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Aug. 28, 2007 - Rush Limbaugh Program
36:18
August 28, 2007, Tuesday, Hour #2
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You know, on the first hour of the program today, we were talking about big report in today's Wall Street Journal about some very suspicious political contributions made to the campaign of Hillary Clinton, and the subject came up about the shamelessness of the Clintons and how brazen they are.
Well, here's another one.
She's weighing in on the real estate problems in this country and the number of loans, the mortgages out there that have gone bad, and she's criticizing unscrupulous lenders.
Of all subjects that you would think Mrs. Clinton wouldn't be speaking about, bad real estate deals and bad financing?
She wants to open that whole thing up again.
I mean, talk about writing the book on real estate deals that went bad with screwy financing.
Does the word whitewater come to mind?
In any event, I'm going to run the risk here of coming across as a parody of the supposedly heartless conservative.
Those right wingers, they don't care about people, they only care about the big people.
They don't care about you.
That's the wrap that's been put on us.
On the other hand, we have ideas here.
And there are some points that are important.
I want to talk about the so-called mortgage crisis in the United States.
Story of today's New York Times and Washington aid to homeowners debated.
Faced with a possible tidal wave of home foreclosures beginning this fall, Democrats and Republicans are battling over a philosophical question with huge practical implications.
Should the government ride to the rescue?
Well, my answer is no.
The story continues.
Both the Bush administration and Democratic leaders in Congress agree that legions of homeowners could be overwhelmed in the next 18 months, as low teaser rates expire on more than two million adjustable rate mortgages, causing monthly payments to increase sharply.
More ominously, falling real estate prices and a pullback among mortgage lenders are expected to make it more difficult for overstretched home buyers to either refinance their way out of trouble or simply sell their houses.
This is really just the beginning, said Karen Weaver, Global Director of Securitization Research at Deutsche Bank.
There's a big wave of defaults coming over the next eight next twelve to eighteen months.
From a political perspective, the wave would be crashing during the primary and general election campaigns next year.
So we've got this specter of all sorts of foreclosures looming over the country and looming over the American economy.
What am I missing here?
A bunch of people went in and got mortgages at very favorable terms to them.
Now they're not making their payments.
What's the role here for the government?
What's the role here for the rest of us?
They borrowed money.
They aren't paying the money back.
What?
They're not supposed to lose the houses.
How does this deal work?
Where you can get a great loan rate, and some of these teaser mortgages were coming in at 0.5, 11.5%, 2%.
You get a great loan rate.
So you can go out and buy a house and have very, very low payments.
Then you turn around and say, well, I can't afford the real rate now that it's kicked in.
Why, President Bush, you've got to help me.
Why does President Bush have to help you?
You did this yourself.
You took out a loan and you can't pay it back.
I don't see any role for the government here.
Well, you sound like another one of those heartless whatever I sound like.
I'm trying to be logical here.
Secondly, the lenders that were making these loans, and I know why they were made.
Interest rates were rock bottom several years ago.
They're still pretty low, but they're not what they were.
There was money flying around all over the place.
And housing was going up everywhere in America.
Everybody wanted in on the game.
All sorts of people who had never been in the mortgage business in their life were opening up shop.
They were becoming mortgage lenders.
People were moving from being renters to being homeowners.
People were taking out home equity loans to take advantage of their rising property.
Everybody was refinancing and everybody was getting a mortgage and everybody was taking advantage of these very low rates.
And for most people, it worked out just fine.
I'm one of them.
I got a fixed rate mortgage at a very favorable rate.
So did many of you.
And the vast majority of people are paying back their mortgages.
For many of them, they were able to get into real estate for the first time in their lives, and they now have an asset, something that they're going to have to be able to provide for their futures.
Turned out to be a great thing.
And for the people who got in on it early, they bought housing when housing was depressed in this country, and they've seen the seen the invalue that seen the value of their investments go way, way, way up.
For some people, however, who got in late, yeah, the value of those homes has gone down.
