Mortgage Meltdown Mess: What to do?

"The Final Meltdown"?

Naturally there is a lot of chatter on the blogs about the $700 Billion bailout. Let’s face it: if you have a blog, you have an opinion. And there are a great many people expressing their opinions about the unprecedented bailout.

I am no different, except I maybe have more questions than opinions because, quite frankly I’m not entirely sure I understand the problem. I mean, I get the bad loans. I understand why loaning money to people who can’t pay you back is bad for business, but once you start talking derivatives, credit swaps and the like I get a bit befuddled.

Some questions I’ve been dealing with of late are:

• How did we get into this mess?

• What does it mean to the man on the street?

• What can we do about it?

So, here are some items I’ve found in my quest for the answers. Perhaps they will help you too, or perhaps you have some of your own links you’d like to share?

How did we get into this mess?

Ron, over at The Wisdom Journal, has an excellent post detailing the road to ruin titled The Mortgage Meltdown Signs Were There All Along.

For a description of why the problem has become bigger than simply bad mortgage loans, check out Another devil in the financial crisis.

What does it mean to the man on the street?

I mean Main street here, not Wall street . It’s obviously bad news for Wall street, but they had a hand in creating the mess so I’m not too concerned about them. But I happen to live on main street, in a place called reality I want to know how will this affect me?

Well, in short, think recession. Bad recession. High unemployment, high interest rates (especially for those with poor credit ratings). You can read What’s at stake for the economy for greater detail.

What can we do about it?

Ron at The Wisdom Journal said it best in Where Do We Go From Here? How About Back To The Basics. Essentially, live within your means, fund your emergency savings, and jettison the debt. Oh, and while we’re at it – how about changing our life style so we don’t rely so heavily on credit and buy things today with tomorrow’s money:

“He who spends more than he earns is sowing the winds of needless self-indulgence from which he is sure to reap the whirlwinds of trouble and humiliation.”

-Arkad, the Richest Man in Babylon.

Photo, “The Final Meltdown”, by Jill Greenseth

Related Posts:

• Is the Bottom Near?
• College Grad Unemployment and Useless College Degrees.
• Are Rising Rent Prices in 2012 Good for the Housing Market? (Video)
• Older Americans Are 47 Times Richer Than Young – So What Or Injustice?
• Unemployment Rate, Cities With Highest and Lowest Growth (Infographic).

Is the Bottom Near?

Is there a Bull on the horizon for the stock market?

I wrote a post last week called “Waiting on Buffet“. The general point of that post was that many experts have put forth the proposition that the stock market will be at or very near its bottom when two basic events happen, specifically:

1. A big fish needs to go under.
2. Warren Buffet needs to take an interest.

Since that time, it appears very likely that these two indicators have revealed themselves. First, with Buffet announcing his $5 Billion stake in Goldman Sachs and now with the Washington Mutual failure.

As the article at the link above notes, WaMu is the biggest bank to fail in US history. I’d say this qualifies as a “big fish”, and $5 Billion (even from Buffet) is no small interest. Could this mean we have bottomed out and the rise of a new bull is on the horizon?

Maybe, but even with these indicators met I think there is still so much fear and paralysis in the financial market that some form of Government action will still be required to kick start the financial sector again – both domestically and abroad.

Here are some articles that put the whole mess in perspective:

• What’s at stake for the economy.
• Another devil in the financial crisis.

I am by no means a fan of expanding governmental control – especially of the financial market – but it seems likely that some form of government expansion will occur. At any rate, it certainly seems like some action on the part of the Government is needed, at least in a psychological sense to calm fears and uncertainty in the markets and for ordinary citizens to regain faith in the banking system in general.

I think my biggest fear in all this mess is not that the economy will fail, or fall into recession, but that the governmental cure may be worse than the disease.

Photo by bastian.

Related Posts:

• Mortgage Meltdown Mess: What to do?
• College Grad Unemployment and Useless College Degrees.
• Are Rising Rent Prices in 2012 Good for the Housing Market? (Video)
• Older Americans Are 47 Times Richer Than Young – So What Or Injustice?
• Unemployment Rate, Cities With Highest and Lowest Growth (Infographic).