Washington Mutual reverting to previous bad behavior after bail out by fed! (page 4)

wha happened?

Ok here we go:

Mortgage back securities are so different from CC debt.

An individual wants a home loan. Wamu comes up with that loan with a Fannie Mae Approval. Which means that when the loan funds, Fannie Mae will "buy" that loan and put into a pile of 100 loans and sell it to investors. Wamu makes approx 10 points on the sale and makes .250 per payment for servicing the loan. Servicing means collecting the payment

There are so many loans that have potential for foreclosure that Wamu has to hoard cash for potential buy backs of loans. If a loan goes bad, Wamu has to "buy back the loan." Which means they have to take the loan back from the investor, pay them for the loan amount and take the "hit". Which means the loss. In term they limit credit and preserve cash.

With this new legislation, the treasury takes these "bad" loans off the book. The treasury buys these loans at a discount, which allows banks to eliminate their potential write down loss. The treasury will negotiate the loans and sell them later at a higher rate. Is this crazy economics? Well banks can resume business without the fear of loans foreclosing and the necessary hoarding of cash to cover these potential write downs. Will that mean that crazy easy loans will return? Hell no. It will resort to the way lending was provided by showing income and assets, but at lower rates.

CC debt is what banks extend and not sell. It's very profitable and it keeps the consumer spending.

Well let's taske a look at history of government intervention.

There are many instances of the Government bailing out private/public industry at a profit:

Lockheed - 1971
New York City 1975
1982 The "Big Three"
1994 Mexico bail Out

Keep in mind that AIG is getting a bridge loan at 11%. That's practically Hard money.

700 Billion to cover potential write downs? I see profit.

R6Laser

Credit card business are just that a business. They need to make money, and increased your limit so that you can use it and pay a higher monthly credit car bill. I don't think they got a bailout and said lets increase the credit limit! They increased the credit limit because that is what credit card companies do all the time. Anyways them increasing your credit card limit has nothing to do with them getting bailed out. They are in the business of offering credit, so they will continue to offer it no matter what. They are not going to stop offering credit cards or increasing the limit, it would be stupid really if they did that.

restrangled

When the Rep from WAMU said:

Your investments are safe with WAMU, we have an additional 50 million in liquidity based on our "Fannie Mae" home loan section. Congratulations on your increase.

I should have said: No, congratulations on YOUR increase.

r.

sammielee24

700 Billion to cover potential write downs? I see profit.

Today I heard it was 1.2 trillion - write downs and to cover the money markets. In the past month people have been scared and 89 billion was sucked out of the money market funds so now they have to fix that problem. Again today, even the feds are saying they haven't got a clue how much they are going to need because they don't have a clue how much is really out there - nor what it will cost to buy it up.

As one guy said today, and he was in Japan when that country went bankrupt - the difference is that Japan had money in the bank. Savings. In the USA there is no money. The debt is so high that if all of that debt - now trillions - just happens to get called in by the foreign investors, the USA is effectively broke. No money. Bankrupt. The treasury has been given the okay to buy up 700 billion at one time - that's at a time - in blocks - so if they need more they have the power to take on more.

Last I heard was that some Republicans are unhappy with any sort of plan to nationalize this massive debt, including Bush, because they believe the 'free market' will sort itself out. sammieswife.

JeffT

A free market will sort itself out, it just leaves a lot of bodies in its path (to be fair some of them deserve to loose their shirts). The problem here is that the government (and most people were all for this at the time) has been co-signing dubious loans. If I'm a bank and somebody with bad credit and a low paying job wants to buy a house I might not make the loan. But then Uncle Sugar comes in and says "don't worry about it, if they can't pay you back I will." Why would I not make the loan?

Now the bill is due and we're all paying it.

MeneMene

Got a response to my inquiry to WAMU asking which institution issues their credit cards.

Thanks for contacting Washington Mutual!

Unfortunately, the account information you requested isn't available via
email.

For information and service on WaMu credit card, you may call our Card
Services department at 866.892.WAMU (9268).

We apologize for any concern or inconvenience.

It really doesn't matter so I won't be calling them but it's irritating they won't give a straight answer.

abbagail

Thanks for the follow-up MeneMene... you got the typical credit card company response to emails... they NEVER answer email questions (I have discovered over time) and it seems they ALWAYS say you have to CALL US, even if it's just a GENERAL QUESTION as your was. It irks me to pieces, and I never call them either, because if they cannot answer "general" emails, why have a website and provide a "Contact Us by Email" option? Grrrr.

Even if you have an online registered account, and "email" them from INSIDE the account where they reply IN PRIVATE, they STILL won't answer, as they always say, CALL US, and I refuse to call them, too, lol.

You'd this "who issues their credit cards" would be "public information" somewhere, but it's no big deal. So thanks for trying! ;-)

/ag

Washington Mutual reverting to previous bad behavior after bail out by fed!