They haven't, to take an example, $350,000 mortgage, in which they put virtually nothing down.
And there were a lot of those loans out there, 0% down, maybe 1%, 2% max.
And then they get a teaser rate.
A teaser rate is one that is artificially low, but is keyed to go up after a period of time, one year, two year, three year, whatever.
And those rates are then keyed to whatever the prevailing market rates are at the time.
So your 1% rate two years later goes up to 6%, 6.5%, 7%, 7.5%.
A lot of those people were counting on the value of the home to go way up in the interim period.
Or they were just crossing their fingers, hoping they'd be able to make the payments in the future.
But they got these cheap mortgages, and they were able to take advantage of it.
If they got in too deep and they borrowed more than they can afford, why in the world should they be bailed out?
And why in the world should the lenders who made the loans be bailed out?
And that's the other part of this.
For people who think that this is heartless, you know where the real push on this is coming?
It's coming from Wall Street.
Because many of the loans, especially the subprime loans, they were bought by some of the biggest financial firms in this country.
It isn't just Frank's mortgage.
It's Citicorp and Bear Stearns and Goldman Sachs, and a lot of others who bought a lot of this paper that now isn't very good.
So yeah, they'd love to see more liquidity put into the market.
They'd love to see a lowering of interest rates.
They'd love to see Freddie Mac or Fannie Mae coming at come in and rescue a number of these bad loans.
They'd love all of that because they don't want their loan to go bad.
But when you've got a private transaction here between a lender and a borrower, and it doesn't work out, please tell me why we should take the risk out of that.
I didn't get a mortgage with a teaser rate, paid a fixed rate.
Because I figured rates were pretty low and I wanted to take advantage of that.
If I would have come in and gotten a mortgage three and a half or four percent lower than the one that I had, yeah, I would have saved money, but I was taking a risk.
We can't be eliminating the risk here.
And as for this notion that we're going to be putting all sorts of people out on the street, I don't buy that either.
The worst mortgages that were made were probably made to people who shouldn't have been buying a house in the first place or shouldn't have been buying a house as expensive as the one they were buying.
They lived in that house, they got the advantage of that.
Since most of these mortgages that have gone bad are ones in which people put almost nothing down, really, how are they being hurt?
If you put down 2% on a home, and that's what some of these things were, and you live there for two or three years and now they're foreclosing, how are you being hurt?
You got to live at below market rates and at below market cost for a couple of years.
Now you're not paying back what you owe.
And we need a government bailout.
This problem isn't limited just to mortgage.
There is concern about a lot of the junk bonds that are out there.
Well, junk bonds were too cheap, too.
There was only a two and a half or three percent gap between junk bonds and junk bonds are those that are considered not credit worthy.
And more highly rated corporate bonds.
Well, that shouldn't have been either.
So now there's a little bit of a washout here.
That washout needs to occur.
Otherwise, you're simply going to have every lender perpetually making loans that shouldn't be made, violating most of their own standards about lending, and you'll continue to have homeowners seeing no reason not to go out and take out a mortgage that may have an interest rate higher in the long run than they can afford because they can get one that's cheaper in the short run, knowing that in the end, well, if it goes bad, the government will bail us out.
It's just like flood insurance or hurricane insurance.
Why take it out if there's going to be a bailout if there's a flood or a hurricane?
I think that what's happening here is painful for those involved.
The lenders who made the loans and the homeowners that borrowed the money.
But it's something that's necessary and needs to occur.
The fact that some people are hurting here because they made decisions that haven't worked out is not something that ought to be fixed by the government.
If you take on risk, that means just that.
And to create this safety net here, so that everybody who's fallen during the risk can be made whole again.
Not only isn't fair to all of the people who are making their payments, it's just a guarantee that we're going to continue to have bad loans made in the future.
And remember, a lot of these people who took out these teaser rates, it's been sensational for them.
If you went out and got a mortgage at 1% for two years, and now it's adjusting upward, and you took advantage of that to get into a home that might have been a little bit more than you could afford, and now you're making your payments.
