Housing Rescue Bailout and the Future of Lending

July 31st, 2008

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Housing Rescue Bailout and the Future of Lending

This must be a bad week for my state of mind. Nothing, including the new housing rescue bill, has been positive regarding the housing scenario. In fact, two of our local banks were even caught up in the debacle and were FDICized.

It seems these banks had to be taken over with Mutual of Omaha as not only the new bank name but the new bank. Mind you, I am not describing banks the size of Citi or Wells or B of A. These were million dollar banks versus billion dollar banks.

Nonetheless, they are symptomatic of the whole system. I can’t believe this happened only in my hamlet – Reno, NV. I have to believe other cities woke up to the same news that several of their small town banks would open under new names.

Something else I find a bit curious, or maybe even funny, is a mutual insurance company branching into the open market bank business. Why would a stable old line insurance company enter into the banking business in small town America? What is that all about?

At this rate, by the end of 2010 there will be only 5 conglomerate sized banks in the entire country. I wonder how easy it’ll be to get a home loan at that time. How about those of us who actually need a loan every once in awhile to keep our real estate empire humming along?

Couple that with home loans from insurance companies and one has to wonder will they still be in business when it comes time – say retirement - to start the contracted annuity payments or pay the face value of the policy at the death of the policy holder. Insurance companies have a tendency to play only in the commercial real estate realm by the way. The returns are usually huge and the loans generally safer.

The discussion possibilities/probabilities are almost endless so I won’t walk that boulevard, at least not today. Besides, there are enough talking heads on CNN and the networks to beat it to death.

Did anyone else get the same feeling about this so called housing rescue bill as me? I don’t see it as a rescue but more as a piece of duct tape over the mouth of the people yelling and screaming about foreclosure.

After all, if you are already in the foreclosure grinding factory, the bill doesn’t help you an iota. You can kiss your house good bye or pay up. What kind of rescue is that?

Maybe it is me and my inherent distrust of anything that even smells like a politician in an election year. Simply throw a few billion at the masses of asses and they’ll shut up. Hell, I’m beginning to think I should be yelling and screaming too and maybe a few dollars will land in my bank account.

I don’t know why this stuff runs through my brain but as noted last week, the real goat in this bailout and rescue mission is you and me the taxpayer. I get tired of paying politicians to create more messes that require more money from me to “fix”.