BluefoxToday blog : Will the bailout plan restore confidence in the marketplace?

Will the bailout plan restore confidence in the marketplace?

The answer is maybe. Time will tell what its short- and long-term effects are on the battered financial sector. The first read indicates that Wall Street wasn't all that impressed as it dropped 157 today after the measure was approved in Washington. There are many skeptics about its potential to cure the ills that were mainly caused by irresponsible mortgage lending practices on all levels and speculative real estate investments and schemes.

For one, everyone should have taken more time in putting the complex plan together. A week or two isn't anywhere near enough time to come up with a comprehensive, well thought-out blueprint for a massive project like this. Congress did hold off the initial Treasury request for a quick approval, mostly motivated by politics, which would have been by many accounts disastrous. The delay did give those who were aiming at a broad-based, responsible outcome to get some kind of a handle on what they were supposed to do. Yet, as it now stands, there seem to be a gazillion details that still need to be worked out and that leaves the door open for all sorts of abuse and mayhem. Haste is the enemy of lasting solutions.

Some of the measures appear to be taking the plan in the right direction, toward restoring confidence in the financial arena and also protecting the taxpayer who is footing this mammoth rescue bill. Federal agencies, supposedly meaning Fannie Mae and Freddie Mac, can modify mortgages in distress. Details on this won't be known for at least a few weeks but it could become a helpful outlet for many struggling homeowners.

A must point was to get an oversight function for the entire effort. Without it the Treasury Secretary would've been pretty much the only authority calling the shots and that would've been potentially very hazardous. After all, he is the one who has been watching the marketplace come unglued for the last several years and didn't have the capacity to correct it. How could anyone trust him to fix it now? Hopefully it has all the needed power to act in the best interest of the taxpayer. And the government can through warrants get equity positions in companies so that if and when bailed-out firms have future gains taxpayers will also benefit from that.

As more details are worked out in coming days and weeks, the picture will become clearer and preferably will yield true results.      



Provided by: 

Esko Kiuru
Mortgage, real estate and apartment industry analyst - syndicated mortgage, housing and property management blog
My cell: 702-499-1006

Comment balloon 12 commentsEsko Kiuru • October 03 2008 07:32PM


Esko, you are right, time will tell with this bill. The unemployment numbers rising so steeply wasn't good for September. The point on the bill was that it was needed because it even would have been worse without it. That's the theory at least.

Posted by Gary Woltal, Assoc. Broker Realtor SFR Dallas Ft. Worth (Keller Williams Realty) about 10 years ago

Lets hope that things will go to where it needs to be, guess time will tell---Bart

Posted by Bart Whitmore, Real Estate Agent (Keller Williams- Louisville) about 10 years ago


Not sure what will happen but I guess we shall find out soon enough.

Posted by Neal Bloom, Realtor CRS-Weston FL Real Estate (eXp Realty) about 10 years ago


It seems to me that the house version was right. I would have voted against the Senate bill because of the addons.

The oversight was needed, as was the staged funding, I think.

How will they handle modifications? How will this help the credit markets which have developed to be the real threat to recover? How will the global market handle this?

Just saw an article on Iceland - banks are crashing everywhere.


Posted by Richard Byron Smith, NMLS #184479, Mortgage Loan Officer (Mortgage Loan Officer, Fairway Independent Mortgage Corporation NMLS #2289) about 10 years ago

I think in time, we'll all learn about the many aspects of this bailout that seem far from helpful but more like serving the many lobbyist factions and industries. As professionals in real estate, we'd simply like the credit markets to loosen up. But, nothing, in this bailout that i can see will help the millions of homeowners who can no longer afford their homes, and who will walk away. This will continue to tumble housing which will keep the economy imploding.

Posted by Ronnie Margolis, Kauai Realtor - CDPE, ABR, RA - On Top of the Aloh (KW Kauai) about 10 years ago

Esko: Not immediately but I think by next Spring or Summer a recovery should be on its way. It will be modest in scope but, for those of us still around, we'll probably see our business increase by 1-2 loans/month. The difference will be that the buyers are interested again and the sellers will realize they still need to sell. This is totally missing from our market right now. Most of the activity is refi's. We will definitely see. Have a nice weekend!



Posted by Paul McFadden, Pest Control, Seattle, WA. (Paratex) about 10 years ago


At least they did something, although I wish they had taken more time with it.

Posted by Esko Kiuru about 10 years ago


The jury is out on this one for a while.

Posted by Esko Kiuru about 10 years ago


Hopefully there is flexibility should things not work out right.

Posted by Esko Kiuru about 10 years ago


Strong oversight was a must on the measure, I agree.

Posted by Esko Kiuru about 10 years ago


They should have paid more attention to struggling homeowners.

Posted by Esko Kiuru about 10 years ago


Recovery is peeking from around the corner in many areas, like here in Vegas. Let's hope this bill will give it a boost.

Posted by Esko Kiuru about 10 years ago