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    Can anyone predict...

    ...what the congressional credit bailout solution will do to our profession?

    Of course not, least of all me. But some of the more heuristic of you may wish to opine in the next few days as this thing is unfurled.

    One thing is for sure, the popular "sound-good" solutions of candidates are not going to work. Statements like "tax cuts for 95% of the people" "I am adamantly opposed to any corporate bailout" and "any credit solution cannot result in more foreclosures" are not going to work. These were made, respectively, by Obama, McCain (before voting for the AIG bailout) and Pelosi. And they are going to have to be more resourceful than the rinky-dink, ambient games they play at the end-of-year with the tax law.

    Congress is expert at releasing popular "solutions" which sound good to various constituencies, but when you look under the rug you find they are nothing but shams.
    A typical example are the smiling faces bally-hooing various "Taxpayer Bill of Rights" which sound like taxpayers are finally going to get some relief in leveling the playing field, but upon closer examination do very little.

    I'm not trying to start a political smudge hurling post. The simple fact is they are going to have to pacify the smart-money people with real solutions. They're not dealing with a public over whom they can pull the wool, with craftily-contrived speeches and press releases. There is no question the dollar will come out of this thing weaker, to investors who already prefer Euros.

    For tax preparers? I'm sure it's no great revelation to you that 50% of all taxpayers already pay no income tax (other than SS & medicare), so how can 95% of them have their taxes reduced??

    For one thing, I believe we can forgot about a "kinder, gentler IRS." Penalty enforcement, plus MUCH heavier interest rates as the Fed already has had their rates artificially pressured downward (that's part of the problem). A few years ago, the Fed stopped releasing their daily M-1 money supply. The public was more interested in Britney Spears.

    What about the handling of the $7500 homebuyer credit? We've already had a few discussions about this.

    Will new tax legislation be part of the credit solution? Will they really be stupid enough to remove capital gains rates with real estate movement already slowing down to a crawl??

    Most of us won't know anything until the package is revealed. We're told if this doesn't happen in the next day or two, the markets will go into free-fall. I can only say that if indeed there is a congressional solution, they are going to have to enact something with teeth and substance because they're not fooling with the gullible public this time.
    Last edited by Snaggletooth; 09-22-2008, 12:43 AM.

    #2
    if there is one thing

    Originally posted by Snaggletooth View Post

    What about the handling of the $7500 homebuyer credit? We've already had a few discussions about this.

    Will new tax legislation be part of the credit solution? Will they really be stupid enough to remove capital gains rates with real estate movement already slowing down to a crawl??
    .

    We can count on congress to manage it's screwing up an already awful situation with some vote pandering. It's pretty clear to me that no one in DC, Democrat, Republican or otherwise, has had to try, at least in recent memory, and figure out how sell a home on which they owe more than they'll get. They haven't sat up nights praying their home will sell, but then wondering if it does, where they'll get the cash to bring to closing to PAY to get out of their home, and then how they'll buy a new one when the availability of mortgages is at a historical low point. I'll be the first to admit, the US got very cozy with our debt usage, and banks certainly loaned money in excessive amounts to people who, in some cases, had no true ability to ever pay it back. What I simply find ironic, though, is the fact it wasn't only the US consumer getting in over their head on their Visa, or with Countrywide on their house, or Lexus financial services for the new SUV; the US Government never bothered to see when all that over borrowing ended, and finally reverse trickled its way back up to wall street, the banks were going to come to the government with their hands out, saying "but, we're too big to fail. If we collapse, we'll take the world economy with us. Brother, can you spare a trillion?" As a member of Generation Y, we might be greedy little people, but we're going to be the ones around 40 years from now when all the debt the government is planning to take on finally gets charged off against whatever might be left in the Social Security fund. When the major reserve banks of the world come knocking with a promissory note in one hand, and a trade balance report in the other, I wonder if we can go to China or the EU then and say "but, we're too big to fail....."
    "Congress has spoken to this issue through its audible silence."
    Anyone ever notice they beat the daylights out of the definition of a child, but they don't spend much time at all defining "parent"?

