGeek: So if a homeless guy off the street asks to borrow $25k from you, and you lend him the money, who's fault is it when he doesn't pay you back?

What I'm saying is that there's plenty of blame to go around. But the taxpayers are now asorbing their losses. So, who has the gains from all those years? Also, if they ever become profitable, will the taxpayers get that profit to pay us back for the fact that we subsidized their losses? Nope. So we have a situation where we pay for the losses but the shareholders/head officiers who are at least partially to blame for this mess get off scot free. In fact, they probably will get paid MORE once this turns around.

@ARP: Agreed.
Mostly.

People on that side of the fence (who don't know) will look at this and tout it as eveidence that gov't should just privatize everything, because then the losses wouldn't be spread to everyone else. Which is true, but...

What happens is that (as is evidenced here) when you lift regulations and turn a blind eye, bad things happen (good-bye mortgage market!). THEN, since they don't want the rich people who are responsible to foot the bill for their mistakes, they send in the same gov't that they had stop regulate things to save them and put the financial burden on US, collectively. US who are not typically as well-off.

Say one thing, do another, right?

Check, and check.

let's not forget that syron (ceo of freddie) took home $19.8m in compensation in 2007. he'll be just fine...

You know what the worst part is? I'm absolutely terrified that we're about to get 4 more years of the same - or worse, should McCain die in office. I will come right out and say that my bf is a hedgie and he made a lot of money from some of Bush's deregulations. However, we also witnessed the utterly absurd real estate boom in California that resulted and have been discussing the possible implications for years. Yeah, plenty of people saw this coming, us included. He got his money out where he could, but it didn't matter. He will get zero bonus this year, leaving our combined income less than 1/4 what it was in 2007. There are plenty of people on Wall Street suffering from the same fate right now. We were smart and planned ahead - we'll be fine. But the dumbass investment bankers who spent all of 2007's bonus? They're nearly as screwed as the retarded homeowners who bought more than they could afford.

You know who's the only ones making serious money now? CEOs who don't need to worry about making mistakes, because if they do, the government will bail them out and they won't lose a penny of those pretty bonuses they get paid no matter what happens to their company. And you know who's paying the CEOs of all these companies bailed out by the government? Us.

I just laughed hysterically through the entire RNC. People really buy their BS, especially in the middle of the country, where they play to the fact that people in NYC and the "ruling" areas of the country routinely ridicule, mock, and generally treat the residents of the "flyover states" as ignorant hicks who don't deserve any consideration.

Your prize for acting this way, coastal people? Bush '00. Bush '04. And if we're unlucky...McCain '08.

Bush was video taped saying "Wall Street got drunk", which mean basically they are unsupervised. Who is suppose to supervise them? Either way we are screwed.

Realistically this will cost taxpayers close to a trillion dollars before the deal is done. While the subprime meltdown is peaking the prime meltdown is just starting. Subprime homes are generally less expensive and owner occupied, prime homes are generally larger and many are investments that are quickly loosing value.

It's gonna get messy.

@junkmail: If your grandmother has 75K in common stock Edward Jones should be sued for negligence since most of her investments should be in bonds.

@Sandtiger: The reason CEO's can get away with it is because they make contracts that allow them to get away it; plus they are the most likely to adequately fund the right people in the government, to me primarily Republican but also many Democrats as well.

As a taxpayer I now own most of the houses in the US. This is going to be fun.

To Junkmail...your wife's grandmother very likely has debt, not equity and would be made whole.

@c_green38: OH MAN YOU'RE SO EDGY I SEE WHAT YOU DID THERE.

@laserjobs: Now there's a silver lining. I wonder how we can exploit this new acquisition...

All you peoples are morons. Sarah Palin has the plan. As soon as she closes down the museum of natural history and the Smithsonian. (Satan put those dinosaur bones there)and takes Huck Finn and those other dirty books out of the library. She has a plan.

These threads inevitably lead to the 'buy within your means' comments, which are valid but raise a question that I rarely see answered: How did you come to define what exactly was within *your* means? Was it a realtor? Loan Officer? Friends or Relatives? Yourself with no outside input whatsoever?

It's a real question, no snark intended. I'm not trying to dismiss the common sense element of the decision, I just want know how much the 'responsible' folks out there relied on advice from others.

@JayDeEm: I have often wondered that myself, but the answer I came up with was that "within your means" broke down to looking at how much you make in a month after taxes, your fixed bills, and what you can afford based on need vs. want.

A lot of personal finance articles focus on cutting out the excess things, which in many cases means cable, internet, phone, etc. But not very many of them consider that to cancel those services before a contract is up would be a lot in fees. I know, I considered canceling my satellite service today and it would have been about $340 in fees.

So to me, at least, living within my means is NOT canceling things prematurely, and to suck up the fact that I wanted internet, satellite television and a place with pool and gym access. It's okay, because I'm not wallowing in debt, but for others, a drastic move like actually moving might be warranted.

So I suppose being within your own means includes having the discipline to not go nuts with credit cards and to pay off your debt, whether you want to or not. And you should want to. Smart people realize most kinds of debt are very, very bad.

Thanks for the responses, guys. I don't know exactly what she has, and I won't find out until Monday. I sincerely hope you're right about the bonds as opposed to common stock.

BTW- I don't think it was an accident that this was announced late friday/over weekend and after the RNC convention had completed. I'm sure they sat on this information for bit.

