Monday, September 8, 2008

So much for free markets - auto companies want rescue, too

The Wall Street Journal -- Top auto executives, including General Motors Corp. Chief Executive Rick Wagoner, will launch a lobbying push this week for billions in government loans to help beleaguered auto makers and their suppliers.

They aim to get as much as $50 billion in low-cost loans, and will try to play down the idea they are seeking a bailout, arguing that Washington has offered similar help to a range of other troubled industries, people familiar with the auto makers' lobbying plans said.

The auto makers and their Congressional supporters also will argue that they need funding to meet new fuel-economy standards imposed by Congress, and that the debt markets have broken down in the credit crisis, leaving them few other options, these people said.

Most analysts agree the new fuel-economy rules that take effect in the next decade will require billions of dollars in investment by the auto industry -- money the Detroit three don't have right now.Top auto executives, including General Motors Corp. Chief Executive Rick Wagoner, will launch a lobbying push this week for billions in government loans to help beleaguered auto makers and their suppliers.

World Markets React to Bailout

U.S.Seizes Mortgage Giants

The federal government now owns the biggest piece of the $11 trillion mortgage market - Fannie and Freddie Mac.

In an stunning move, the feds seized Fannie Mae and Freddie Mac in its most dramatic market intervention in decades.

Treasury plans to replace the companies' CEOs and provide up to $200 billion as part of the rescue. What got us into this mess? Bad underwriting and sloppy management. In the end, will the government end up merging the two mortgage giants. Did I hear that Fannie + Freddie = Frannie ?

As Crisis Grew, a Few Options Shrank to One

The New York Times - For Freddie Mac, the beleaguered mortgage finance giant that was desperately trying to avoid a government takeover, the moment of truth came three weeks ago.

In a last-ditch effort to raise money to offset billions of dollars of losses, Freddie’s chief executive, Richard F. Syron, traveled to New York to huddle with potential investors at the headquarters of Goldman Sachs and a law firm, Davis, Polk & Wardwell.

Over a couple of days, he and his lieutenants made their pitch — only to have every option rejected, people briefed on the discussions said.

Empty-handed and crestfallen, Mr. Syron canceled plans to join his family at their weekend home on Cape Cod and returned to Washington to deliver the bad news to Treasury Secretary Henry M. Paulson Jr.: he still hadn’t found anyone willing to save Freddie Mac.

Mr. Paulson and a team at the Treasury had been working for months on plans to prop up both Freddie and its sister company, Fannie Mae, hoping they would never have to act.

What Bailout of Mortgage Giants Means

The New York Times - So what does the federal takeover of two mortgage finance giants mean to consumers?

Mortgage rates may fall a bit initially but probably not enough to halt the decline in home prices anytime soon. Some delinquent borrowers may have a better shot at modifying their loans and ending up with lower fixed payments. And the rules on new mortgages could slightly change.

Oh, and the federal government will help pay for it all, using your tax money.

These themes emerged over the weekend as mortgage specialists wrinkled their foreheads to determine what the federal bailout of the mortgage finance giants Fannie Mae and Freddie Mac will mean for consumers. They cautioned, however, that the unprecedented nature of the rescue makes it hard to know all of the ramifications immediately.

So first, what happened here, and why? In order to provide capital to banks that lend money to aspiring homeowners, Fannie and Freddie need to be able to sell the mortgages, packaged as securities, to investors around the world once the two companies have bought the loans from the banks.

All this worked fine until foreign investors got nervous about the housing market and the uncertainty over how a theoretical federal takeover might affect their holdings. When concerns emerged about the viability of Fannie and Freddie, the government thought it had no choice but to step in and take over.

Sunday, September 7, 2008

That Student Loan, So Hard to Shake

The New York Times - MOST people struggling to pay off their student loans keep quiet about it. They do not want to acknowledge that, perhaps in a fit of naïve, youthful optimism, they borrowed more than they could handle.

Then there is Alan Collinge, who for years has described his struggle with tens of thousands of dollars in student loan debt to anyone who will listen. He has appeared on “60 Minutes” criticizing Sallie Mae, the nation’s largest student lender, and has been quoted in the pages of this and other newspapers attacking loan companies.

Student lending is a big business, one that has been the subject of many complaints over the past two years after revelations of questionable ties between lenders and colleges’ financial aid officers. More recently, tight credit markets raised the possibility that some students might not be able to borrow to go to college in the fall.

But much less attention has been paid to what happens to students after they borrow. Lenders who make loans guaranteed by the federal government can more easily take steps against borrowers — like garnishing wages and benefits — than they can with other kinds of unsecured consumer debts. And all student loans, federally guaranteed or not, are extremely hard to get rid of in bankruptcy proceedings, more so than credit card or other debt.

Saturday, September 6, 2008

Why Journalists Never Get Wealthy Moving

The Wall Street Journal - If you're a true cheapskate, stay put.

Moving is expensive and wasteful. You spend thousands fixing up the home you sell, and then thousands more fixing up the home you buy. You throw out perfectly good packaged food in your old home, and then go out and buy that same food in your new home. You throw out drapes, and buy new drapes. You register vehicles in one state, and then register them again in another state. The list goes on and on and on.

I speak from experience. My wife and I have bought and sold four houses in the last 17 years, and we're now buying a fifth one in northern New Jersey. Each time the sale was prompted by a new assignment for The Wall Street Journal.

Career-wise, it has been worth it. But strictly in real-estate-investment terms, we usually would have come out ahead financially by staying put instead of moving to another city.


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