Bad News/Good News

In 2010 ARMs are coming up. Many speculate this will be the next big round of forclosures. I've heard of these things - basically home loans that have you paying interest only to begin with - with the idea that you'll be making more money down the line and therefore able to afford higher payments in 5 plus years. This is just another financial service ponzi scheme real estate folks were running to make commissions and bankers were packaging to hide the risk.

Not looking so good right now.

What's interesting about these loans, however, is that unlike subprime loans, the majority of these loans were used in high-value real estate areas (ie good spots). And they were used because people with decent incomes wanted to live in good spots, but whose home prices were incredibly inflated and perceived to be safe. Basically, folks just used to a certain standard of living. Who know what will happen in 2010, but going by the story link - there are folks stuck with 750,000 in debt on 500,000 homes. Ouch! Add it all up and it's 30 bil. I smell another bailout.

PS - side story - heard on the radio today about the AIG bailout and how it protected an enormous amount of personal assets for financial services senior executives. Can someone do the math on this please and explain why incredibly rich dudes who steered the ship to near ruin aren't bankrupt? They wanted to play risky and they lost...and we bailed them out.