I have received multiple e-mails today suggesting that instead of the bailing out banks at the expense of taxpayers, the government should give mortgage holders money to pay off their mortgages.
Both ideas are bad. But there is a better solution.
Why the Government Shouldn’t Just Bail Out The Banks
The government is talking about setting up a Trust to buy distressed debt then sell it again. The problem is that the Trust company will simply bail out banks at taxpayer expense without helping mortgage holders much. The mortgages it sells will still be underwater, or too expensive for many people to service, especially as their houses lose value.
The other proposal, just giving money to people to pay for their mortgages, is bad also. Housing prices are actually dropping, most mortgages issues were bad mortgages with horrible penalty clauses, based on assumptions about housing values which are just wrong. House prices are going to keep dropping.
What the government should do instead is set up a Trust to buy mortgages at a discount, then reset them to 20, 30 or 50 year fixed mortgages with a reduced face amount. If the house is later sold, half of the increase goes to the government, so that taxpayers make a profit. The mortgage cannot be paid off before the end of its term so that financial scavengers cannot come around and, as they did over the last ten years, say "get rid of that mortgage, and take ours. It’s better. Honest!", because we know that when they say better, they don’t mean better for the mortgage holder. The mortgage is attached to the property and is transfered to any new buyer. And the mortgage cannot be removed from the property, and any new mortgages attached to the property are junior to the government mortgage.
End results:
a) a floor is set for mortgage prices. (Whatever discount the government is buying at. Probably 60% to 70%, but it should be based on what the long run price was in the area before the housing bubble.) This ends the confidence crisis in these securities, because there is now a market price—what the Trust will pay.
b) It helps homeowners stay in their homes.
c) It gets rid of overly complex mortgages and puts in their place a dead simple mortgage that anyone can understand.
d) It punishes lenders, which they deserve, for making loans they should never have made.
e) While it does keep homeowners in their homes, it doesn’t let them off scot-free either. In exchange for a good mortgage they can service, they give up some of the future profits on sales in their houses.
f) The government will almost certainly make a long term profit on this. This is important, because it’s not fair for people who aren’t underwater on mortgages to spend hundreds of billions or trillions bailing out those who are without some expectation that in the end it won’t be more than just a transfer of wealth to them and to investors and banks.
This bailout can be done right. It’s up to Democrats, who appear to be in danger of stampeding into a hasty decision, to stand firm and make sure it’s done right. The last two times they didn’t stand firm and do things right, we got the Patriot Act and the Iraq War. This is too important for Democratic fecklessness. Too important for them to just give the Bush administration whatever it wants.
If they do give the administration what it wants, then Wall Street and the Banks just got bailed out, no help goes to ordinary people and you get stuck with a trillion dollar bill. Taxpayers get all the toxic assets, but Wall Street, who paid themselves more in bonuses in 2007 then 80 million Americans got in raises, keeps the profits.
Democrats need to stand up for ordinary Americans and do the right thing.
Related posts:
- Does MERS Registration and Mortgage Fractionalization Extinguish Mortgage Rights?
- Pretending to Protect Citizens from Banks
- Mortgage Foreclosure: Here Come the “Deadbeats”
- NY Bankruptcy Court Wipes out MERS-Registered Mortgage; New Trend in Foreclosures?
- The Next Big Taxpayer Bailout? IMF Could Get Hundreds of Billions for European Banks
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Zed. Now to read. Hi, Ian!
Spread the word:
Digg this important post
Ian, this rationality-based stuff is just going to leave you frustrated. /s. Seriously, is there any chance that a plan like this can make it to the attention of someone who could run with it? Say…somebody like, oh, what’s-his-face, you know, the Democratic Presidential candidate. or maybe his Veep?
Yes, I agree. This was what I wrote for what is becoming my daily update to entry 87 of my scandals list:
Unfortunately, I think this is where we are headed. It pisses me off.
Good summary, and agreed. The current “plan” is just wholescale socialization of Wall Street’s losses.
Despite the dissembling, our economy is our defense. Without it, we got nuthin’.
Awesome idea, Ian. Please send it to Chris Dodd, since he’s head of the committee working on this. He also has responded to us fringe bloggers in the past, so there’s hope on this one, too.
The only that I would add to the proposal is a measure of revenge. I want the upper levels of management of these companies to suffer direct, large, personal financial penalties for their terrible decision making that got them into this position.
Hi Ian,
I like your solution. I don’t think most homeowners buy houses for the profit they might get at the end – most because they want to have a secure place to live. So your plan does just that. Hooray!
Now, how to get someone to actually DO it!
We need a Dennis Kucinich or Wexler to take this on – and a whole gang of supporters as well.
Something in the air. Mark Thoma at Economist’s View:
A Worker Bail-Out Fund?
I wouldn’t characterize not being able to profit from bad judgment, mismanagement and in some cases, fraud, as revenge. I’d call that fair, if not accountable.
If folks like it, sending it to your congresscritters might do something. Might not. I don’t personally have a congresscritter. :)
Bernie Sanders beating the Phil Gramm drum pretty hard. good. this is from sanders hometown paper (vt)
http://www.rutlandherald.com/a…../809170372
My bold. These problems did not get here overnight. These crooks are now holding a gun to Congress’ head saying, do something or everything blows. so dishonest.
o/t anybody else tired of seeing Mike Murphy apologize for McCain? he’s everywhere.
YES! I think they should return all of their salaries for the past year or so, and their fancy houses, and any cars that are worth more than say $1000 (the limit of the value of a car that a regular person gets to keep when they declare bankruptcy).
I agree with Jim, Ian, But also, how long do we really have until whatever they work out needs to happen? I know there’s a time limit but I’d like to think that they can’t use the excuse or scare tactic similar to, act now or get slaughtered by Saddam’s ‘Weapons of Mass Destruction’.
also from the above link.
make it hurt.
Fat chance of anything either getting passed (Rethugs in the Senate) or past Shrub’s veto pen. Even though it would help McStain they won’t do it. They have been pretty consistently pulling the rug out from under him on a lot of stuff lately. Ha!
Meanwhile, the people suffer…
Simple, clever, and do-able.
I suggest that the same sort of campaign as has beebn done on ‘net neutrality’ and ‘fisa’(though fisa was unsuccessful).
To that end, i offer the letter i faxed to Congress people involved in this mess an suggest that others do the same. And thanks to Ian for some of the verbiage.
Below is my letter that I faxed to those most involved -in Congress- with the ‘bailouts’ that are occurring. I strongly urge all that receive this to write their own letters or copy mine (whatever) voicing your concerns as what is happening will affect your and your children and grandchildren.
I’ve put the fax numbers for those this was addressed to at the bottom of this missive.