This has been great for you.
The majority of loans, including subprime loans, have worked out.
And for some people, they went from renters to homeowners and they have built a future for themselves.
They're the ones who are making the payments, they're the ones who figured things out.
They're the people who have managed their own incomes and make good decisions.
Instead of constantly worrying about the people who make the mistakes and who aren't being responsible, maybe we ought to be a little bit more interested in those who are doing the right thing.
And I'm referring here to both the lenders and the borrowers.
So I'm saying there shouldn't be any bailout.
The federal government shouldn't do anything.
I don't want Bernanke and the Fed to pump more liquidity into the markets.
I don't want to see a lowering of interest rates, and I don't want to see Congress changing the charter for Freddie Mack or Fannie Mae.
I don't want them to do anything.
I think we should allow the market to play itself out here.
1-800-282-2882 is the number at the Russian ball program.
Agree or disagree.
My name is Mark Belling, and I'm sitting in for Rush.
I'm Mark Belling sitting in for Rush Limbaugh.
So Goldman Sachs and Bear Stearns and the big Wall Street firms are crying, and the Republicans are listening.
And a lot of individuals, the so-called little guy, are facing foreclosure and they're crying.
So the government's going to race into the rescue.
Why?
I just challenge the notion that this is a good thing.
Let's go to the phones.
Coco Florida, Tim.
Tim, you're on the Rush Limbaugh program with Mark Belling.
Hey, Mark, uh, great show today.
Um I told you call screen, I've been a mortgage broker for 10 years, and I was letting them know that in a couple years ago, people that were getting into the subprime market, you've got to understand these people have credit issues to begin with.
And when you offer them a loan, you offer them several different scenarios.
The scenario that's coming to roost right now is the 228, which means that the loan has a fixed rate for two years.
They choose that loan with the the logic that a couple years from now they're going to be able to refinance into a fixed rate loan.
But at the time, they are offered most of these loans offer a 30-year fixed, but the rate, say two years ago, instead of getting six and a half, they're getting eight and a half.
Right.
And they are they were assuming that they would be able to stay at six and a half or even lower.
Well, they may they made that they made that judgment, and it didn't work out for them.
They could they could have simply taken a fixed rate loan two years ago that would have been a little bit higher and made higher interest payments then, but lower interest payments now than the prevailing rate, they chose not to do it.
Why should they be bailed out?
And why should the lenders who made those loans who are now facing the possibility of being stuck with a house that's hard to sell right now since nobody's selling a house, why should they be bailed out?
I just missed I just missed the whole point here.
I'm also not sure exactly who the victims are, because the people who took out those loans got to live in the houses during the period that they were there.
If they didn't have the loan, they would have simply been throwing the money away on rent at the very same time.
So who's victimized here?
You had a bunch of lenders making loans that they probably shouldn't have made, and you had a bunch of people taking out loans that they probably couldn't afford or on terms that were too risky for their own personal situations.
I just don't see a need to step in here, and if we do, we're merely guaranteeing that this is going to continue through every real estate cycle that we have.
I totally agree with you.
I do not believe that they should bail anybody out.
This is a way that the up the private market, the private mortgage market cleanses itself of these bad loans and bad risk.
And as I said, the same thing's happening with corporate debt right now.
Junk bonds, and that's merely a loan that is made to a company that doesn't have the best investment rating, are supposed to pay higher interest than loans that you would make to General Electric because that other firm doesn't have the same financial situation as this GE.
That's why the interest rates are higher.
And when you keep tampering with these things and putting in bailouts and pumping in money to prevent defaults and to prevent what they call fiscal meltdowns and so on, you're merely guaranteeing that everybody's going to go after the risky loan in the future.
There's a reason they call it risk, and there's a reason why the reward is greater if it works out, just as some of your clients who took out these loans and are making their payments and got the house before the real estate market started to go down, they're doing just fine.
The market can work here, and we don't need to provide safety nets for lenders and borrowers that I think don't deserve them.
Thank you for the call, Tim.
