Many pieces go flying from mortgage implosion a payday loan might be necessary

WASHINGTON – Your taxpayer credit card is on the counter, all set to get the economy moving again. Caveat emptor – let the buyer beware. The value of the mortgage-backed securities the federal government is set to buy is hard to decipher when the good, the bad and the scary are bundled together.

Quoted With Edits From: Many pieces go flying from mortgage implosion (Dallas Morning News)

Banks Get Federal Intervention

The bailout as we have been hearing so much of in the news, some are speculating that the government will profit from the value of the mortgage backed securities that the fed is set to buy. These securities are largely considered to be the driving force of the current mortgage crisis.

How did this happen?

Pushed by Wall Street, these securities, also called “credit swaps” were basically insurance policies that were purchased by homeowners from the banks. The flaw however is that they were creatively called credit swaps to avoid insurance regulations thus the banks weren’t required to set aside the required funds to protect themselves if these faulty securities came due. As the economy began to slip, The securities put many banks in the red, hence the need for the government to bail them out with a huge payday loan.

Americans currently hold 10.6 trillion in mortgage debt. $1.8 trillion of that debt accounts for mortgages that are underwater or loans that are higher than the value of the property.

The expected bailout is currently set at about $700 billion dollars. It is quite possible however, that this price could be significantly higher in the long run as we are only beginning to see the fallout of the mortgage market. There are still trillions of dollars worth of these credit swaps that were sold so it’s hard telling how many more will be redeemed and how fast.

The Bailout may bring relief to the nations banks but additional hardship to consumers which may cause more Americans to rely on a payday loan. We can already see the “credit crunch” happening as more and more banks tighten up there lending standards. They to are feeling the financial strain of mortgage defualts.

What to expect…

Expect to see bank fees rise as they try to make up lost revenue. Credit lines may also be reduced as banks fear that consumer will borrow what they may not be able to pay back.

The American people will just have to wait and see how it plays out. The taxpayers will certainly get stuck with the tab and may need a payday loan to cover the expense.