"That means the fate of U.S. taxpayers rests squarely on the shoulders of the housing market and the global economy."

Fixed it.

So, basically, we're paying for other people's mortgages huh?

Didya feel good as people like Bush bragged about record home ownership? Well now you're gonna pay for that warm little fuzzy.

Did you sell your home in California or Florida at the height of the bubble, thus making a huge profit? That extra money came from the taxpayers, essentially. Your welcome.

This is what you get when you infuse Democratic market manipulation into the free market. Why we needed these outfits when we had functioning capital markets is beyond me. Those who advocate Obama-like policies, take note that if the free market isn't doing it already it probably isn't a good idea. Kinda like loaning your sketchy cousin Eddie money when no one else will. You got to ask if those folks know something you don't.

It's driving me crazy, but what movie is the header pick from? I know it's not "Network"

[consumerist.com]

Settle people, settle.

This should have happened five years ago and in some ways was an inevitability. The system was flawed from the get go - you do not finance a mortgage market with private institutions set up by government. What you might expect to happen did indeed happen - those institutions took part in an orgy of speculation, got caught and hid the mess until the government had no choice but to step in.

What sucks is that it didn't happen until now, when things are seriously F****ED.

I hate to say it, but this was needed some time ago. The market was in a state of speculation and it needed the correction that we're seeing now. The "meltdown" that we're experiencing is being sensationalized by a media that's got everyone in a tizzy over something that unfortunately HAS to happen after the way the market was 5-7 yrs ago. Anyway, Freddie and Fannie's CEOs make a boatload of money - way more than they should - but that's what you get when your company cooks the books. The gov't saw this coming a mile away at least 3-4 yrs ago which is why they both went thru massive federally mandated restatement periods. This shouldn't be news, but it IS to the generally mal-informed public who gets all in an uproar because the news reports on it purposely to get you that way.

And I think the idea that taxpayers are *now* paying for the people who overextended themselves is grossly generalized. Why don't you do some research on what other things your taxes go toward these days and THEN get your panties in a wad. If you are JUST getting upset NOW at the fact that your hard earned dollars are going to "bail out" people, then you obviously don't have a good understanding of how your money gets distributed in this country, regardless of the President in office.

First off to bloame people for having medical bills, or a job loss or divorce which causes them to not be aboe to pay their mortgage is ridiculous. MANY of these mortgages were obtained with the help of the mortgage companies providing fraudulent appraisals because the value of houses would always go up in their eyes. Guess what? THEY DIDNT!!! The government under the republicans has failed to regulate an industry that was filled with corruption. Check out Countrywide, Ameriquest, etc, and realize these companies deserve what they get, as does Bear Sterns, and Fannie and Freddie. Let them rot as far as I am concerned. If I were upside down on my house right now, I would stop paying an dwalk away as well.

My fiance and I have been together for more than ten years. We haven't ever bought a house because the prices have been too high for us (that is to say, we have an idea how much they should cost and they're far in excess of that). Now it looks like we'll never have one because our taxes will go up to protect the greedy bastards who live way beyond their means and are now whining about being homeless. Makes me want to kick a fricking whiner out of their house and move in, since I'm paying for it anyway.

I keep saying it: Buy GOLD. Not certificates or BS like that, COINS. This economy is crashing.

@Eyebrows McGee: Sounds like you know more than most!

I put up an explanation here and warned about this when the first story broke. To reiterate, nobody knows how bad, bad will be. We do know that it isn't over by a long shot. Not only are banks going to fail, but also Insurance companies as well. States will also be affected, this truly is a big deal that's been coming for a while.

"If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it." - Ronald Reagan

An Obama supporter and voter and lifelong progressive quoting Reagan. These are interesting times.

@zymase:

That's a little out of context. Ronald Regan actually said:

"Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it. "

"EIGHT is enough".

@JayDeEm: No man is an island, suer, but seriously - a bank approved me for a $450,000 loan, on my salary alone. That would have been a payment almost $4k a month (once you add taxes, insurance etc.) I am not a financial genius, but one look at my take-home pay told me that we couldn't afford that, so we only spent half of that. (Sounds like a lot, but we're in an expensive market.)

The person selling us that loan (and trust me, the loan is a product which they are selling) asked if we were interested in a 5-year ARM, "because rates could come down in a few months" (that was when rates were 5-6%.) I figured rates are at historically comical lows, why would we get an ARM? We got a 30 year fixed.

When the Realtor and Loan Officer are both getting a percentage of the sale, of *course* they don't have your best interests at heart - no more than the salesman and loanie at a car dealership do. You have to look out for yourself.

That being said, not everyone is good with numbers, and many honest and hardworking people were taken advantage of.

I for one welcome our new taxpaying overlords

The federal government got us into this mess. Why does anybody think the federal government can fix things?

I can't believe a government that supposedly believes in a "Free Market" won't just let them die. That's one of the fundamentals of a free market economy, businesses that can't cut it wither and die.

@CaptainSemantics: That's a little overkill, don't you think? I expect what this will ultimately mean is bye-bye to low mortgage rates. In the late 70's /80's the average mortgage rate was like 21% !!!! While it would suck to see it return to that, the takeover of two bloated institutions that had no right existing in their current form in the first place is hardly a sign of the apocalypse. To make changes when things are failing is a sign of proactive behavior. The apocalypse would be if the gov't just said 'to hell with it' and let them fail.