To Waltham, Massachusetts and Ernie.
Ernie, it's your turn on Russia's program.
Good afternoon.
Thank you for taking my call.
Thank you.
Couple of points.
Number one, the US government doesn't produce anything, and when they talk about the government spending money here and there, that you have money in mind.
Now, we bailed out Chrysler, okay?
That that's a fact.
Right.
And so what I'm saying right now is that the other thing is that we we uh we spend billions uh in foreign aid around the world.
So why the heck can't we come up with a structure to help these people that are have a problem that have paid their taxes for years, and to say that, you know, it well, you know, they basically Well, okay, Ernie, uh my answer to that is why should we?
What do you mean by should we?
Why should we why should we spend billions of eight car and aid around the world?
Well tell me that that that might be next.
That might that might be do you want to hear the answer or are you just gonna keep asking the question?
That might that might be next hours topic.
I'm not arguing whether we should have bailed out Chrysler.
I'm not arguing that we ought to waste a fortune on mass transit programs around the country.
I'm not defending the welfare state.
All I'm saying is that if you borrow money and you don't make your payments, it shouldn't be Joe taxpayer that has to bail you out.
The fact that you can cite other federal spending that you don't like is not an argument to do this federal spending.
If your only justification is going to be to come up with everything that you perceive to be a waste of money, you've got a pr a pretty weak argument.
I want to know, never mind foreign aid, why we should do this.
You're not going to come up with a reason, are you?
Well, can I speak?
Yeah.
This country in Lexington, what we have in Washington, in my opinion right now, is an uncivil rule.
This country is understanded from the inside, not the outside.
And the reason why we should bail out people who aren't paying their mortgages is total bailout.
I'm saying there should be some mechanism in place to assist them.
Why?
We assisted.
Now you're gonna go into all the other things that we've assisted, and you're not going to come up with an answer.
And I don't know if the reason is that one can't that one doesn't occur to you or if you're in that situation yourself.
I don't know the answer to that.
But to simply cite other stupid federal spending and other stupid federal decisions as a justification for this doesn't make any sense.
This is a problem that needs to work itself out without government intervention, or we're going to repeat the cycle all over again.
Mark Belling for Rush.
Just at a guy arguing with me about the Chrysler bailout.
Wasn't that nineteen eighty?
I think I was nine or something then or something.
Plus, wasn't that Carter?
Pretty sure that was Jimmy.
Don't blame me for what Jimmy Carter did.
Uh New York Times today talking about this discussion going on in Congress and in Washington about what to do to deal with the mortgage crisis.
There's a quote here that makes some sense, and you're not going to believe who it comes from.
It comes from Barney Frank.
You simply cannot you cannot simply decree that there will be no foreclosures.
You can't just give people a free ride.
Now that doesn't believe mean that he doesn't want something of a bailout.
Means that he doesn't want a total bailout.
The story says Frank and other Democrats are pushing for changes, they hope will free more money for lower income families and shift the balance of power between borrowers and lenders.
The proposals would expand the house program of insuring home loans under the Federal Housing Administration, part of the Department of Housing and Urban Development, create a national fund for affordable housing.
Now let me stop here.
That's a big part of the problem.
So-called affordable housing.
And loans for low-income people.
You had a lot of people who simply don't have enough income to justify the mortgages they were taking out.
We were run and the mortgage industry itself and the banking industry itself is just as responsible as those people who took out those loans.
As for the argument, the proposals include insuring home loans under the Federal Housing Administration.
There is an enormous industry already in this country that provides mortgage insurance.
Back in my own hometown of Milwaukee is, I think, the largest MGIC.
They're taking a hit right now.
That industry's stock price is suffering.
All the stocks are down, all the mortgage insurers.
Because they got involved in something that turned out not to work out for them.
The downside of risk is that there is some pain.
If you don't have the potential for pain, you're never going to have any risk reward factor that makes any sense.
If the problem here is that loans were made that shouldn't have been made, the way to correct them isn't to run around and provide more insurance that guarantees that no bad loan will ever really go bad.
