Confused about the bail out bill?

Bargains_4 The 700 billion dollar bail out bill passed on Friday, except it is called a financial rescue package.  I don’t think it is going to have any immediate impact on our local economy. 

It has been harder for home buyers to get mortgages this year than it was last year and I don’t see that changing because of the passage of the bill. I also think it is a good thing that lenders have tightened things up a bit, and I hope it doesn’t change.   

Some people are blaming the lenders for this mess, they are a huge part of the problem but I also  think consumers need more education on how to use credit. Some would blame the credit industry itself for all the credit card and loan solicitations that are mailed to homes.  There are ads on television and on the radio and everywhere for loans of various types.

I would agree that consumers are bombarded with those ads, but why is it that some consumers amass huge amounts of personal debt and others do not?  Not everyone takes advantage of the credit cards and the solicitations to refinance. Not everyone who has a credit card has too much credit card debt.

Buying things and having things seems to be a huge part of our culture. We start using credit at a young age.  I have met several first time home buyers who have had to wait to buy a home because of the large student loan payments they have.  It is possible for students who go to some of the local universities to put their tuition on a credit card.  My daughter has a friend who did that, and took out student loans. She now works two jobs to make ends meet.

Don’t get me wrong. Credit is not always a bad thing.  If we had not gotten a home loan many years a go I would not be sitting in my home office writing this post. Instead I would be paying an amount that is triple my current mortgage for an apartment with room for an home office.  Credit should be used wisely. Just because a lender can loan the money doesn’t mean the borrower should borrow it.  That is where each of us has to take some responsibility and use credit wisely. 

Oh and lets not forget how the US government uses credit. Each party blames the other for the current financial crisis.

The US National Debt as of this posting 10,275,051,731,157.99

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10 Replies to “Confused about the bail out bill?”

  1. Yes, just about every aspect of our lives has something to do with this mess – from buying too much stuff on plastic to a collapse of basic standards in lending to people playing with the stock market when they didn’t know what they were doing. It’ll take a long time for us to un-learn all the bad behaviors that made this possible.

    As someone who predicted this right here on this blog on April Fools’ Day 2007, I take only some pride in knowing this. But I bring it up again because I want people to believe me when I say that the worst is definitely yet to come. Stay focused, stay within your means, and think about what your grandpa would do (‘cuz he probably live through a depression, you know). That’s my advice.

  2. Teresa Boardman says:

    Good. Maybe you can tell me when we reach bottom, and when the unemployment rate will go up, and when the DJIA will go up again. I want to buy stock when it hits bottom, and would also like to know how high it will go and when it will go down again.

  3. Teresa, Inspired by your article I decided to sound the alarm of true change in VA in today’s post. Thanks.

    http://therealestatebakery.com/2008/10/06/let-history-not-repeat-itself/

  4. Not so confused, but more than a little concerned that this will be yet another case of not being a solution to the current problem and yet more tax payer money lining the pockets of greedy corporate leaders.

    good post though.

  5. We certainly had a hay day over the past couple of years. Eventually the piper must be paid. That day is here. For those who acted responsibly, times are definitely tighter. For those who did not, it is getting really difficult.
    Too bad some of the bail out money isn’t being used for consumer education.

  6. Patient Buyer says:

    Stay out of stocks until their prices are justified by their DIVIDENDS, not by earnings.

    Anyway, the problem with credit is that it is the financial analog of tailgating the car on front of you.

    It only pays off if the asset you are buying is appreciating beyond inflation, or for business investment where opportunity is too good to wait until funds have been saved.

    Debt is not wealth, many are now finally having to realize that truth.

    If one is not reading the daily banking news (as I do) you don’t realize how bad this is getting. It is very bad.

    Those who are IN DEBT are not necessarily those who will be hurt the worst. The greatest pain will come to those who need to USE DEBT.

    Access to credit is collapsing. You may not see it yet, especially in the still-viable Minnesota economy, but rest assured it is coming.

    It will be just like the old days when the only people who could get credit usually did not need it.

    If debt had not been used in such insane amounts, the price of homes and college educations could never have been bid up to such levels.

    There is no dignity quite so impressive, and no one independence quite so important, as living within your means.
    – Calvin Coolidge

    This statement will be the trend of the next decade.
    You heard it here first.

  7. Teresa Boardman says:

    PB – I wonder why no one talks about the fact the college tuition has skyrocketed. When I have asked questions about tuition I am told not to worry becasue there are loans and financial aid. Like they can charge anything they want and people with just pay it because they can borrow.

    No I am not seeing access to credit changing right now but I beleive that it will. It will have a direct impact if it affects the automotive industry where most of my family works, and of course if people can’t get home loans that will put me out of business.

  8. It may be a long time before we start to see any impact from this bailout. How long until is trickles down to the individual consumer trying to buy a house?

  9. Patient Buyer says:

    ———————————————
    PB – I wonder why no one talks about the fact the college tuition has skyrocketed. When I have asked questions about tuition I am told not to worry becasue there are loans and financial aid. Like they can charge anything they want and people with just pay it because they can borrow.
    ———————————————

    This was the sick fraud perpetrated on the American people. Tuition rose so fast because well intentioned loan programs allowed it to. it was easier to load students up with debt than to find more cost effective ways to provide education.

    I want someone to explain to me how loading a 21 year old up with 90k of debt is not predatory lending. They are YEARS paying it off.

    ———————————————
    No I am not seeing access to credit changing right now but I beleive that it will. It will have a direct impact if it affects the automotive industry where most of my family works, and of course if people can’t get home loans that will put me out of business.
    ———————————————

    Loans will be available. It is unlikely that credit will vanish. But the buyer’s market that is coming will stun even some of the housing bears. Realtors will do fine once they realize that they need to promote market-clearing prices. They will have plenty of business.

    “Appreciation” will not be a bullet point on the sales brochure for some time to come. Many agents need to face the TRUTH: Price appreciation and the RE mania did most of the heavy lifting FOR YOU during the bubble. True selling ability is being tested now.

    ———————————————
    It may be a long time before we start to see any impact from this bailout. How long until is trickles down to the individual consumer trying to buy a house?
    ———————————————

    It may never make it that far. Even though central banks are cramming credit in to the system, the banks are hoarding cash because they are undercapitalized.

    Think back to what access to credit was like in the sixties and seventies. That is the new normal. Prices will adjust accordingly.

    Japan had a credit bubble and a bank crisis, followed by SEVENTEEN years of real estate price depreciation.

    Think they are not ‘making any more land’? Even more true in Japan. Prices turned up there last summer, finally.

    There is always opportunity to prosper for those who adapt to new conditions. Those who want to sing the appreciation song and bottom call are going to get trounced.

  10. Teresa Boardman says:

    wow the national debt must be gone it is not showing up on my post.

    PB – maybe rents will go down and you will never have to buy. Might be nice safe way to live.

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