    Comment


      #3
      I wrote a tax newsletter for my clients about the new First Time Home Buyers Credit
      in which I say that this new credit has two problems:
      1. The refund (if any) from this credit will not be received until months or a year after
      the home is purchased, so the money will NOT be available for the down payment on
      the house.
      2. The credit must be paid back.This is equivalent to an interest-free loan.
      I believe that this new credit will cause complications for preparers far beyond it's worth.
      Last night on the Larry King TV program, Suzy Orman said the she is in favor of the
      700 billion or 1 trillion dollar bail out.
      Last edited by dyne; 09-23-2008, 07:15 AM. Reason: more thoughts

      Comment


        #4
        Originally posted by Snaggletooth View Post
        ...what the congressional credit bailout solution will do to our profession?
        It will keep us busy == $$$. The more convoluted things get, the more help people need in dealing with taxes, entitlements, etc. The down side for us is that tax planning advice is best avoided, no way we can guess what the laws will be next year, let alone 5 or 10 years from now.

        As for Congress, be assured that they will screw up this process like everything else they've touched. I agree with the wag who recently said: "This bailout is just postponing the inevitable [collapse of our financial industry and the ensuing depression]."
        "A man that holds a cat by the tail learns something he can learn no other way." - Mark Twain

        Comment


          #5
          We'll be kept busy since the gov is putting the squeeze on the IRS go get compliance going, while congress is making the tax code so complicated by pandering to everyone (so the top 1% pays most of the taxes; they make most of the money!). and the fed will need more $$ to pay for bailing out everyone. What ever happened to the conservative ethic that the market would police itself????

          The credit thing is inane right now; I tried to get a measly 20k equity line on a home I own outright to do some repairs, and got shut down..(well Wells Fargo Financial offered me some kind of subprime bullpoop as though I cant read an interest rate).and I have perfect credit, a good job and lots of assets. But Wells Fargo just called back offering me a 13K credit card saying even if I didnt use it it would bring up my available credit to used credit ratio and get me a better loan rate on the equity line they didn't want to give me. Does this make sense to you? It doesn't to me. I told the guy they were acting like used car salesmen, and since I used to be one of those I know of which I speak.

          And WF is a bank with a good rating. Maybe I should go to Wachovia or WaMu.

          Comment


            #6
            if it makes you feel

            any better, my wife and I are shopping for a home. Once the mortgage officer's here I have my own practice and am self employed, I swear, it's worse than shaking their hand and then saying "Oh, by the way, I have flesh eating disease, thought you should know".

            I agree with taxmandan, at the rate congress is moving, planning is moving quickly off my list of priorities. Wonder if Congress has E&O for when they start destroying people's long range, expensive tax plans.
            "Congress has spoken to this issue through its audible silence."
            Anyone ever notice they beat the daylights out of the definition of a child, but they don't spend much time at all defining "parent"?

            Comment


              #7
              Originally posted by joanmcq View Post
              The credit thing is inane right now; I tried to get a measly 20k equity line on a home I own outright to do some repairs, and got shut down..(well Wells Fargo Financial offered me some kind of subprime bullpoop as though I cant read an interest rate).and I have perfect credit, a good job and lots of assets. But Wells Fargo just called back offering me a 13K credit card saying even if I didnt use it it would bring up my available credit to used credit ratio and get me a better loan rate on the equity line they didn't want to give me. Does this make sense to you? It doesn't to me. I told the guy they were acting like used car salesmen, and since I used to be one of those I know of which I speak.

              And WF is a bank with a good rating. Maybe I should go to Wachovia or WaMu.

              My realtor clients have been telling me that's been the problem with home sales. They have a buyer make an offer, both spouses employed making high wage incomes, great credit rating, little other debt, prior home owners and the buyer cannot get a mortgage. It's been killing deals and the realtors are furious about it. The lenders over compensated for their previous behavior and now won't write anyone a loan.

