Banks want "an epic rescue plan"

Weekend reading, worth checking out, though I am sure it will not sit well with many of you:

--The New York Times notes the banks are now pushing "an epic rescue plan": "A confidential proposal that Bank of America circulated to members of Congress this month provides a stunning glimpse of how quickly the industry has reversed its laissez-faire disdain for second-guessing by the government — now that it is in trouble."

More: "Bank of America suggested creating a Federal Homeowner Preservation Corporation that would buy up billions of dollars in troubled mortgages at a deep discount, forgive debt above the current market value of the homes and use federal loan guarantees to refinance the borrowers at lower rates. "We believe that any intervention by the federal government will be acceptable only if it is not perceived as a bailout of the bond market,'' the financial institution noted. In practice, taxpayers would almost certainly view such a move as a bailout.

The NYTimes reports that the Bush administration -- yes the same crowd that said "absolutely not" to a bailout earlier in the week -- "has expressed interest" in hearing about bailout plans.

Meantime the ever-alert Westside Bubble links to reports of another bailout in the making: This one for the homebuilders, in the form of a $10,000 tax credit for buyers of brand-new homes.  You may recall the homebuilders' lobby has been sulking, and withholding political donations, because it didn't get what it wanted in the first stimulus package.

"A substantial tax credit for home buyers is likely to be part of any second economic stimulus package enacted by Congress," Marketwatch reports. Who knew there is already a second stimulus package being discussed?

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.

Comments

[Steve]

Just goes to show you, save you are a chump, if you buy RE and stay in debt you win.

[shireen]

Ugh, that $10,000 tax credit for buying a new home just makes me want to throw up!

that is about all the analysis I can muster before I finish my cup of coffee.

blech!

[sunsetbeachguy]

Ahh, it burns...

The stupidity is burning my eyes.

Run every bum out of Congress that supports this deceptively marketed bailout that is in direct contravention of the peoples will.

They admit that!

[sunsetbeachguy]

Having said the angry part of my comments.

I would support an epic bailout IF, the Officers, Board Members and every Sr. Exec from a firm that utilized the bailout returned all of their salaries, options and bonuses since 2001 and paid 10 years of restitution to the government under Chptr 13 judge supervision.

In addition, give Hilary free reign to design their new regulatory climate.

Restore Glass-Steagall, adopt Lansner's suggested reform of reporting stated income directly to the IRS and letting Wal-Mart and anyone else into the banking business.

There is a price to be paid for the bailout and that is the price.

[silverfern]

I think it is time for tax payers to write their Congressperson. One letter is seen as representing 100 voters. You could email, but a paper letter mailed via the US Post Office is better. But do what you have time for, just please write your Congressperson if you do not want a bailout. A letter mailed to your local office will get there faster than to the Washington address (because of security processing, etc.).

U.S. Senators, Contact Info:
http://www.senate.gov/general/contact_information/
senators_cfm.cfm

House of Representatives, Contact Info:
https://forms.house.gov/wyr/welcome.shtml

[anon]

"Federal Homeowner Preservation Corporation"?

A "Resolutiion Trust Corporation" for the 21st century?

If that's the case, count on this becoming a reality.

[Joseph... the Real Estate Guy]

Investors, wall street, banks should be the only ones responsible for the meltdown!

Not the taxpayer!

[Sara]

I don't believe what I am reading! Bank of America floated this proposal? As a B of A customer that pays numerous fees on my accounts and holds a mortgage with the same institution, I am stunned and angered by this proposal. I am a financially responsible individual- the bank should be a financially responsible institution! In the end, taxpayers such as my self, paying what is grossly more than my "fair share" will shoulder the financial costs of the negligent financial institutions that gave credit to borrowers that did not qualify for it. I am livid! There is no better time to leave this bank, perhaps for my local credit union!

[CD]

Our Friend Ocrenter of bubbletracking.blogspot.com is now threatened with a law suit by a disgruntled home owner that wasOcrenter mentionned on his site. Title was -1/2 million discount and still no sale-. That is where we are folks. People telling the truth are slapped by the disgruntled fat cats with law suits. The guy does a fabulous job keeping track of sales in CA and inform us all on a daily basis. Please visit his site and bring him support. He has also a great story about the little Tokio lofts downtown LA.

[Dr. JwB]

I already wrote Boxer and Feinstein, and it made me feel better for about 5 minutes.

The 5 minutes are over.

[CD]

Thank you Peter for keeping the ' Bank bailout" on your post every day. Our local papers could care less. You are our " LOCAL HERO"

[NoWayinLA]

I'm as anti-bailout as anyone, but the bailout package being pushed by BofA is something I actually don't hate all that much.

The thing that could make it work is that "deep discount" the government buys the mortgage for. If the mortgage is $500k, and the house is realistically worth only $200k, then the bank could sell the mortgage at $200k, and they're still taking the loss they rightly deserve. The government finances that as a sensible loan that has very low risk, and collects a fee for insuring it. The idiot homeowner stays in the house, preventing urban blight and rising crime.

