Wikinvest Wire

The $100 trillion economic stimulus package?

Tuesday, February 10, 2009

Now at least a half hour behind the live coverage of today's House Financial Services Committee hearing on the Federal Reserve's many and varied liquidity measures implemented over the last year or so, there's already been a memorable moment.

In his opening remarks, Rep. Spencer Bachus (R-Alabama) made an interesting slip of the tongue when listing the many bailout and rescue efforts that the government has launched, all, seemingly, to no avail thus far.

Actually, immediately after the slip, he goes on to make a number of very good points about how so much money is being created and spent by the Fed with no debate or oversight.

Here it is:

When historians look back at the financial crisis and ensuing economic upheaval of the last half of the first decade of the 21st century, what will be the storyline?

I submit it will be that, while the public was focused on the tax rebate program, then on the $700 billion TARP, and finally on the $100 trillion economic stimulus package, a much larger drama was unfolding below the surface.
Yikes!

A hundred trillion dollar stimulus program?

Obviously, it's taking some people a little time to adjust to the new math in Washington.

Here's the part about the Fed's bailout programs which is the subject of the hearing:
While the public was distracted and focused on these high profile activities and events, other programs and activities some five times larger than those debated and discussed in open forums were being enacted by a select few unelected federal regulators who were making commitments of trillions of dollars backed by tax payer guarantees and loans.
It sounds as though some members of Congress may have been issued copies of G. Edward Griffin's classic The Creature from Jeckyll Island.

More later, most likely.

2 comments:

donna said...

Bachus thinks he lives in Zimbabwe now for some reason...

Anonymous said...

Mr. President, pleases review a simple idea for a very complicated condition as I see it as a real estate professional:

1. You could liquidate large volumes of residential properties to eliminate an over saturated supply of standard homes through the MLS systems, auction events, and millions of foreclosed property across the USA.

2. My idea is simple enough using the raised funds through your stimulus package or another one to fund Fannie Mae, Freddie Mac, and all the national banks in the country immediately by structuring a 2% interest rate fixed amortized over 30 years purchase money only.

Purchase money only loans @ 2% fixed over 30 year amortization would serve to stimulus a buying frenzy and getting first time buyers and investors back into the purchasing market that will normalize the difference between supply and demand.

3. A purchase loan at 2% fixed rate amortized over 30 years will motivate and bring back immediately millions of investors holding out for the residential real estate values to plummet another 10%-15%.

The purchase loan at 2% fixed rate amortized over 30 years would facilitate first time buyers affordable opportunity to buy now at present values. Properties sold at present values will stop the hemorrhaging value destruction to the lending institutions, and in turn create immediate confidence again in real estate market.

Negative equity would be stabilized at today’s levels once a flood of first time buyers and investors can afford lower mortgage payments against perceived overpriced homes.








Example:

Purchasing a California home today at an average of $500,000
FHA and Conventional interest rate @ 5%.

Payment amount $2,147.29


Home price $500,000.00
Down payment 20.000 %
Total amount financed $400,000.00
Total payments $773,021.33
Interest rate 5.000 %
Interest compounding Monthly
Total finance charge $373,021.33


Purchasing a California home today at an average of $500,000
FHA and Conventional interest rate @ 2%:

Payment amount $860.21


Home price $500,000.00
Down payment 20.000 %
Total amount financed $400,000.00
Total payments $532,251.70
Interest rate 2.000 %
Interest compounding Monthly
Total finance charge $132,251.70





The average time to liquidate 6 Million homes annually nationally is 4 ½ months time at the peak of the real estate market. The present market time is closer to 12 months, plus inventories that are being foreclosed daily at 6,000 to 10,000 properties making up 40%-60% of all listed properties in all MLS system nationally creating market supply flooding.

4. Reo homes in California have decreased to 30 to 50 cents on the dollar off the 2006 high values causing great negative equity across the state. Lending institutions losses suffered at 50 cents on the dollar to dispose of 1.8 million foreclosed homes, plus another 5 million more projected to be foreclosed could cost more than the difference between the cost of funding purchase money @ 2% fixed amortized over 30 years stabilizing the residential market promptly.

5. We specialize in buying Reo properties at an average 40 cents on the dollar off the 2006 high market values in California and we lease them right back on to the market equal to cover our debt service. We can only use this business model at this values or through 2% fixed rate over 30 years would create the same affect with properties a present values with standard listed values.

Thank you for your time.


Mike Garibay
Coldwell Banker George Realty
(323) 947-7698

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