If the private companies that were insuring these mortgages are insulated from the downside of mortgages that go bad, then every bad mortgage is going to be approved.
As for the supposed imbalance between lenders and borrowers.
Well, the lender doesn't make out if they make a mortgage that they have to foreclose on when they buyer only had one percent equity and the value of the house is plummeting.
You think all these banks want to sit on housing stock all over the country want to try to sell a house now?
No.
That's why they want this bailout as much as many of the borrowers do.
To the telephones in Coral Springs, Florida, Robert, it's your turn on the Rush Limbaugh program with Mark Belling.
Hey, Mark, I'm glad glad to hear you uh set it in for Russia today.
Thank you.
You know, you're you're you're absolutely correct, but one piece that you're that you're not getting, that first of all, the market can't uh the market is the only solution.
But what you're not getting is most of these subprime loans were made with a split loan, an eighty percent first and a ten and a twenty percent second.
So the the real loser is the lender that uh happened happens to be holding the second mortgage.
Because they don't get to foreclose.
You're right.
Right?
Those are the ones that are gonna get wiped out.
The first mortgage, the lenders that were making the had these loan programs available to to anybody like you've said, many of them shouldn't have been buying a home.
The lender's really not gonna be losing.
Well, it depends on who the lender and it depends on who the lender is.
You're right, when some of them are structured in that fashion, the company that issued the second mortgage is the one that's going to be holding the bag, holding the bag.
But everybody was a grown-up here.
You can't, if you're a seven-year-old, go in and buy a house and get a mortgage.
You've got financial institutions that knew what they were doing.
You have major Wall Street firms that bought up a lot of this subprime paper that knew what they were doing, chasing that extra quarter to a half percent of performance per quarter, and you have a lot of homeowners who knew what they were doing.
Now we'll hear these arguments.
Well, I didn't know my loan was going to go.
Come on.
You didn't loan know your loan was going to go up.
I've never met a person who didn't know what their interest rate was.
They knew exactly what it was, and if they didn't, if they didn't pay attention to what their rate would be, what are we supposed to do?
Walk them through life?
What about all the people who knew exactly what they were doing?
And they took on that risk.
And what about all the people who are making their payments now?
You know, the subprime loan itself isn't a bad thing.
It's not a bad thing.
It allowed a lot of people to get into housing who otherwise wouldn't be in.
It helped fuel a very, very strong uh escalation of housing values in this country that has really set a lot of people up for very, very good lives.
The fact that the product is available and the product may have been given to some people who couldn't make their payments doesn't mean the product is bad, just as the fact that some companies right now may be in danger of defaulting on their junk bonds, doesn't mean junk bonds are bad.
There are zillions of corporations in this country for whom that was the only way they could get financing.
They now employ millions of Americans.
The junk bond isn't bad.
All these things are loans that have some risk.
That's all they are.
And we can't take the risk part out of that.
And we shouldn't be using government policy to try to bail out a bunch of people who were involved in deals that may go bad.
If so, should we bail out every purchase out there that turns out not to work out?
But by guy buys a hardware store and three months later, Walmart comes in.
Should we provide a safety net for him?
Should we pay off his loan?
How far do we take this?
Thank you for the call, Robert.
To Kansas City and Mike.
Mike, it's your turn on the Rush Limbaugh program.
Listen, before you end this bailout now, um, I sold a uh Pential home down in South Florida, and uh after owning it about three years, didn't gain anything.
And then a couple years later it doubled in price.
So I need to make up the difference there that I lost.
And uh maybe the guy that sold it after me could split his profit.
And to earning, I'd like for Ernie to just pick out one person he knows is having a problem with this loan, and he could help them work through this loan.
He could pay a portion of their monthly payment.
Well, we always like Yeah, I know.
We always like to think that the government isn't us, don't we?
Yeah, if if Ernie knew what it would cost him for the government to bail it out, it'd be easier for him to cross the street and help the guy monthly.