So why do I hate it? Because of the timing, and a total lack of faith in anyone involved in appraisals. The banks will no doubt sell the mortgages based on today's prices, which are still too high. That $500k house might be "valued" at $350k by today's useless appraisal methods. This means the bank basically does a short sale to the government, and the government finances another loan that's doomed to failure.

Tell the banks to tie sale prices to median incomes, and I'm on board.

[mbob]

Sliverfern is quite right.

A hand written letter is roughly equal to its weight in gold.

Congressional staffers regard such letters as the boiling point that a voter has reached. The theory goes that if a constituent will take the time and effort to write a page or so longhand, then they're already broadcasting their opinions to any who will listen.

My experience with writing to politicians strongly supports this idea.

[mark g]

ugh... what is the cutoff point to determine the home value and forgiving the dollar amount beyond that? Is that open to periodic re-adjustments or is this a one time transaction, still exposing those 'saved' to more devaluation in a declining market? Me thinks this is like putting padding on a bull in a china shop...

[Nonan]

"Just goes to show you, save you are a chump, if you buy RE and stay in debt you win."

Truer words have never been said. If it benefits the economy and GDP overall, then it will happen--regardless of how "fair" it is.

Looks like the very few people who hoarded their cash are not going to see the crash they are hoping for in order to buy a house at a deep discount. As the great sage Spock once said, "The needs of the many outweigh the needs of the few."

[Raul]

The Banks, the Real State people, deserve our respect, and they deserve better. They sold us a dream and they did a good job. We were all happy driving our nice cars, taking vacations all over the world, We were Rich, all we had to do was Refinance our house. Now guys that was real, You could feel it, You could taste it, was delicious, some of us sold our properties and retired young.... Those lucky guys are still living the dream. That was perfect, Every one was making money, We were all happy. And now I am asking You, what is wrong with bailing out our Banks?, We all need to cooperate and save our economy, nothing wrong with a little bit of inflation, we all get back to normal.... And you wait to see what kind of "Trip" they are preparing just for Us next.

[BottomFisher]

This is how Washington really works. Lobbyists paid by 'you name it industry' are at the door and phone of every elected person in DC. Thats who they listen to, and not us. The lobbyists have one goal in mind.....get this big money losing problem off their business and onto us...the taxpayers... who have absolutely NO control over Washington....and they will NOT STOP until they win and we lose, so we will be hearing bad plan after bad plan for the taxpayers until Washington finally caves in

[Anthrodiva]

Ok,

I wrote my letters this morning, to Feinstein, Boxer, Pelosi, Reid, Clinton, Obama, Calvert, and Bernanke.

Pony up, people

[Michael Snyder]

When I read this I had to finish my coffee and do a workout before I could comment without profanity. We're talkin' tar & feather time here.
It either takes a lot of chutzpa to purpose such an outrageous plan or these "moguls" are simply stepping forward to collect on a debt. After all, they've been paying for "representation" through "contributions" for years. Now they're simply seeking a "return" on their investment.

I periodically bombard our "representatives" in the Senate & Congress with my opinion and an admonition to follow blogs like this one in order to discover an informed grass roots position on the topics covered here. From the results I may as well be talking to a wall.
The political machine in California is deeply entrenched and quite comfortable with the perks provided by the special interest that run them like so many stringed puppets. Boxer & Feinstein are particularly egregious with a consistent record of espousing one ideal and voting another. I recall recent incident where Sen. Boxer made a big brouhaha (covered in this blog) over a bill relating to what's erroneously called a subprime debacle and she didn't bother to show up to cast her vote. But she did garner some "ink" & a little more name recognition. What's more if you call & ask I'm sure the voice on the phone will assure you Ms. Boxer is at the "leading edge" in finding a "solution to this crisis." What a crock! Ms. Boxer is likely being entertained by some lobbyist pushing for a bailout on our backs as we speak.
Sadly I don't see Congress being sensible without a level of public outrage that rivals our reaction to the Viet Nam War. Let's face it; any private enterprise staffed with such a gaggle of incompetents, liars & thieves would quickly fail in an open marketplace. An embarrassing percentage of our country's top leaders are either under indictment, in jail or former convicts. It seems more like a college educated street gang than the face of government for the world's first great experiment in democracy.

It's a shame the best our vaunted Fourth Estate can do is dig into the candidate's sex lives. We've all seen proof that marital fidelity has nothing to do with competence, integrity or honor in our current President. It makes salable copy, but it does nothing to fulfill the obligations inherent in the privileges granted by the Fourth Amendment. But I digress... Again...

The timing of this "revelation" indicates the financial "brain trust" is taking their cues from across the Atlantic. There is a huge difference between what England's done and what these bankers purpose. The nationalization of Northern Rock places the bank, its' assets and management entirely under government control with the profits going to indemnify the taxpayers against the short term losses incurred by this move. BofA's proposal is to dump the losses they expect to absorb in their purchase of Countrywide onto the backs of the American taxpayer while retaining control of the institution's remaining assets and management. Talk about monkey see, monkey do! Bankers figure if England can nationalize a bank, and Warren Buffet can tender an exclusive offer for the profitable portions of a failing business, then they can foist their losses on we poor dumb working stiffs and catch the back nine at Boca Dunes before dinner.
I'd also expect the Fed to quietly lift their restriction on the total percentage of deposits held by one institution in order to allow the CW/BofA deal to close. This will open the floodgates for another round of bank "consolidation" leading to tighter credit and more egregious abuses of consumers locked in revolving debt.

