Hammerfist

This is a prime example of you not having a fucking clue what you are talking about. This is economics 101.

Krontak

Hammerfist and Dildo,

If you read the title of the post that is the crux of my argument, not me getting the %2.5. That is an afterthought.

Lets put it this way.

I currently do everything correctly. Pay my loan payments on time and even early. Don't speculate on property and get myself into trouble. Don't get greedy or drunk as Bush put it, and start trading peoples loans, BETTING on the market.

Market crashes...

My job decides to move from Virginia to Ohio. Oh crap. My house just lost $100,000 because a bunch of jackasses left the interest rate so low for so long because everyone was getting rich of trading loans they thought it was good and then, when the prime interest loan rates given to banks was raised to prevent inflation.

I walk over to my bank and ask hey, I'm going to be moving, my rate of %6.5 is so high, that if I move, I won't be able to rent to cover myself plus rent or buy at my new location. Can the government give me a low interest rate loan like you're getting? I'm good for it but I really need some help so I don't go back ten years on my life. Sorry, we can't do a damn thing for you and the government doesn't give hand outs, hand over the house.

Have a nice day.

Then, these same fucking jackasses turn around and beg the government for loans at a %2.5 rate so they don't crash because they got greedy and drunk on making money off others peoples loans, all the while paying their CEO's up the yin yang.

I was listing to C-SPAN the other day and they were calling off the 20 richest people in the DC Area. I swear, 1/3rd of them were from Fanny Mae/Freddie Mac. It's bullshit.

Hey, lets not socialize the consumer but lets go ahead and socialize private banks.

There is something seriously wrong with this picture. This is the same ownership society crap Obama pointed out in his speech. It's fucking hypocritical. Socialize the banks but don't socialize the hard working families.

I understand some staunch Republicans are Darwinist but when the fuck does humanity kick in?

Hammerfist

You stated Republicans are ok with 'socialized' banking, implying there is a socialization double standard. What the fed is doing now is what it has always done. It's what it does. Your looking for some of your partisan bullshit in areas you need to educate yourself.

Start here: "How the Fed Works"

Pay attention to discount rates. (Tip: Section 10)

Widem

Krontak....

I'm assuming your problem is you don't understand the rate you have.

The 2.5% rate you are seeing first off can't be borrowed at will by a bank at any given time. This would be what you call an arbitrage opportunity and what would happen is banks would borrow unlimited funs b/c they are guaranteed a profit.

IE. Borrow infinity at 2.5% then lend infinity at 6.5% = 4% gain on any cash you borrowed no matter what. For anyone who isnt familiar with arbitrage this is what it is.

Now furthermore, you have to meet requirements to even be eligible for borrowing from the federal funds.

Here is the kicker for what you are trying to understand Krontak and what I mean by you having to compare apples to apples and oranges to oranges.

This 2.5% rate is a short term rate and the rapayment terms for federal fund can be as short as a week or as long as 6 months - 1 year typically.

Im assuming your 6.5% rate is a fixed 30 year rate. If it is a 3-5year floater you need to find a new bank, but im almost positive its a long term rate b/c thats pretty typical of current long term rates. A long term rate is basically the average of all rates during ther period of the loan so currently we have unnaturally low rates thus the long term ones are going to be higher. This is actually very normal whereas the previous 10 years have shown on average an inverted yeild curve.

My short term rate on my Heloc is 3.8% which is a 1.3% spread on the Fed Funds rate. These are suppose to be short term funds, like a credit card, to be paid off quickly, and the Fed has lowered their lending rate to free up cash in a time when cash is scarce, thus hopefully pulling out the economy without increasing inflation.

The point is....

Your comparing the wrong things. A long term rate is under the correct assumption that the lending rate isnt always going to be 2.5%. It will take whatever the projected average over the terms of the loan and these projections can be anywhere from 4.5%-6% typically and then add a spread which is based off of a similar forula such as Fed Funds Rate + Risk + Liquidity +/- other investment opportunities = Your rate.

A big kicker no one really thinks about is liquidity. In the real estate market liquidity is suddenly a huge factor. No one is buying homes. For some reason if a principal such as yourself can't make a payment and the bank is forced to forclose its almost impossible to sell it. It then costs the bank more to carry not only the money they lost, but now a home. When this happens to a bunch of loans at once theres a pretty good chance this bank will be eligible for emergency funds.

Hopefully that helps.

Daedalus

I honestly don't know how you ever managed to get through school/college.

It seems to me, every time you run into something you don't understand, you absolutely refuse to listen to people who try and inform you.

Krontak

You're right Widem. It was apples to oranges regarding the rates the way I pointed it out.

Just forget I mentioned the rates everyone. It was a really bad example for me to use to get my point across. Thanks.

I guess the problem is when Government decides to socialize private banking industry but won't help out the consumer via HUD or anything else in the same way they have the banks, who more than often, took on this careless trading, its a bit hypocritical.

When Bear Stearns was about to collapse, the government backed the deal with tax payer money. When Freddie and Fannie collapsed because of the same problem, getting caught up in trading mortgage backed securities, the government stepped in again.

Now, why, at the whim of a pen, does the government bail out private banks but when the consumer is in a similar situation, it takes almost a year of beurocracy to figure out a way to help the every day consumer.

Krontak

Speaking of housing crashes.

Hammerfist

Omg seriously?

Krontak:

Daedalus

The problem is that they control a large amount of debt/money. If the government didn't bail them out, then there would probably be a domino effect of bank failings.

It sucks ass and seems unfair, but letting them just fail as "punishment" will probably just bite everyone in the ass, and hard.

Illuminator

I like this guy's views on the matter:

My Way News - Greenspan: Don't use Fed as a 'magical piggy bank'

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