Dear Senators and Representatives;
I am writing this to you -as well as the Senators and Representative for whom I am a constituent(Senators Boxer and Feinstein, Representative Susan Davis)- as you are involved with the plan(s) by the Bush Administration(Treasury Secretary Paulson) and the Federal Reserve to address the ongoing issue with the ‘credit crunch’ and ‘markets’. Or, in
Senator Obama’s case, running for President. And whom, if elected, will be
saddled with whatever plan emerges.
First some facts. Over the past week, regulators have decided to allow banks to:
1. Gamble with depositors money by getting rid of the rule that said they couldn’t use that money to prop up their investment banking divisions. Using depositor money to gamble used to be considered bad.
2. Decided to allow them to use an “asset” that you can’t actually sell or borrow against, and whose value is pretty much whatever banks say it is, to meet reserve requirements.
The events of the past year are not a mere accident, but are the results of a conscious and willful SEC decision to allow these firms to legally violate existing net capital rules that, in the past 30 years, had limited broker dealers debt-to-net capital ratio to 12-to-1.
Instead, the 2004 exemption — given only to 5 firms — allowed them to lever up 30 and even 40 to 1.
Who were the five that received this special exemption? You won’t be
surprised to learn that they were Goldman, Merrill, Lehman, Bear Stearns, and Morgan Stanley.
And now it is the taxpayers that will bear the burden of such decisions?
WHY? It certainly wasn’t anything the average American did as the average
American kept consuming just like the powers that be wanted them to.
Under a proposal issued this week, regulators would permit buyers of banks and thrifts to count some of the good will -an “asset” that you can’t actually sell or borrow against- toward meeting their regulatory capital requirements.
“The agencies that issued the proposal — the Federal Deposit Insurance
Corporation, the Comptroller of the Currency, the Office of Thrift Supervision and the Federal Reserve — indicated that it would be adopted after only 30 days of public comment.- NYTimes, Sept 18th,2008″
Yet there is NO means by which public comment is provided by these agencies nor is such public comment being solicited by these agencies in terms of public notices.AND the rush to ‘come up with a plan’ COMPLETELY discounts such public comment.
The action by the four banking agencies provides more favorable accounting
treatment of so-called good will, an INTANGIBLE asset that reflects the
difference between the market value and selling price of a bank.
The move is similar to a step taken in the midst of the savings-and-loan crisis that helped many institutions in the short run
OVER THE LONGER TERM, THAT DECISION INCREASED THE OVERALL COSTS OF THE BAILOUT after the government took away the good will benefits.(”This is a deleveraging like nothing we’ve ever seen before,” said Robert Glauber, now a professor of Harvard’s government and law schools who came to Washington in 1989 to help organize the savings and loan cleanup of the early 1990s. “The S&L losses to the government were small compared to this.”)
Quoting William Seidman (who led the RTC from 1989 to 1991) “When you have a big loss in the marketplace, there are only three people that can take the loss — the bondholders, the shareholders and the government,” “That’s the dance we’re seeing right now. Are we going to shove this loss into the hands of the taxpayers?”
That seems to be the Bush Administration and Federal Reserve intention, to shove the loss of gamblers, the failure to properly regulate and the intentional decisions by the SEC onto the taxpayers. Again, WHY?
The total tab for U.S. government rescues has now mounted to more than $1
TRILLION and that doesn’t count the $5 TRILLION of liabilities from the
nationalization of Freddie and Fannie Mac. And Secretary Paulson is talking about more Trillions; what do you think people are going to do when the dollar is only worth 70 cents?
The data shows that Bush’s tax cuts alone account for 42 percent of the
budgetary deterioration for 2009 that stems from policymakers’ actions since 2001. Increases in military and other security programs account for another 39 percent. Combined, these two factors account for 82 percent of the budget decline that is due to policy actions.
Yet Senator Obama is saying that Bush’s tax cuts might not be rescinded as it would hurt if we are in a recession and Congress is doing nothing to address the increases in military and other security programs. In the meantime, school districts across the nation are having to raise the price of school lunches, cut or do away with bus service, extracurricular programs, and TEACHERS. More people are losing their jobs and their homes (AND apparently their right to vote because of being foreclosed on) and all the government is doing is bailing out those who basically caused the problems?
Trying to restore a corrupt and unsustainable system (easy credit INTENTIONALLY given and consumption for the sake of consumption) WILL NOT fix the problems facing the United States. And the total amount of credit default swaps(CDS’s) is over $62 TRILLION with no one sure who owes what to whom.
THERE USED TO BE CONCERN FOR POSTERITY VOICED. Apparently that has now been shouted down in an effort to save the FIRE (Finance,Insurance,Real Estate sectors) upon which the nation has become dependent.
And now I’m reading where the 3rd Infantry’s 1st Brigade Combat Team,beginning Oct. 1 for 12 months, will be on-call as federal response force for natural or manmade emergencies and disasters, including terrorist attacks AND “to help with civil unrest and crowd control”. Apparently, this is to address the consequences
public officials will face when all forms of Social Security, Medicare, food stamps and general welfare dry up. When that happens there will be a level of violence that erupts all over this nation, from
attacks on all forms of government to ransacked commercial firms by armed gangs to in-home invasions by desperate people who cannot feed their children.
Is this what Paulson and the Federal Reserve are trying to occasion by ‘plans’ to address the current crisis which has NOTHING to do with the overwhelming majority of taxpayers?
I strongly urge all of you to ENSURE that those responsible for this financial mess be the one’s to suffer for cleaning it up and not to foist the burden onto the backs of the average taxpayer/citizen
.
WE WILL BE WATCHING.
Sincerely,
Bruce Sims
San Diego,CA 921116
To:
Senator Dodd, Chairman, Senate Banking, Housing, and Urban Affairs. (202) 224-1083
Senator Kerry, Chairman, Senate SUBCOMMITTEE ON SOCIAL SECURITY, PENSIONS, AND FAMILY POLICY (202) 224-8525
Senator Baucus, Chairman, Senate Finance Cmte. 202 224-0515
Senator Sherrod Brown (202) 228-6321
Senator Schumer 202-228-3027
Senator Casey (202) 228-0604
Senator Obama (202) 228-4260
Senator Boxer (202) 224-0454
Senator Feinstein (202) 228-3954
Senator Reid (202)-224-7327
House Speaker Pelosi (202) 225-8259
Representative Barney Frank, Chairman, House Financial Services Cmte. (202) 225-0182
Representative Maxine Waters (202) 225-7854
Representative Susan Davis (202) 225-2948
I sure don’t understand how if a regular person did their job as badly as these schmucks, not only would they be fired, but they would also have a really hard time finding any kind of job doing that same thing again.
Instead, these apes get “golden parachutes” and someone else hires them for twice as much money as the last place after they run the joint into the ground. WTF?
Carly Fiorina is a perfect example.
============
Re-Set to Fixed
============
It’s simple & easy to remember; it sounds fair.
There’s your slogan, Ian. Doesn’t include all your points, but makes the major point: helping Americans, not Masters of the Universe.
