Tilton BB and SIKSUKR have it right, IMO. It's convenient for folks to want to point fingers and assess blame, but those two actions fail to address a lack of personal responsibility.
Just because I "qualify" for a ridiculous loan, mortgage or credit card limit doesn't mean I should take it. And I don't think it's the bank's fault for offering it. They take the risk of not getting their money back when they offer those absurd instruments. And to date, I haven't heard of one single case where the borrower was forced, against their will, under duress, at gun point... to take on those debts! THAT IS THE ROOT CAUSE OF THIS WHOLE MESS.
It sounded great when Frank & Co. wanted everyone to have their own home. But as noted above, not everyone can afford to or should have their own home. But that's not a de-regulation issue. It's not a bank issue.
It's a personal issue to take on a loan you can't afford to pay. Sure, it's a little sketchy for a bank to offer an interest-only mortgage payment. But if you don't understand what that means and are foolish enough to think it's the right lending instrument for your needs, well, that's your issue, not the lender's.
"Bailout" has a nice ring to it, but it's not really what DC is trying to do right now. It's more of a giant loan backed by every taxpayer in the US. We, as a whole, have much more financial capacity working together to buy these bad loans, get them off the books of the financial institutions, hold on to them for 5, 10 or 15+ years, then sell them off when they are worth the paper they are printed on. For example, we, the US taxpayers, buy the $250k mortgage from Bank A on the property currently worth only $150k due to the declining market, hold it, and some day down the road when it's worth $240k, $250, or maybe even $260k, we sell it. So we're not throwing our money away, but we -- the taxpayers -- are putting our skin in the game to help everyone involved until everyone settles down, stops panicking, and we get some stability back into the market.
So here we are today waiting on DC to solve all our ills. Never a comfortable spot to be when we're looking for Washington to employ the common sense and fiscal prudence we need right now. It's ugly. And I'm not sure what the solution is. Personally, I'd like to see some banks fail. If you invested heavily on risky loans and bought a book of business that included mortgage instruments that the lenders couldn't afford to pay, well, that's business. I just personally don't think our government should be in the mortgage business, but that ship sailed long ago. And the best idea I've heard to date is to offer a form of insurance to help companies, but not put cash on the table right now. Increase the FDIC of $100k to $1M, stop folks from running on the banks, and not force through some legislation that we really haven't thought through completely. After all, the "houses for everyone" legislation took a long time to pass. Can you image the ramifications 10 years from now of something we threw together in 10 days?
Keep doing what you're doing. Keep working. Keep saving what you can. And if you can afford it, now is a great time to be getting IN, not OUT, of the market. Buy low, after all. But probably best to stay away from bank stocks at the moment.
