What's Riding On The Latest Bailout?
There is a lot riding on the latest banks bailout - for banks and investors, taxpayers and homebuyers. CBS News correspondent Wyatt Andrews reports on what it means.
Wall Street cheered the toxic mortgage plan - because what it means for the investors who might buy the mortgages is one very sweet deal.
Despite record foreclosures, and slumping home prices, 85 percent of homeowners still pay their mortgages. That means even the worst of the so called toxic assets has a value - because good mortgages have been mixed in with bad - and Wall Street sees a chance to buy low.
"Some of these assets are definitely good buys because most Americans pay," says Curtis Arledge.
Arledge of the giant investment house Blackrock Inc., says his firm wants in on the program - in no small part because his clients can buy the toxic mortgages with government financing.
"The fact that the government is coming in with both equity capital and debt capital to finance the purchase of these assets is simply going to expand the universe of investors," Arledge says.
And in theory, expanding the universe of investors will create competition for mortgages, Andrews reports.
What that means for the banks is the chance to sell the toxic loans they want to unload as long as they get their price. And the sale of any mortgages could help unclog the credit markets, which would be very good news for the normal consumer because they would likely be able to access credit more easily.
The ultimate goal is to stabilize mortgages, stop the freefall in home prices, and end the fear of homebuyers like Suzers and George Sachs who worry they're still buying too high.
"We're in a situation where we have no choice," George says. "But we also want to know that the value of the home is not going to continue to be going down."
Meanwhile, what this means for taxpayers is the trickiest part of all. The plan, simply put, is a trillion dollar gamble, Andrews reports.
Everything about this plan that makes it a sweet deal for investors, starting with 80 percent government financing, makes it risky for taxpayers. So if the real estate market tanks worse than it has, taxpayers lose, if real estate turns around taxpayers make money.
By Wyatt Andrews