As for the Masters of the Universe, I have another slogan ready:
==================
Seize Ill-Gotten Gains
==================
don’t worry folks. McCain has a “track record” of financial “reform”.
seriously, after 9/11, katrina, iraq, DOJ, fourth branch, Walter Reed, Gitmo, Abu Ghraib, Big Oil, Bear Stearns bailout, etc, after all that, do we need any more “shaking up”?
OT, sorry. but there is a pBs online poll (Palin, what else?) being freepd. Please spread the word and link.
The problem with writing new regulations now is that Congress has only something like two weeks left before they adjourn, the Republicans are likely to kick up a fuss, and I believe Bush has already promised a veto. So no meaningful legislation until next year, and the danger of bad, hasty, overly business friendly legislation if there is any this year. A hell of a situation.
Does Palin pay her federal income taxes? Does she file her federal income tax returns?
Just wondering.
I like it.
Another word: liens.
Why don’t we taxpayer/owners put liens against those highrollers? Pay up.
Political reality is that something will happen next week. If it’s not going to be the Paulson plan, then Congress needs to pass something else.
You can write legislation really fast if you want to. FDR’s folks used to write such legislation in a couple days. Dems need a war room set up, staffed with about 5 people, plus their aides. Financial experts, lawyers, legislative aides, etc… Get a draft done by Monday. Legislate principles, not exact details.
Gotcha. My point is simply that this crisis has been brewing and those companies knew it as much as congress or anybody. They wait until the shit hits the fan precisely so they can get a bailout saying no one else will/can help. It’s blackmail.
Why the sudden big rush to do something now??? Why did they wait until they called the Congress members in and drop the nuke on them now…leaving them with “hours” to do something?
How long have they known what Congress apparently didn’t know..whatever that truth is…there’s something stinkin’.. Dodd stated that what they were told took the oxygen out of the room. There must be something more to all of this than anyone is being told.
I agree with Ian that the mortgagees need to be helped, and so does Dodd.
Won’t Congress “look bad” if they don’t do something? Aren’t they going to run their own personal career calculus first before voting against a stinky GOP solution?
If Bush wants to veto a bill like this, let him. The Republicans will be annhialated and a veto proof majority returned. It will not just be political suicide, it will be lemmings jumping off a cliff.
the problem is that Dems are faced with the same thing. They need a good bill to vote on or they will pass a bad bill.
Ian
Can you explain what this means:
So say someone gets their house reset. BUt then they get a job in a different town, so they need to sell the house.
In the meantime, property values go up (yeah, I know, but bear with me). So the person puts the house on for it’s new value (maybe 85% of the value of the current mortgage, so 110% of the new mortgage.
Someone wants to buy the house, needs a mortgage for more than what is owed on the house. What happens then>? They can’t buy the house?
I just don’t understand how you can have a mortgage attached to a house, and what that’ll do with fluctuating property values in the future?
Whatever it was should be shared with the new buyers of this crapola. That is, we citizens holding the bag want to know what these yahoos are discussing.
yeah, it’s as if they wait til the very last minute and then give the Dems no choice. And I sure got the impression today that the Dems feel don’t have much choice but to do what Bernanke & Paulson say.
*head banging desk*
I think the seller just has to pony up the shortfall. That’s all. Although that kind of cash might not be easy to come by…
Can I take out an equity loan to pay off the shortfall?
:P
Often when you sell a house, the other person takes over the mortgage. In these cases you always have to take over the mortgage. You can, however, add an additional mortgage on top, but the government fixed mortgage will always have priority. So if you go bellyup some day, the government gets the property and first crack at getting its money back before the issuer of the second mortgage.
Similar to how some bonds have priority over other bonds when a company goes bankrupt.
May not have explained it properly or used the right language. Should get BMaz to do it up correctly. I’m pretty sure similiar things have been done in the past.
The main thing is I want to avoid predatory lenders coming in and saying “pay that morgage off and take ours.” That sort of behaviour is what got us in trouble in the first place. I also want to make sure the government not just gets its money back, but makes a profit. Only fair to taxpayers.
But details can change, it’s more the principles that are important.
I think it’s fairly simple. The party buying the house would have two loans, the one already on it – and a new smaller one for the difference between the main loan and the current market value.
There used to be a lot of this kind of financing – people ‘assumed’ an existing loan and then got a small second mortgage to cover the equity and closing costs. My husband and I had this arrangement when we bought our house. Back in the dark ages before deregulation.
Yes, legislation (and re-regulation) could happen quickly but I have strong doubts it will happen.
BTW crude oil ended this week at $104.55/bbl. This spike isn’t about Ike or seeking an investment refuge. It’s a result of the liquidity that Paulson and Bernanke pumped into markets yesterday. This is what is so bogus about the whole idea that making cash to borrow is going to help day to day business activities. What happens instead is that everytime there is an injection of easy money, the big players take it and start speculating with it, the same kind of speculation that got us in this mess. This is why we need strong regulation of these markets, but like I said I don’t see it happening, maybe something cosmetic, maybe something stopgap, but nothing fundamental which is what is needed.
Cindy’s boy John is against bailouts. I hope the Democrats loudly let everyone know.
Of course, back in the dark ages when we bought our house we were expected to pony up some serious cash ($15,000) for a down payment too. None of this walk in without paying a dime.
I keep thinking about this with Naomi Klein’s Shock Doctrine in mind. The Friedmantes will grab power in times like this.. it’s what they do..and they do it in secret, which we know there is plenty of secrecy gong on this week.
So this little snip in the NYT was alarming in more way than one.
WTF? when i just voted, it said 56% said they thought she’s qualified to be VP.
The Republics just want to hold things together, by any means possible, until the election is over.
Only if you use your “goodwill” equity.
;~P
And I see that’s not what I said in the piece. Amended language. Thanks for the catch, you’re absolutely right.
Hence the phrase “being freeped”
“If the house is later sold, half of the increase goes to the government, so that taxpayers make a profit.”
Oh right. So people whose major asset are no in partnership with the Feds, just like the horrible Hope for Homeowner Act 2008 (aka No Hope for Homeowner Act).
We’re the taxpayers. Either give us a break (just like wall st), or remove the capital gains exclusion for personal property so rescued, gains based on the gain between the original purchase price and the then current sale price.
It’s not scientific. Vote early and vote often.
If all mortgages were “walk away” mortagages (if the mortgagee can’t afford the payments, he can abandon the house) we wouldn’t have had this problem. That way, lenders wouuld be very careful about qualifications for the loans they grant. We also need to get back to the bankruptcy laws we had before. The current laws favor business—big time.
Okay. I understand better.
I’m assuming, though, that someone could win the lottery and pay off their own house?l
Well for one thing if there is a positive differential between the original mortgage value and the selling price as you said in your post the government can and should take most of the profits. From the buyers point of view, they get the original mortgage (now partly paid off) plus a new mortgage (fixed long term, no variable rates, etc allowed) to make up the difference.