              Daniel
              "A man that holds a cat by the tail learns something he can learn no other way." - Mark Twain

              Comment


                #8
                somehow my ex has been getting loans on rentals up the wazz. He has the same debt I have on the rentals & houses we own together, plus a bunch more. Plus about 70K of credit card debt he's used for down payments. Credit score was down to 666 (I wonder about that one) last time he checked, but he makes about twice as much as me from his w-2 job. So guess who's signing the loan on one we are buying together. I have great credit, no credit card debt, no car debt, savings.....

                IT MAKES NO SENSE!!!! I told the wells fargo guy that they must be on drugs and that kind of lending was exactly why the financial markets are imploding.

                Comment


                  #9
                  Rentals

                  My wife and I are about to sell 7 rentals and this stupid mess (a gigantic understatement!) could not have come at a worse time.

                  Comment


                    #10
                    rental property

                    Originally posted by DTS View Post
                    My wife and I are about to sell 7 rentals and this stupid mess (a gigantic understatement!) could not have come at a worse time.

                    Seems to me that rental property may begin to be in greater demand, what with
                    large number of foreclosures.
                    ChEAr$,
                    Harlan Lunsford, EA n LA

                    Comment


                      #11
                      yeah they are. I think WF did me a favor; there was a bit on NPR yesterday with someone talking about how she lost her home because her landlord was foreclosed on.She was out of town, and her neighbor called and said, don't look now but your house is being auctioned on Thursday. No loans on this home!' could be a selling point to potential renters!

                      Comment


                        #12
                        ---> No loans on this home!' could be a selling point to potential renters! <-----

                        Joan, do you think most renters would care, or even know enough to ask the question?
                        "The only function of economic forecasting is to make astrology look respectful" - John Kenneth Galbraith

                        Comment


                          #13
                          Rentals

                          I understand the point about rentals being a good thing in a foreclosing market, but how is this current state we're in supposed to help a buyer trying to get a loan to buy property? Lenders are dried up, helocs are being cancelled or significantly reduced.

                          Comment


                            #14
                            Originally posted by JohnH View Post
                            ---> No loans on this home!' could be a selling point to potential renters! <-----

                            Joan, do you think most renters would care, or even know enough to ask the question?
                            My ex has already been asked by renters that were looking for a new place because their old landlord was foreclosed on. I have friends who had to find a new place because of it too. In fact there was a newspaper article recently where one couple who had to move from two rental houses in less than a year were looking for a big apartment complex because they figured at least that way they wouldn't have to move again. I'm in the 5th worst housing market in the nation. Bad enough to lose your own home; but to be forced to move because your landlord took your rent but didn't pay the mortgage??

                            Comment


                              #15
                              Beware of Regulators Frenzy

                              Sounds like Joan is already seeing the effects of this in her area. Joan, I have a cousin in Vacaville.

                              Whether anyone wants to admit it or not, the government "takeover" is manned by bureaucrats who don't know how to manage a business any better than the sick industry management they are to "rescue." Had a good friend in the residential homebuilding business in Texas during the Savings and Loan crisis in the late '80s. The regulators back then would commandeer the builders' unfinished home, and sell it at auction for $75,000. In many cases, only $10,000 was needed to complete the home, and it would have sold for $160-$180K. Stupid, indeed, but the FSLIC had perfunctorily been issuing orders to the bureaucrats - "No more money, no matter what." Those of you from Texas who remember this fiasco can vouch for these events.

                              Remember this when we hear the clamor to turn out to pasture those managers in the mortgage and loan industries in favor of letting the government "take over and fix things." I often wonder whether part of this problem stems from regulations such as "quotas" to lend a certain number of loans to sub-prime candidates.

                              Everyone I talk to seems to lay the blame at the feet of people who borrowed more money than they could pay back, and lenders who made these loans. I wonder how much of the problem was government pressure on the Federal Reserve to keep their interest rates low, and also how much available money supply was sucked up by the spate of highly leveraged private equity buyouts.
                              Last edited by Snaggletooth; 09-24-2008, 11:11 PM.

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