Readers weigh in on the financial mess

John W. Schoen Senior producer • Profile • E-mail

These are extraordinary times. So this week the Answer Desk is asking you to comment on the financial crisis and the government’s emergency bailout. Log on to Newsvine and join the conversation. (If you don’t have an account, take a minute to register.)

Here’s a sampling of the conversation so far:

How are we supposed to pay this bailout of $700 billion when we are broke? Where is this money going to come from? I've heard that the fed/gov't will issue a check that can't be cashed to pay for all of this.
— Chris J.

Technically, the money would come from the sale of Treasury bonds to investors. But unlike Treasury funds that are spent to make up for the shortfall in taxes, this money would be invested in other bonds that are backed by mortgages.

If the people holding those mortgages pay them back, that money would go back to the Treasury, which would use the money to pay of the investors who bought the Treasury bonds. If it worked, the plan would leave the Treasury owing nothing when the mortgages were paid off.

That's the plan anyway.

How about the rest of us that have sacrificed in order to pay our mortgages each month by working harder and scraping to get by, what do we get out of this except the fact that we will have to pay for other people's mortgages more or less?
— MBritt

There are a lot of msnbc.com readers who agree with you: Why should I have to pay for the mistakes made by my neighbor who borrowed too much money?

It's an absolutely fair question. Here are few things to keep in mind: Relatively few homeowners who borrowed too much — or who were tricked into loans the brokers knew were unsustainable — are getting off easy in this mess. Millions have already lost their homes; only a few hundred thousand have worked out modified loans with their lenders with more affordable terms.

The rise in foreclosures is at the heart of the current financial crisis. The reason mortgage backed securities aren't trading is that investors who buy them have no idea how many mortgages in that pool are good — and how many more will default. Until we can figure out how to stop foreclosures, all of this mortgage paper will continue to clog the financial system. Whoever is to blame, the risk to the wider economy is very real.

Think of it like a patient who has a clogged coronary artery. Unless he gets bypass surgery, he's at high risk of a heart attack. If we don't come up with a solution — quickly — we risk an economic heart attack that would seriously damage the economy. And we'd all get hurt — no matter how prudently we've handled our personal finances.

Join the conversation This week, Answer Desk wants you to weigh in on the bailout of the financial system. Click here to leave a comment or ask your question. (If you're not a Newsvine member, take a minute to register.)

We sold our townhouse this summer, and we are now looking to buy a single family house. We have been looking at bank-owned properties and auctions. Is there any sense yet how this plan would effect those markets? Will there be more or less on the market? Will prices continue to drop?
— Bill

While home prices in some parts of the country have begun to level off, there's really no way to know whether we're near the bottom. A lot depends on how many more homeowners can't keep with their payments. As they default and their homes are foreclosures, those homes go one the market at distressed prices. Banks are will to price aggressively because they don't want to hold onto properties any longer than they have to.

It's very hard to forecast when the pace of foreclosures will begin to fall. Some loans have yet to reset to higher levels. Worse, if the unemployment rate continues to rise, people who lose their jobs are at greater risk of defaulting on their mortgages.

And real estate is very local. Some parts of the country have been harder than others, some started turning down sooner than others — and may begun to rebound earlier. One important indicator to keep an eye on: the level of unsold homes on the markets. Before any regional market can recover, you have to see that number start to come down.

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