OMG! Anything we DON’T need is this administration to have even more power to destroy everything it touches. HELP!!!
&*^&$%!!!!
is this even constitutional? (not that that matters anymore). I thought congress held the money.
SO, Ian, lets put this in the form of a petition and get this ball rolling. No?
Well…that is exactly what got all the people that agreed to those mortgages to bite…they weren’t properly informed…
Really, the whole thing is a huge pyramid crime, and people who did this should be in jail along with those complicit in protecting them and giving them golden parachutes. It is totally outrageous.
We act like we are victims..over and over. We need to demand justice. They are gonna rush through the rescue of the criminals, and leave us holding the bag and ignorant as ever….grrrr…
I say…stop…think…then act when there is clarity. Congress should not fall for this fearmongering BS…same old pattern.
aha, i add yet another word to my vocabulary. thanks.
Oh those lenders love their interest. Lots of times there is a prepayment penalty for early pay in full if you do win that lottery.
I don’t understand your second point – if it is your primary residence and you have lived there for at least 1 full year – you don’t pay any capital gains.
1. the dems you are talking about are the same dems who played a big role in the deregulation that helped bring us to this point (yes furman is not rubin – but as far as i can tell they are very close in their thinking).
2. no way 5 people are going to do this without corporate america in the room. not unless i dreamed the last 20 years.
3. fdr had a strong progressive movement providing some counter-corporate pressure. we don’t, at least not yet.
i just don’t see how this adds up to what you described.
modified from an email i sent earlier today:
this is not an anti-obama statement. i’m really just trying to see things as clearly as i possibly can, and i’d love to have a reason or two to think that good economic policy has a chance to be made – by anyone – if we’re not in the game like we were on fisa, only more and smarter this time.
Agreed… this whole week is another continuous impeachable offense.. to put it mildly. Considering giving these cretins any more power is just appalling. I sure wonder what power they are demanding?
Even if that govt. mortgage can not be discharged, I am sure they will be legal ways to wraparound that mortgage, letting a bank offer a second with the right to foreclose and possess.
These legal forms predate our statutes, and have a way of reasserting themselves in spite of attempts to change them or dress them up differently.
The Feds should nationalize the banking industry. Shareholders get nothing. As the management get the keys, they can get on buses to Leavenworth, where they can stay for a while until their trials are over and their assets confiscated.
God…it is the mortgage “hot potato” story…quick pass it on before you get burned…
Arrest them all.
Good point on Hardball….we’re not even talking about the auto industry yet…
And yet, listening to Barney Frank today, I get the impression the Administration calls the tune, the Dems have to dance to the music played, whether they like it or not.
The big three are asking for 25 billion now.
Thanks Ian for putting this up, and thanks ubetchiam for the letter, will be revising (only slightly) and sending it to my peeps as well as this list.
I’m gone!
Ian, today in what Paulson said -and in other comments I heard from other public officials, they talk about the system being “clogged” by these bad mortgages. All we have to do is clear out this clog of bad mortgages and then the Markets can get back to flowing freely.
Is it that simple? Is the mortgage mess a clog in the pipeline of capitalism?
Here’s another solution: A lot of the mortgages, if not all, were enabled by Congressional legislation like the Garn-St. Geman Act of 1982 which specifically preempted and overrode state usury legislation. By preempting state laws which were otherwise not amended or themselves repealed by the state legislatures which enacted them, Congress did not make the laws void but unenforceable. If Congress simply repealed the laws which authorized otherwise usurious mortgages, borrowers could have the mortgages voided or at least reformed to comply with state law that, but for the obnoxious federal legislation, would have been valid to make the loans illegal.
Maybe so, but the Democrats need to make that clear to the voting public. The crisis of today are the Republics fault. The Republics are still preventing a real fix.
we’re not even talking about the auto industry yet…
I was – last week.
It is infuriating to watch the so-called elite of the national media, always at least three days behind, and more often than not, still wrong.
wrong both with their facts and the conclusions to be properly drawn therefrom.
why do I keep watching these fools?
Don’t want the bailout, don’t take it. I wouldn’t make it mandatory. That said, your suggestion isn’t a bad one.
So, Ian, I’ve read most of your post, but not yet had a chance to go thru the comments. Already I have questions, though. Why do you say:
I seriously think that by the time all is said and done, the mortgages that the government buys will be bought at fire sale prices, deeply discounted. I don’t know whether Dems will allow the deal to go thru Congress without insisting that the owners of the houses that have not yet been foreclosed be allowed first rights of refusal on the refinancing of their homes. I would not necessarily give that option to speculators, but neither would I tie my own hands in the event that we have some houses that have been trashed. Sometimes some speculators can redo homes better and cheaper or at least as well and cheaply as, say HUD or FHA or the VA. Some substandard homes that are no longer fit for human habitation may have to have their prices reduced and offer a discounted bridge loan to the spec that you know will fix up the house and flip it for his own profit. But this should only happen with the substandard housing and then maybe do a profit split of some time with the government. But essentially, I think they are going to end up following your formula, which anyone can figure out is what makes sense. But it sounds like you’re almost sure they’re not going to do this. Do you have inside info?
Why don’t we attach these mortgages to the estates of the buttwipes who passed these laws and who issued them?
I cannot figure out why the “bailout” isn’t simply a “gaurantee against the loans at the lowest rate sold”
then the lender can either keep the loan or give it to the government.
this is a no lose proposition as far as I can see, if this type of bailout is not accepted the lender loses the loan intirely, the lenders who enticed the consumer with a usery rate of increase will simply carry the debt or suffer the loss.
they can opt into this plan or accept the forclosed properties, which they do not want to do
Follow the Palin strategy. Say that you don’t want the money, then keep the money anyway.
Yup. People need to take some real losses and the rich need to be a lot poorer.
I think the best method to unclog the bad mortgages is to make them good mortgages, this to be done by awarding the lowest rate they were sold
I think you could write it that way, yes. Just can’t borrow money to pay it off.
You might be right. We’ll see. Nonetheless, what I’m spelling out is what can be done. Hopefully, they’ll do it. If they don’t, we move on. But getting the idea out there that it’s possible, is part of making it happen.
that’s not quite what happened, she never said she didn’t want the money till she already got the money and was asked to be vice president
so it’s’
“ask for the money, make believe it’s for a bridge, when the bridge becomes a non starter take the money you asked for that bridge and say you are not going to build the bridge, then lie to everyone and make believe you told everyone you didn’t want the brige, and then lie again and tell everyone you didn’t want the money, then rinse and repeate no less then 30 some odd times”
there
Yes and no. It’s not just mortgages, it’s a bunch of bad debt, though mortgages are the most important part right now. However, if you just clear the cloggage without changing the diet and lack of exercise, we’ll do this again in about 8 to 10 years. Plus the huge overhang of expenditures will crush the economy for years, and it will completely determine how Obama spends his first 4 years (which is why he needs to weigh in.) Right now Republicans are determining Obama’s taxing and spending policies. There won’t be money left to do anything he wants if this goes through.
