$700 Billion Bailout: The Emergency Economic Stabilization Act and What It Means to You, Your Money, Your Mortgage and Your Taxes Kindle Edition
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From the Back Cover
Praise for Muolo's Chain of Blame:
"There's no time like the present to read this one. Talk about a whopping taleand it happens to be true."
"Chain of Blame offer[s] instant history on what may turn out to be the worst economic disaster of our time."
Wall Street Journal
"For the federal investigators now piecing together the history of who knew what when, Chain of Blame's storehouse of stories provides a good place to start."
Is America a sinking ship? With the economy in the midst of crisis, the United States government has approved an unprecedented $700 billion bailout of the battered financial industry.
$700 Billion Bailout is an analysis of the controversial Emergency Economic Stabilization Act and explains in easy to understand language what the bailout bill means for individuals. The bill, described as the $700 billion bailout . . . and $110 billion in tax breaks, will include tax breaks shielding millions of taxpayers from the alternative minimum tax this year, increase FDIC insurance for bank deposits from $100,000 to $250,000, and provide support for Wall Street's floundering financial institutions. But what does this truly mean for people on Main Street?
The book provides understandable analysis of the bill's provisions and offers "to do" and "not to do" steps on how the bailout bill impacts individuals. Whether the plan will work, and how we can prevent this from happening again remains to be seen, but with $700 Billion Bailout Paul Muolo gives us a critical tool for deciphering perhaps the most sweeping piece of legislation since the Patriot Act. --This text refers to an out of print or unavailable edition of this title.
About the Author
- File size : 678 KB
- Word Wise : Enabled
- ASIN : B001OWDXQ6
- Publication date : December 11, 2008
- Print length : 208 pages
- Lending : Not Enabled
- Publisher : Wiley; 1st edition (December 11, 2008)
- Screen Reader : Supported
- Text-to-Speech : Enabled
- Enhanced typesetting : Enabled
- X-Ray : Not Enabled
- Language: : English
- Best Sellers Rank: #3,464,433 in Kindle Store (See Top 100 in Kindle Store)
- Customer Reviews:
Top reviews from the United States
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Additional information on credit default swaps and mortgage backed securities could have been helpful, but that may have taken the book away from its intended audience: the average American tax payer.
At the time that EESA was passed, there were $44 trillion of CDS outstanding - totally unregulated. The national delinquency rate for the $1 trillion in sub-prime mortgages is now about 35%; there are also about $400 billion in Alt-A, another $800 billion in home-equity loans, and an unreported amount of ARMs.
"Toxic" mortgages are believed to be worth, on average, about 60 cents on the dollar, with about 20 cents offered. (No explanation for the difference.) Muolo believes that total losses will run about $1 trillion, with only half recognized by holding entities so far.
Fannie Mae and Freddie Mac together own about 18% ($180 billion) of mortgage bonds backed by sub-prime loans, as well as $1.4 trillion in home mortgages, while guaranteeing still another $4.2 trillion.
TARP spent $250 billion to buy stakes in large, and small and mid-size banks (about half in each). Seven of the nine large banks didn't want to participate - it was done for psychological means to show that American banks are strong.
Legal costs alone for foreclosure run about $15-20,000; also the lost monthly payments, and damages caused by irate occupants who were forced out, plus vandals and thieves.
Down payment assistance programs are no longer allowed - found they went bad much faster than mortgages without.
Tax breaks included in the EESA focused on renewable energy - wind, refined coal, biomass, disposing of CO2, idle-reduction units on trucks, energy-efficient appliances, and some NASCAR etc. facilities. The bill also extended tax credits for solar energy, small windmills, plug-in electric cars, etc.
"Cram-downs" did not make it into EESA - mortgage-industry lobbyists did not like giving bankruptcy judges that authority to modify mortgages.
Recommendations: Bring back Glass-Steagall (repealed in 1999, led by Sen. Gramm), regulate the CDS market and hedge funds as well.
What's wrong with the author's assessment? Here goes:
1. Why were subprime mortgages even offered in the first place? In 1977, President Carter signed into law the community reinvestment act which began to issue ratings, CRA ratings, based on how lending institutions issued loans to low-income areas. At face value, the act sounds good as it was believed that lenders discriminated against people of color. Lenders were not compelled to lower their lending standards to issue loans to minorities or high-risk areas (crime ridden low-income areas).
2. During the Clinton administration in the 1990s, the CRA ratings of lenders took on a new dimension. If the rating was not high-enough, the bank would not be authorized to open new branches, or merge or acquire other banks until the CRA rating increased. This effectively put force of law to the CRA rating and banks naturally began to view loans to otherwise (credit) unqualified people as a cost of doing business. Voila! You now have the subprime mortgage sector created.
3. In 1999, President Clinton signed into law allowing lending institutions the ability to securitize these mortgages and the SIV or structured investment vehicle was born. By 2001, SIVs were now responsible for billions in securitized mortgages. It was during the latter 90s and early 2000s that Wall Street greed now takes these products to the next level.
4. From 2001-2006 over two dozen legislative attempts were made by President Bush to toughen regulation of Fannie & Freddie given that they too held trillions in debt and were also securitizing the underlying loans and selling them profitably using their status as a GSE (government sponsored enterprise) to sell them abroad under the cloak of backing by the Federal Government. As early as 2001, President Bush stated that the trillions in poor-quality loans held by Fannie & Freddie had the ability to turn the economy into deep recession if defaults of those loans were to increase. Each substantive legislative attempt was thwarted by filibuster by the Democrats. Rep. Barnie Frank was Fannie/Freddie's #1 recipient of campaign cash - he now chairs the house banking committee. Sen. Chris Dodd was Fannie's #1 recipient of campaign cash - he now chairs the senate banking committee. Sen. Hillary Clinton was the #4 recipient. Sen. Obama was Fannie/Freddie's #2 recipient of campaign cash. In fact, the top recipients of Fannie/Freddie's immense political clout & cash were all democrats.
5. In 2004, Federal Reserve Chairman Alan Greenspan encouraged Fannie/Freddie to securitize their loans further because Credit Default Swaps (CDS) reduced the underlying risk.
This major problem was the result of government (Congress, Presidents, & Federal Reserve) interference which came as a result of their intention to implement "fairness" into the private sector. It is completely wrong of the author to blame Wall Street as if they operated in some sort of vacuum. This was the doing of the Federal Government.
Did the author mention any of the points I just now made? No, not one of them. He covers the $700 billion bailout in good detail but his huge omissions underline his bias: free pass to government & progressives responsible for this fiasco.
Lastly, the book is roughly 160+ pages long. The first 83 cover aspects of the $700 billion bailout and how it relates to us in the author's assessment. The remaining half of the book is a reprint of highlights of the bailout bill. He could have simply made that a PDF download or included a link to that on the internet. It was really a waste of paper and slight of hand to make the book appear to cover more detail than actually is covered.
Top reviews from other countries
The book is 185 pages long of which only 89 pages deal with an explanation of the Act and TARP; the rest is a verbatim recital of excerpts from the 2008 Act and a Glossary, and therefore does not put too much flesh on to this most unique piece of legislation. However on the plus side it does give at least an understanding of the scope, magnitude and anticipated effects of EESA and TARP.
I do hope that the author Paul Muolo brings out a book in depth updating the workings and outcome of this Act as his co-authored books on the Credit Crisis "Chain of Blame" and "Inside Job. The Looting of America's Savings and Loans" were absolutely excellent full blown, well researched investigative works.