Well, in a lot of these b a lot of the solutions they're talking about isn't direct cash.
It's worse.
It's messing with the structure that is in place.
The mortgage business in America works.
This is something that is not a problem.
You've got houses out there that are selling from anywhere from twenty-five thousand dollars to millions and millions and millions of dollars.
Most Americans don't have that money in their checking account.
The only way they can get into a home is to borrow it.
And over the life of that borrowing, they pay a lot of money in interest.
In fact, first time I ever bought a house, you get that statement that they give you when you realize what your credit costs are going to be, how much you're gonna be paying in interest payments for the years and your eyes just bug out, but it's the only way to get into a home.
That's why you have lenders out there that are willing to make these loans because they get a whole lot of money in interest payments.
In the meantime, people get an asset.
They gradually pay off their home, they have a not only have a place to live, they have a financial asset for themselves.
They have a place to raise their families, and they have something that is now worth something as they get up there in years.
It's something that works that allows people to get into a very, very expensive product, a home, and do so reasonably and affordably.
When real estate starts to go up, it's a big windfall for a lot of people.
The problem is that everybody then wants to get in on the act.
And if you buy anything after it's gone up a long, long time, you run the risk of being wiped out.
This isn't that much different than all the people who bought those dot com stocks in 99 and the zeros.
They were inflated.
Those stocks went down to nothing.
Should we bail all of those people out too?
They took on a lot of risk.
It happens.
The mortgage industry in America and the ability of Americans to take out mortgages works.
The fact that for some people, it doesn't work out, isn't something that we need the government to step in and correct because all they'll do is ruin the whole thing.
As in the same fashion than any other time that they intervene in private markets, there are unintended consequences with that intervention.
To Naples, Florida, and Harry.
Harry, it's your turn on the Rush Limbaugh program.
Hello.
Hi.
Yes, oh I uh thank you very much for taking my call.
I had a thought, which is uh I think a novel concept which might be able to help the situation.
Uh you can uh purchase real estate in a self-directed IRA, and of course many people who have IRAs aren't even aware of that, and very few people do it.
Uh perhaps if the government, since there's trillions and trillions of dollars tied up in IRAs, offered some kind of an incentive, like let's say you uh were able to develop a rough real estate IRA by taking money and transferring it out of your IRA to purchase real estate.
Well, why do we need to do any of that stuff?
Excuse me?
Why do we need to do any of that stuff?
Oh, well, because I think I'm I'm not interested in bailing out the uh the uh people who took out the bad loans at all.
I'm interested in the overall economy and the fact that even though uh this doesn't impact most of us directly because we didn't do that, it it still impacts us because of what's going to be happening to the economy.
Let me throw out a radical notion.
Maybe the decline in housing prices that we're seeing right now and the softness in the real estate market is a good thing, not a bad thing.
Maybe prices got higher than they should have been.
Correct.
Yeah, I think we're just assuming that this is a problem because there happens to be a downside for the economy.
Now I understand a lot of people who had a house that was worth 150,000, that house went up to 400,000, and all they did was go out and take out a home equity loan on the full 400,000, and they don't have a penny penny in equity right now, and now they see that house going back down from 400,000 and they realize they can never sell it for that.
I understand that.
But maybe the house never should have gotten to 400,000 in the first place.
Remember also that when you have a major escalation in real estate prices, it makes housing not affordable for the next group of would-be buyers to step in.
That's why prices need to come down and find their proper level.
There are a lot of people who believe that right now is a great time to buy a house because there are a zillion of them on the market, and a lot of buyers are starting to lower their prices.
This might not be something that we have to assume is a bad thing.
Now, for people who got overextended and become cash poor, it's a problem for them.
And yes, there's going to be ramifications on the entire economy because they're going to be tight on money for a while.
That doesn't mean that the government ought to step in and solve it.
If things got too high and they're now coming back to reality, I'm not sure that we want what reality ought to be to be altered by creating a number of government programs here.
The fact of the matter is that it's pretty doggone easy in this country to buy a house.