So if it has to be done, he needs to make sure it’s done in a way he wants it done, because he’s the one who’ll be stuck with it. (Unless he loses, in which case McCain gets to do it.)
An interviewer once asked John D. Rockefeller:
“how much money is enough?”
“just a little bit more.”
Done, thanks for the link.
i hope i’m wrong.
but even if all the wrong people get bailed out now – we ought to be able to demand some reasonable regulation as the price they have to pay for it.
Yes the Dems need a ‘good’ bill Ian, as do the PEOPLE of the nation, why, then, are we all so concerned that they haven’t the wit OR the will to come up with such a bill?
It is not just the Rethugs whose past actions are on the line, we shall see if the Dems realize that or not. As well as see where their loyalties really lie.
They should rush to do nothing, and take the time necessary to consider suggestions such as yours.
A measure of the ‘change’ the Dems have in mind and in store for us should, thereby, be apparent rather soon.
It would behoove Obama to take a leading role in these ‘negotiations’.
Much shall be revealed; one wonders if the Dem politicians realize this?
watching the TB tonite, the consensus seemed to be “Holy shit!! We gotta put politics aside and all come together.” That’s OK for “God Bless America” on the Capitol steps. But the last time we took an approach like that to legislation we got the PATRIOT Act.
I’m worried,
p.s. i should have said at the start – yes you are.
imo, it’s not enough to point out how fucked up a response bushco is providing. shocking, i know.
providing alternatives and pushing for the best of them is key. so, thanks for trying to get us on that track.
The NewsHour just pointed out that while McCain was lambasting Obama for taking money from people connected to Fannie and Freddie, his won campaign received 10 times as much.
Then on to the inanity of Brooks and Shields. Brooks does his shtik both Obama and McCain were stupid about the financial story. When the Republicans are caught with their pants around their ankles and their dick in their hand, they always fall back on everybody does it, everybody is as guilty.
Seems they’ve used the “24″ scenario to scare the hell out of Congress…again…to get what they want…probably will have immunity in it too.
i don’t want to just judge them by their actions – i wish there was something we could do to help them succeed and do the right thing for the country. hasn’t that been obama’s message? that it’s up to us – not him – to make change happen?
Shields and Brooks praising Paulson to the heavens. Aarrgh!
Citibank was about to bite it…their shares were at $13 yesterday, I think that might have pushed the lemmings over the cliff…besides, the Saudis own a big part of Citi.
thanks for watching, so i don’t have to. don’t think my tv could have made it through these last months intact.
-close to 100.
o/t
maybe somebody’s pointed this out but Naomi Klein and Paul Krugman are on Real Time tonight. Hope Sullivan lets them talk. Right.
Brooks now saying that Bush did a good job this week, that the housing crisis is not his fault. This is another Republican tactic. Say it was an act of God. Who could have predicted . . .?
It’s time for them to go on out to pasture, imvho
Brooks now saying that Bush did a good job this week, that the housing crisis is not his fault. This is another Republican tactic. Say it was an act of God. Who could have predicted . . .?
Hugh – please. Back away from the teevee. Avert your eyes. Find the remote. Save yourself.
We are seeing another Shock as in Shock Doctrine and we need to be ready to scream loud and clear. Ownership of the banks should be transfered to the government as a percentage relative to what is taken plus. All banking entities ought to be subject to oversight and that includes all of the cayman islands crap, hedge funds and etc. All people involved in any aspect of the fraud shall be prosecuted. The penalties shall not be prison but rather assets seized as well as any income they may have down to a level of poverty and they shall be required to live in the worst slums america has to offer
Don’t get mad get even!
Yes, but Obama will have to listen, as will the other Dems, THAT particular ‘record’ as you know, selise, has a groove worn in it, how did Nancy Pelosi put it?
Oh yes, basically, we, as in we the ‘people’ have to know our place.
Well I’ve got news for Nancy and her ilk: This nation IS our place and we will do what is necessary to protect it even if the politicians won’t.
In spite of what people are led to believe, none of these descisions are written in stone, and if ‘they’ screw it up, then WE shall insist, with, how is it put? With EFFECTIVE DEMAND. And I’m NOT talking money, even if ‘they’ are, it is our money and they had better not bail the crooks and fritter our future away.
That will not fly.
An aggressive foreclosure defense should accomplish the same end. The mortgages, combined in pools, with the right to receive principal and interest sold all over the place via tranches are previously unknown in the law. Personal property (a mortgage note is personal property), except in trusts which have different rules, is not separated into legal and equitable title. In simpler days the holder of a mortgage note owned the note and was entitled to the principal and interest from that note. With tranches, it is impossible to say who gets the proceeds of a specific mortgage. This brings up questions of standing to sue and in the case of trusts, whether an express trust with a specific beneficiary exists. If not, a court in a state like Connecticut, should find the beneficiaries are necesary parties and not grant foreclosure until they are joined which may be impossible. Of course the federal government in these things makes judges hesitate as does the eternal question, “Do I dare disturb the universe?”. Damn few judges are ready to do that.
LOL I have the remote close to hand. It always gets me how Brooks says he doesn’t know anything about economics and then mouths off the Republican line and accepts no criticism of it. Apparently it is all very complicated and this lets Republicans off the hook because they don’t do complicated.
I need to face reality and read that book, don’t I?
i read that today.; 2 different ways to figure. the way used by mccain doesn’t include contribs from officers, directors and lobbysists.
The New York Times has published a separate list looking at contributions from “directors, officers, and lobbyists for Fannie Mae and Freddie Mac” for the 2008 campaign cycle. That list — using figures from the Federal Election Commission — shows McCain receiving $169,000, while Obama received only $16,000.
http://www.nytimes.com/2008/09…..#038;scp=4
If the U.S. isn’t able to provide universal health care like all western democracies have, do Americans actually believe that the GWBush administration and a weak Democratic controlled Congress can come up with something other than a band aid to prevent a total economic collapse? The response will be nothing more than another half-assed American “solution” that will protect the oligarchs and saddle the American public with a gigantic debt that their great great grandchildren will be paying for. No one in the corporate media and few if any professional politicians are saying this is a result of Republican economic theory and policy. To do so would be “poor taste.”
i think me and you are the only ones here who haven’t. been meaning to, but…………….
Well said, Too true.
The Republicans don’t have their dicks in their hands, they have it shoved up the collective asses of the American public.
hmm well I have my student loan through them (rather I’m paying off the student loan I have from them)
This is my concern as well, especially in a constricted, pre-election timeframe.
Stop Whining. O’Reilly on Fox Noise is having a Special Report: What Happened to the BayWatch Babes.
He’s not having the body language expert on? damn! I look forward to that all week.
For me it has been a slow read and I learned speed reading in HS. But it really is a must read. May I suggest an enama stick with a gearshift knob. Just kidding ya
Teddy’s upstairs
Did Jerry Brown Save Marriage Equality in California?
naoimi klein on oberman last november:
my bold.
