Bailout watch: Banks 'pleading' for federal help

It's happening -- the secret bailout talks I warned you about.

Banks are pleading their case in Washington. The headline at Calculated Risk is "Banks Plead for Bailout," linking to this Wall Street Journal story: "The banking industry ... is urgently shopping proposals to Congress and the Bush administration that could shift some of the risk for troubled loans to the federal government.

More: "One proposal, advanced by officials at Credit Suisse Group, would expand the scope of loans guaranteed by the Federal Housing Administration. The proposal would let the FHA guarantee mortgage refinancings by some delinquent borrowers."

This I would define as a U.S. taxpayer bailout for the banks, oddly enough being championed by a Swiss bank.

The bloviation part: I have a silly question that may strike the globalists in the crowd as nationalistic, but I will ask it anyway: Let's say you are a member of the United States Congress, the one in Washington, and you represent people in one of the 50 United States. Let's say, just for purposes of argument, that your congressional district does not include Zurich, Switzerland. Now let's say the lobbyist representing Zurich-based Credit Suisse wants to talk with you about expanding the scope of loans guaranteed by the FHA. Do you really think this is a conversation your bosses (the residents of your district) want you to have? Why on earth wouldn't you politely inform the lobbyist to hurry his nice suit to Reagan National, and get on the next plane to the Bundeshaus and make his case to the Swiss Federal Council? I bet they've got piles and piles of money.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Photo credit: Treasury Secretary Henry M. Paulson Jr. and friends, via the Associated Press

Comments

[Cal]

They see all the money the US government is giving away and they want in on the action.

Funny thing about all these international banks holding this subprime debt. During the boom, when Doom & Gloom people were saying it would all go bad, the banks were saying the beauty of securitization is that the risk is distributed around the world and not concentrated in one area. Now that it is all blowing up people are saying the problem with securitization is that it distributed risk around the world..

[Tombstone Realty]

If the Fed offers a bailout, the EU has to offer it too. They happily reaped the profits off the housing market, they got to suck up some of the pain too.

Not that we should be bailing out any of these morons anyway. If you add 2+2 and get 17 - then you don't belong in the banking business.

We need to go back to smaller community banking again. That's all.

[JW]

As Lefty always says.................."It's a great time to buy a home. Get 'em while they're hot."

[twohoos]

CSG will simply be arguing that they're holding billions (or whatever) in U.S. mortgages, and any relief that's good for them will also be good for the homeowners, who will be that much more likely to avoid foreclosure.

For their part, Congress needs to ensure that whatever deal is struck is "good" for the US. By "good", I mean "encourages a soft landing" -- there's no avoiding a recession, but if they can short-circuit some of the fear in the markets, it will help avoid a more catastrophic meltdown, in which values plummet even below the point where they "should" be.

[Rob]

If this fraudulent activity ends up on the taxpayers doorstep, someone better be going to the Hoosegow...

[TakeFive]

So, you want a bailout? Well here are my terms:

You know those pens by the tellers? The ones with the chains on them? Well I want an extra foot of chain on every single pen. You promise me that, and you can have your $100 billion.

Silly? Yup - but the taxpayers will be lucky to get that.

[MyLessThanPrimeBeef]

We have saved Europe twice before, so maybe, given the precedents, they have come to taken things for granted.

I thik we should consider helping out the Swiss, PROVIDED that they hand over the Romansch region of their confederation. I think the Wall Street crooks, sorry, industry giants can use some of the banking secrecy protection there.

[Pat]

Your biggest mistake is assuming that the members of Congress work for us, citizens of the USA. Members of Congress have been bought and paid for by these lobbyists for decades.

[JohnnyB]

Good blov…

I would also ask said Congressperson – as they are considering siphoning off their constituents personal incomes to give to those “pleading” banks who got us into this mess – is that really the best way to resolve this crisis FOR their constituents?

NO WAY…

JUST ASK THEM!

Common… get out of the beltway and talk to your people… they need you now.

This is shaping up as THE WORST CRISIS IN A GENERATION.

Don’t get on the wrong side of this or you’ll wind up out of office and on K Street schlepping more bogus, anti-middle class ideas to a new Congressperson.

Oops… I forgot… that’s one of the rewards for a job well done in Congress.

[Todd]

This is a bunch of bull crap! The banks were making a fortune of loan originations. In the past 10 years I pulled dozens of loans, from residential to commercial. Every time I practically felt raped. Banks stick it to you with BS fees. I will provide example: LOAN DOC FEE, that is damn fee to print the loan paperwork. UNDERWRITING FEE, isn't that included in my application fee? APPRAISAL FEE, they charge whatever they want. POINTS, they make a ton on points.