You've got lenders that will make loans to people for 95% or more of the value of the home.
All we ask is that you pay it back.
And I don't think the failure of some people to pay it back ought to be perceived as a crisis that the government needs to step in and get itself involved with.
Thank you for the call.
My name is Mark Belling, and I'm sitting in for Rush Limbaugh.
I'm Mark Belling sitting in for Rush Limbaugh.
At the state level, a lot of states are passing laws to now tighten up on the mortgage business so that many of these loans are not made in the future.
And most people are saying that that's a good thing.
No, it's not.
The government should not be telling a lender and a borrower what the terms of their mortgage should be.
Furthermore, for some of these people who right now need to refinance because they're going to be strangled by their existing mortgage.
If you tighten terms now, you're going to make it impossible for them to refinance.
Just allow people to try to work this out on their own.
Secondly, we're acting like half the mortgages in America are going bad.
We're acting like this is the Great Depression.
The vast majority of mortgage loans in America are not subprime.
The problems are occurring primarily in the subprime market, and most of those loans are being paid off.
This is a small percentage of another small percentage of overall mortgage loans that are out there.
Let me throw another thing in there.
No one will know until five years from now whether or not housing is still overpriced or whether this correction has created a tremendous buying opportunity.
If we all did know that, we all would have bought Microsoft stock in 1985.
We don't know.
But I think it's certainly possible that this is a great time to buy a house with this huge inventory that's out there on a lot of people who can't make their payments now putting their homes for sale.
We'll know that in a few years.
Do we really want to meddle with the mortgage market since the market itself is the only real answer to get ourselves out from underneath this?
I think the answer to all of those is no.
To Emlinton, Tennessee, Rick, it's your turn on the Rush Limbaugh program with Mark Belling.
Hi, Mark.
Thank you.
Tom, I just wanted to make a comment.
There's a gentleman who was comparing the uh bailout with the mortgage loans to the Chrysler situation.
And actually, Chrysler was not a bailout.
Uh Lee Cochle, if I remember I watched him sign the final check he paid the payment back to the government for that loan.
Well, you're right.
They did give they did give the money back, and I don't recall all the details of it.
And I do know this.
There was a tremendous debate in this country as to whether or not we ought to we we should have done it.
Since then, the financial markets have really changed.
Michael Milken was a genius.
For better and for worse, he's a genius.
He came up with this concept that there needs to be a way for companies that don't have the greatest credit in the world to be able to obtain financing.
At the time, you either had the most solid business there was, and you could get money from anybody, your bonds were out there on the public market, and anybody would buy, or you couldn't get any money at all.
Milken essentially invented the junk bond.
It was out there, but he's the guy that brought this thing to the mainstream.
All the junk bond is is a loan in which you pay more money on your interest rate than somebody else would have to pay.
You know, the big revolution in Las Vegas, the Mirage Hotel started it all.
It was built with junk bonds.
Prior to when the Chrysler thing was going on, we didn't have the junk bond out there, which would have been a way to deal with that.
The auto companies themselves, right now, their bonds, I think are close to being rated junk because of their financial situations.
The same thing is happening in those credit markets as is happening in housing.
They got too low on the interest rates, and there are now some defaults that are looming out there.
The market will correct for that by finding the proper level of rates.
In the cases of corporations that go under, the bondholders will be left holding the bag.
In the case of mortgages that go bad, the lenders will hold the bag.
I don't think that that's an American crisis.
Will it have an impact on the economy?
Yes.
Is it something that the government needs to meddle in?
No.
The one thing that we've got going right now in our country that works is home ownership and having the gov the government step in here could screw up a whole lot more things than we're presently aware of.
I'm Mark Belling in for Rush.
I'm Mark Belling sitting in for Rush Limbaugh.
Talked about unintended consequences.
Let's imagine Fannie Mae and Freddie Mack, two private companies that were chartered originally by the government, step in to the housing market to a greater extent than they are now, raise the limits on their loans to deal with this so called crisis.
All that will do is stop housing from finding its proper level.
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