They will be just fine…too big to fail.
ohhh, I’m afraid I’ll jump off the roof if I read it — from what I’ve heard others say. But sure sounds like she has the bead on what’s going on.
Thank you Selise
Great quote.
The ‘Cinderella’ hour approaches …
Hurry, hurry, worry, worry, oh dear! …Oh dear!
Whatever shall we do?
Fear! Fear! Fear!
We’re gonna get screwed, oh dear!
Unfortunately, yes and possibly Directive 51 ….
(Let us keep our wits and our heads, we may have need of them later.)
BINGO!
google is my friend. here she is on bbc yesterday.. good interview.
the free market guy is, surprise, a idiot. and she tears him apart. awesome.
Which includes.. having the same old Chicago School boys in place and ready to insist every failure only failed because it wasn’t given the full faith and support it now so richly deserves.
I wonder … are Paulson and Bernanke exactly this type?
So what are the big ideas that are “lying around?” Democratic socialism, theocracy, fascism? There are no big ideas of the left just lying around. The so called “left” in the U.S. would be nothing more than “centrists” in Western Europe. If there were a real left in the U.S. then labor, students, minorities and intellectuals would be on the streets demanding real change, not band aids.
Oh boy this is a big topic. I need to go read the comments but before I do…
A caller on talk radio in New Orleans today said something that I think is probably true. This “bailout” with govt buying assets at “market” prices is probably another way for Bushco’s cronies to fleece America yet again.
So probably they will over pay when buying the “distressed securities from their friends and then when they sell them they won’t get what they are worth. The potential for giant rip offs is huge. The rip offs could double or triple the liability.
The Republicans probably figure they will be out of power for the next few cycles if not forever so they might as well clean out the treasury before January even if it actually bankrupts the country.
Let’s face it folks the economic crisis might be bad and we might all be losing money but it is not nearly as much as we will lose if the actual country is bankrupt. Don’t think it can’t happen. If we take on too many bailouts then our counry’s balance sheet will be toxic. 1 billion here a billion there. This latest bailout is a trillion dollars minimim. OMG this is madness. Oh and now we are guaranteeing Money Market Funds?
We will lose our AAA credit rating and then we are toast. If the country sustains a 3rd world type currency crisis that is all she wrote. Our money is worthless. These are real possibilities.
It is also a real possiblity that the people who put us here have enough resources to live out their days in luxury in an undisclosed location no matter what armegeddon they have left in their wake.
as far as i can tell, there are very few in gov. who are not. and that includes obama’s advisors. obama isn’t an economist, i expect he will be listening to advisors who are. that is why we need to give him some other people to listen too – us.
i’d say that stiglitz is the best gov economist i’ve heard from. he was chair of clinton’s economics council, head economist at the world bank – so in addition to his nobel prize and job at columbia (i think?) he has lots of real world experience. and best of all, he actually seem to think self government and democracy are good things.
there may be ideas, but “lying around” implies that they are available to be used. and i don’t see that as the case. at all.
hence my jumping up and down. time is short, if we want to think through and proposed some ideas of our own.
OT but after Palin’s comment about a Palin/McCain administration, it’s probably about time McSame puts a food taster on the payroll. Sarah and Todd Palin have the potential of doing to politics what Tonya Harding and Jeff Gilooly do for ice skating.
Stiglitz is definitely #1 on my list. Second Krugman. Dean Baker’s ok. That’s about the end of it, really.
Stiglitz is far and away the best of the three though, he doesn’t play insider games much anymore.
Good catch – I just wish Naomi had the opportunity to counter that old farts You will just raise rates in the future BS
Ian, FDL is at its best when we the pups take action. I really hope you (individually or in a collective thread) put together some sort of petition.. whether it’s specific demands or pleas for consideration. And submit it to the blogos for an actionable event. We all need a way to weigh in now.
Just my two cents.
I would also ad that in general I think that the whole idea of “too big to fail” has to be revisited and regulation needs to be such that there is no such thing as too big to fail.
My sister works for Lehman. I have been following this for years reading rgemonitor, calculated risk and patrick.net. So I asked her at one point if she was worried about her job or Lehman going under. She said I am not worried because Lehman is “too big to fail”. So if this is what they are teaching them in business school I think this says a lot about how we got to where we are.
They are playing casino with the money all the while expecting a government bailout. If there is no fear of bankrupting the company then of course we are going to have excessive risk taking…we are not worried we are too big to fail.
This whole idea makes me sick, particularly with people losing houses, jobs and going hungry across the country.
far and away mine to. good list, i’d put baker ahead of krugman though – for policy advice. rather hear from all three though.
I will second that motion
would love to do that. but i don’t think we’re ready yet – since we don’t already have the ideas “lying around”.
i may have suggested this before (pretty sure i have)….. stiglitz has written a bunch of books for the lay audience. i’d love to see him invited here for a book salon (or whatever reason can be invented) with ian – we could then discuss our ideas about what to put forward. maybe naomi klein as well.
if there are any good ideas laying around, i bet stiglitz and klein will know about them.
Oh one more comment….
If we are going to bail wall street out to this kind of tune I think there should be consequences.
CEO’s of any company getting 500 million or more gives up all but 1 million of his net worth including retirement accounts. The forfeited assets are to be used for worker transition programs. Think of this as the I screwed the taxpayers tax part one.
Any company getting a bailout has to pay a higher corporate tax rate from now on. Forever. No matter how many times they are bought or sold. When they start making money again we tax them at 30% just like the American tax payers who they fleeced. Part two.
Re: Punishing Lenders
This goes back to the Clinton administration, doesn’t it?
The claim back then, if I remember correctly, is that Democrats were looking for ways to help ordinary Americans achieve the dream of owning their own home. Back then, it seemed like mortgages were restricted to an overly small segment of the population. Others seemed excluded. In other words, lenders were encouraged to lend. Why punish them for responding to a new government policy?
Obviously, the catch here was to find a way to make mortgages more available, but still make sure that the new owner could still pay off the mortgage. What happened was that the floodgates got flung open too wide, and fools and speculators rushed in.
Perhaps mortgages should be rated like bonds. Mortgages with relaxed terms would be considered junk mortgages. Lenders would have to accept greater risk, and could not simply pass the buck to the public. An enhanced process of oversight and regulation would be required for junk mortgages, to make sure that they remain viable. And there should be tighter restrictions on the sale of junk mortgages to Federally-backed accounts, which in essence passed the risk to the tax-payer without adequate compensation.
I don’t know the exact history, but I suppose what happened during the Bush years is that regulatory oversight of these mortgages was relaxed, with predictable results. Is this true?
Bob in HI
In the meen time we could be developing lists of goals, lists of things that would be totally unacceptable and negotiables. I concur that someone like stiglitz would be great to have but times awastin.