Trust me when I tell you NOT TO CRY FOR THE BANKS. They were making a killing, just an absolute killing. They deserve to get their legs whacked off at the knees. It was their lending practices that drove the price of real estate so high that I had to stop investing in real estate at the end of 2003. Let the banks take their lumps.

[Andrew Z]

I'm pretty new to all this stuff, so forgive me if this sounds a tad naive, but isn't a federal bailout for these banks kind of like giving a kid a lollipop for beating the crap out of his little sister? I mean, the kid gets rewarded for behavior that is in no way, shape, or form acceptable.

I say the tightening of lending standards is a great start. Let's let it's ramifications work through the economy and shake out the bad stuff. It might hurt and a little blood will be spilt, but in the long run won't we be healthier and stronger because of it?

[Tony Ponce]

These are the same banks who are raising the interest rates on credit cards without any justifiable reason. They are just doing it to make up for the money they've lost on these dumb investments. First they backed the move by congress to make it harder to file bankruptcy. Now they want the people of the US to back they're losses. Typical. Why don't we just open the treasury and let them take what they want?

[NoWayinLA]

The only thing that's surprising here is the messenger. The American banks are desperate for this, too. I predicted federal backing of bad mortgages was coming down the pike as soon as they passed the "stimulus package" that included the astronomical raise on jumbo loan limits... making them eligible for FHA or Fannie/Freddie involvement. The proposal by Credit Suisse is merely the obvious next step in the bailout-that's-not-a-bailout plan.

As I said then... enjoy your $600 checks, because they're going to cost you a fortune.

[SReno]

It doesn't even matter anymore, typical democracy can't make it past a couple hundred years. Let me guess the next chapter in this book is massive protectionism and then a repeat of "war to end all wars", got to get that population down. The human race sucks.

[mike]

andrewz tsk...tsk...tsk... you are naive. the big guys need to be bailed out to keep the american economy strong. haven't you heard we can just print more money in washington...we are the U.S.A.

[SReno]

Anyone want to offer me a bunch of printed paper for my land, I don't think so. I'll take gold, silver, maybe copper but not paper, you can keep that garbage for the outhouse.

[brettdl]

Perchance American banks pushed the Swiss to make the request. After all, no one feels sorry for the banks in America, but maybe they hoped we'd feel a sense of "responsibility" toward Europeans.

[Jason Hoppe]

Why don't we just open the treasury and let them take what they want?

Why? Because the treasury is empty. And has been for a long long time.

[D-Auburn,Ca.]

I can't wait until Bank of America buys Countrywide and decides to raise everyone's credit card interest rates X 3 to offset their knight in shining armour purchase of a unethical mortgage company. Why doesn't AG Jerry Brown do more than just investigate Countrywide? Jerry should call them and ask to speak to a supervisor in the loan workout department. By the time he gets to speak to a real person, his term in office will be over. How can mortgage companies who are bankrupt or have lost their licenses, still take our money and do business in such an illegal manner?
Countrywide will not call you back and try to help you workout a rate freeze, refinance, loan modification, or any program in which our president and governor have been speaking about on national television. We have never missed a payment, but when the rates re-set, we're in trouble. I thought we were the ones who the mortgage companies wanted to work with. Silly us to believe paying your bills made you valuable. They are crooks, just like Mozilo their past leader who retired with a fortune.
When is AG Brown going to make lenders like Countrywide comply to the proposed HOPE, RATE FREEZE, and now the LIFELINE plans we hear announced monthly?

[LA-renter]

Peter and LA Times staff: Please call lenders and government officials on claims that they are helping "homeowners".

In fact, anyone who is in serious trouble cannot be a homeowner. Rather, they are "loan-owner".

It would surprise no one here if the most people who need help from Paulson and the Treasury were better served by extrication from loans and "their" houses.

I think Paulson has realized this, and he & lenders are now just trying to move the *&%# downwind.

[KenO]

As one of your earlier blogs pointed out so well, the banks have already received a huge bailout in the form of a lower Fed Funds rate, while conventional mortgage rates have continued to rise or remain neutral. The widening margins on the current loan products should start to make a big dent in covering losses.

If one of these banks is really on the verge of failure, then we should let at least one or two fail outright, if for no other reason than to hold them accountable for creating this situation in the first place. Creating a bailout before there has been any failure is premature and irresponsible. If banks know that the government will bail them out in this type of situation, then what will ever prevent them from doing the same thing again?

[bulwark]

Hey, I want a bailout, too. My bank paid 2% interest on my savings account but made a fortune on mortgage loans. Give me my fair share!