Tourists in New York were drawn to the offices of Lehman as employees left their former employer with their possessions in cardboard boxes and paper bags. To bad there weren’t guerilla actors passing out applications to Wal Mart and McDonalds. Could have sent a powerful message to tourists and the recently unemployed workers what the future holds for so many Americans.
We don’t have time to read more books.. Congress may very well seal several deals next week.
Goals need to be prioritized. Punishing the guilty as far as I am concerned is a non negotiable goal however at this point stabilizing the ship has to be priority #1. Leaving the door open for the punishments, how they are to be determined etc must be left open.
foothillsmike and eureka springs – nothing says we can’t work in parallel on both v short term issues, like what ian discussed in his post… what we can put pressure on congress for now, and what we can start building pressure for obama on. you can bet his econ advisors are doing some heavy planning (and getting hit by corporate toadies) already.
we may already be too late – but no way to know unless we try.
and every battle we fight, even though we lose, helps us climb that learning curve and prepare ourselves for the next one.
The way I look at it is several things dovetailed.
My Dad once told me that I didn’t need to worry about looking for a pre-payment penalty on my mortgage because they had “done away” with that since he had got his mortgage in the 80’s. I had to break it to him that he was wrong and they had allowed those egregious terms to creep back into mortgages. Consumer protections went out the window.
I think several factors are to blame:
1. Housing bubble created by artifically low interest rates – Greenspan fault.
2. Laws relaxed so that bad loan terms were allowed to be used. Such as high pre-payment penalties etc. If you don’t read your papers and maybe even if you do you might not understand these. Congress fault.
3. Banking laws relaxed on several fronts: not enough reserves, not separating investment banking from regular banking etc. Congress fault
4. The securitization of mortgages allowed many people to to make outrageous fees off of mortgages that they had no liability for if they were not repaid. Whether it was bankers or mortgage brokers they didn’t have to own the mortgage anymore so they became more concerned with doing deals than with doing good deals. All the banking regulators fault. Probably congress too.
5. It has been documented that there has been widesprad appraisal fraud. I myself had an experience with this. There are two ways to do an appraisal: the comp method looking at comperable houses that sold recently, and the income method looking at the value of income that could reasonably be made from the property. When I ordered the appraisal for purchase of a condo in New Orleans the appraisal actually said “income method is not appropriate”. Well it seems the appraiser decided it was not appropriate. Luckily I decided not to buy the condo but I later realized the reason it was not appropriate. The income method would have shown that I was paying $100,000 too much for the condo. The comperable method said I was right on with my bid.
6. Last was probably the government encouraging people to own homes.
It is probably a case of which came first but I think all these factors dovetailed to creat this firestorm that we are now in. If one or more of these had not happened or been less damaging we would be in less of a pickle. If the powers that be had looked at fundamentals instead of trying to prop up the economy with artifically low interest rates the bubble would have been less.
People in the industry knew that this was a house of cards. People knew it was not going to last forever. One of my dad’s friends left the mortgage industry because he saw this coming. Many many saw this coming and they were ignored.
We need to be more careful with our economy and our regulating. Contrary to what the Rethugs think we NEED regulation for our markets to work fairly.
So, being new to this thing,I am not sure where to go but lets get coordinated for this battle, we don’t have any time to waste, Let us develop something of a strategy. In a battle things are constantly changing. Soldiers are taught to cope with chaos but we need a rudimentory plan.
Seconded.
We can also call Congressional reps.
FWIW, I emailed Steny at his Majority Leader site and he forwarded it to my Congressman.
If nothing else, we can just forward this excellent post.
Well said, thank you.
Too often in the past imho, liberals were painted with the “limousine” label, because we had no counter to Grover Norquist’s mantra of “lower taxes, less government, less regulation.”
I think it would really be helpful for liberals to “rise up” on this issue, much as we did with “rubber stamps,” and on FISA.
i you like, email me at gmail dot com
…….
of course, you are right. but until these evening, i was despairing that anyone would be willing to think about anything other that the elections.
i’m no economist – but we have some pretty smart people here. and there may be resources we can tap.
what do you think?
amen.
thinking…
What if we lose our credit rating?
http://www.nuwireinvestor.com/…..pardy.html
This crisis is a direct result of the 9/11 attacks. Busho used them to bankrupt the treasury with the waronterrorism. It seems that just a few weeks ago we were talking about how much that $$$ would have helped our country if spent on physical and social infrastructure. Today, that amount of money is just water under the bridge. Taken together, the war $$ and these bailouts, the sum is staggering. We are living in a time of change. Hopefully the US will make it through without becoming a third world country or worse. We asll have to get involved with this election. Our future depends on it. Literally. And Nancy Pelosi wants to give out another Stimulus Rebate using the same failed policies that got us into this mess.
I think I’ll go have a Guiness and then put my head in a vise.
WayneC
This is a possibility but it is something that is in the control of others. At this point we are where we are if it happens it is another hurdle. This is not a reason to shrink from what is coming but the opposite It is all the more important to be vigilant and let our voices be heard
Note that all the big stuff happens on the weekends, now …
I sent a e-mail to selise @ ……. did I get through?
I’d be in favor of that personally, but if the government is going to be the mother of all assignees of the “troubled debt”, the solution would be to allow usury defenses against all state mortgage foreclosures by eliminating the federal clauses preempting such usury defenses. This is probably a tad too subtle for the simple minds that find it difficult to enforce a Congressional subpoena. Better to impose a confiscatory tax against all “earned” that is to say “unearned” income from sales of financial instruments held less than six months.
If Democrats were called in by (or offered to help) Treas. Sec. Paulson, then this game isn’t going to end yet. There will have to be more time added to the clock.
Now that a lot of Repubs have turned on Bush, including McCain, there is the question of whether George wants to truly test the attitude that he will continue as he wishes so long as he has the support of his wife and his dog. Would he really stab everybody in the back, toss McCain and every Repub in the country under a big giant yellow bus? We’ll see.
“Country First!”
You know, Alaska…
“principles” and maybe a flowchart of process and an indication of who is in charge
Part of it had to be the takeover of Fannie & Freddie, which Dems did not instigate and which hasn’t really been adequately explained.
This tells me there’s a Bushie political aspect to this sequence. That’s one reason I still wonder just where Bush is going with this and if he’ll be copacetic with giving Congress time. It’s important to realize this so Congress knows they need to do this on their time and not expect more.
The failures of other Wall Street entities has also been somewhat mysteriously bunched. Is it natural for all these outfits to collapse at the same time? What precipitated that?
Congress had better step up quick and overwhelmingly or Bush gets to take another turn at bashing — and nobody really wants that.
Those who are shorting are probably waiting for the magic word from Chris Cox and hoping to crush the market. Those who are their intended victims would be a bit less tempted to go with that flow if they see Congress act decisively. There’s a lot at stake yet.
People need to know the Market isn’t going to go to zero or even 50%.
Remember we ARE in the Bush surrealism era where the unthinkable is part of their plans. They depend upon us not going there. They’re thinking outside of the moral box — gettin’ all surrealistically sociopathic on us.
What if Repubs were promised eternal everlasting majority if they follow the plan and don’t get squeamish at times like this? What if Bushies promised them, don’t crucify Bush, don’t flinch in the clutch, let it go over the cliff and it will still work out alright?
Don’t underestimate them.
That’s why you’ve got to know them, their plans & goals and be ready for the elbow to the ribs or the knife in the back.
The thing is the bailouts Bernanke & Paulson are working on isn’t to save the stockholders or employees, just the assets and the economic system.
Dodd & Frank seem to have in mind some kind of enforced punishment, but with a backstop or just a discounted buyout and forced restructuring of mortgages to speed the whole process of getting the whole ball of wax back onto known sound footing. Sanity!
As I understand it he has said he’s going to stay out of it and just trust Congressional Dems, Bernanke and Paulson. With McCain ymmv.
Gotta clear them toobz! Heh.
I think what he meant was that bad mortgages aren’t being traded and nobody wants to loan money to holders, so the whole system is slowed by them — thus resembling a drain clogged with nasty paper.
I was listening today for that point and all the Repub pundits & journos are insisting it’s equal blame. And, as you know, there are really few Dems on t.v., so it goes unchallenged. Absolutely no mention of Phil Gramm except from Kevin Phillips who laughs at the idea that he’s a valid economic adviser to anybody. And absolutely no talk of Gramm’s midnight raid.
Good thinking, but I think they used that idea to some extent in the Dodd-Shelby-Frank Housing bill/law and now they see a much larger problem which they want to push through a refinance formula faster. Depending upon lenders & borrowers is slow-going.
However, once this new HOLC or RTC has bought a mortgage and re-jiggered it there’s no reason the “homeowner” should be pushed out. The idea is to fix the problem to KEEP people in their homes (at least the home they’re living in).
Think of the Housing law as being like some Drano and the HOLC or RTC as more like a snake. One is a bit slow, but not so dangerous and the other is fast & effective, but might cause some damage.
In some places, first mortgages are non-recourse. In some places, they aren’t. But just about everywhere, second mortgages are recourse. That’s getting a lot of people in trouble right now.
Often when you sell a house, the other person takes over the mortgage.
I don’t believe this statement is true, at least not in my experience. Can you clarify?
– Naomi Klein
Yes, and what ARE those “ideas lying around” just now? Well, Repubs just bought into Socialism, didn’t they? What will Dems pick up and use? The language has been “1929 crash…FDR saves the day”. But, Friedman’s philosophy is largely based on his youth, growing up in the 1920s and seeing how, in his terms, the Great Depression was how Dems governed and ruined everything. Like some Repubs today he preferred to ignore placing responsibility for the Crash.
I think Dems have to use restraint, pragmatism, good sense of what has worked in the past and a lot of compassion for people who have been or might be hurt if they fail. Having a variety of KINDS of Dems in the room might help to get a well-rounded solution. And the rest of us? Pray.
Their plan is to NOT give you that time. That’s why Cox banned short-selling. It prevents rational behavior. They control the cards, the timing, the sequence and use it they will.
I suspect, after Bushies cronies have sold short they’re set for the valve to be opened. Second, they buy up the market to push people in. Then, next, they open the valve and flush everybody out (market crash for financials perhaps) and then they rebuy & pocket tons of moolah.
The counter-strategy has to be to get out on top, after they bought it up high, and make some profit. Then sit & wait out the thrashing. Let it go haywire, cuckoo wild as an ice sheet crashing into the ocean.
Perhaps then, as it’s on the way down, one can simulate the short-sell action by buying back just above the Bushie cronies and restabilize the market before they get to settle their shorts.
But, where are they set to settle? Can one know that? How to know where to get back in without getting crushed by the herd running off the cliff?
The whole things is scary and can happen within an hour. Milton Friedman would be deliriously happy to see all this. BTW, his books are booooring.
Couple of Problems:
As of now, Foreclosures are in Clusters — that could change, but when a house is sitting vacant, unrented or unsold, chances are the Property Taxes are unpaid, and since these support Police, Fire, EMS, K-12 Schools and teachers, Garbage collection — a significant cluster has dire consequences for local government.
What Securitization of Mortgages means is that they have been sliced and diced into pieces, and one share may represent several hundred to several thousand houses sliced up according to various risk estimates. The owners of the hundreds or thousands of shares in one mortgage may be all over the world. Some of these securities have been structured with heavy risk — intentionally assuming losses, which offset gains on other income investments for an individual investor. It strikes me that one of the first things that necessarily needs doing is to totally unravel this ungodly practice, making an individual mortgage a whole piece of paper. Computers may help in this task — but it will be huge.
I’d like to start with what is the real asset, the house and the lot. My idea of a good program would be to establish a state agency in each state under overall HUD direction (no need to invent another Housing Agency when we have one), and then establish non-profit management teams to locally manage the assets (houses), gradually market those that can be re-sold to residents with yep, fixed rate long term mortgages, and then rent and properly manage those that can’t be sold now — rent at market rate, pay the RE Taxes, hire unemployed construction types to do repairs, etc., and then over time, offer the rental units for sale. This would tend to support neighborhood property values, and maximize longer term ownership and rentals, which make a community more desirable.
In the meantime who actually owns Mortgages can be sorted out, they can be discounted, conveyed to the State Housing Authority, and clarity of title established. I would make it very clear this is not to be “out-sourced” those who manage and sell these assets would be plain ole Civil Servants working for the State Housing Authority.
We need to also understand that many of the holders of these securities are public employee pension plans, with the beneficary being current retirees and future retirements. They get hurt two ways going — fired or laid off if local taxes on RE Assets are unpaid, or screwed on retirement if the sale or reorganization of the paper they hold isn’t fairly dealt with. What AIG is partially about is that they insure vast amounts of this Pension Plan Paper.
Anyhow — I think the best way to get this done is to get the housing assets rented and then gradually sold because then they are performing assets, even if way discounted, and then we can have an argument over how to deal with financing local services budgets and all the rest.
Which means what exactly for the people living in these homes now, as their mortgages are “conveyed to the State Housing Authority” and their homes are “re-sold?” Sounds like wholesale foreclosure to me, this time with the government as the villain twirling his dark mustachios.
I’m pretty sure you can transfer mortgages. If it’s not the case, it can be made possible. It’s just a law.
My son recently sent me these links (which I suppose many of you have already heard/read):
About the mortgage crisis, on This American Life — apparently a highly popular episode:
http://www.thisamericanlife.or…..pisode=355
PDF transcript:
http://www.thislife.org/extras…..script.pdf
While this was a wonderful explanation, it seemed to me that, as I wrote to elef junior,
But of course that’s not preventable, because as we all know, the economy is cyclical. /snark