You'all enjoy a beautiful day, I'm going to hop on my bike and pedal off my frustration.

[CaptHowdy]

I agree with sunsetbeachguy.

Boatloads of money were made by the parasites on Wall Street during the bubble.

Let government hunt down and retrieve as much of that loot as possible before even considering bailouts. Why haven't we heard about upper ups getting personally ruined by this scam gone awry? I want to see the Skillings and Lays of this thing GO DOWN.

Then maybe, just maybe, we can think about something sort of resembling a bailout.

[nope]

NO

If this goes through, I'll be rioting in the streets. OMFG

[Gene J]

From the original article...
"Mr. Taylor estimated the government might end up buying $80 billion to $100 billion in mortgages. But he said the government could recoup its money if it was able to buy the mortgages at a proper discount, repackage them and sell them on the open market."

So the banks and investors will give away the loans to the governmant, then the government will repackage the dud loans that nobody wants and then sell them on the open market.And they will make money!

If these were such good loans why don't the banks sell them themselves on the open market???

As I see it the taxpayers will buy these loans at an inflated value and get stuck with them. This should be a non starter of an idea.

[ash molari]

Silverfern's email inspired me to make a handwritten note to senator boxer - it only took me a total of five minutes including sealing it in the envelope and putting a 41 cent stamp on it.

I urge you to do the same - even if there are 200 people reading this blog who take those five mins and 41 cents to write to their senators, this would result in 200 envelopes stuffing their los angeles office mailbox and her aides will DEFINITELY bring it to her attention - I have spoken to people who work as volunteers in political campaigns and they agree that this is how your voice gets heard. for all the publicity blogs have generated, the old fashioned hand written note still reigns supreme when it come to influencing policy

Bottomline - politicians are almost all very RICH (that includes boxer and feinsteinn) and they give two hoots about AMT or illegal immigration or housing prices since they dont have to buy the starter home, they are already living in their mansion. They dont care about AMT since most of their income is from capital gains/investments.

The ONLY thing they are scared of is losing voter support.

This is precisely why the anti-illegal immigration grassroots campaign was so successful in thwarting that bill last year.

Trust me, you will feel much happier and atleast get that temporary peace of mind from having done something about a topic so near and dear to your hearts.

[allen gillespie]

The builder sponsored $10,000 tax credit is even more outrageous than the bank bail out, since the only party benefitted would be the builder. This would lower the value of other homes in the area by $10,000 immediately and encourage builders to add supply to an over built inventory. For every home built under this arrangement, an existing home would be unsellable and ultimately foreclosed. Exactly what we don't need (unless we are a builder).

[silverfern]

Dr. JwB:

You are right; writing a letter to a Congress Representative makes you feel better for about 5 minutes. This morning, I wrote my _second_ set of letters to my representatives. It might not change anything, but then again, it might. At least I felt good for 10 minutes!

It might only be a drop in the bucket, but it is better than doing nothing. If enough Americans write letters about this, it just *might* change something about the bail out plan. One letter can be readdressed and rewritten to 3 representatives.

[yinyang]

So banks are willing to take "deep discount" of their current holdings. Funny, I thought a bank was suppose to make money. How bad could the mortgage crisis be if banks are willing to LOSE money just to get these loan off their hands.

A tax credit can be a better option than a current stimulus package. At least you are helping those who spent money. Most of the $600-1200 that will be sent out will be used to pay down debt because everybody is so freaking scared right now.

But the thought of tax credit for purchasing real estate makes me sick to my stomachs.

[Driedup]

Bailing out the banks is not what bugs me. It's the home that were and still are so overpriced. There are too many interests in the sale of a home. A house is not a home anymore. It's an investment? That's blight. Where people don't live, have neighbors, just a place to sleep and take a shower. What are we, soldiers? Here, in Azusa, and I don't doubt anywhere, house after house, looks so silent.

And not just now, but for a long time.

And for the past few years prices going up and up.

TYING HOME PRICES TO MEDIAN INCOMES, so nice.

I hate this, I hate it all. And we're squeezed in here, my sister with her two snotty teenagers, my sister with her "companion" and my aunt and my two brothers.

My mom and dad are old they don't have the strength for all this.

I want this whole real estate industry, with the banks, brokers, mortgage agents, real estate agents, anyone who is involved in the sale of a house, to perish.

And let me buy a house, like I buy a used car.

[msprompt]

washington doesn't listen to working stiffs because we have no way to make our voice heard. (Aside from handwritten letters, which I will send to everyone who got or could one day get my vote. Any suggestions for effective language to include?)

The founding fathers knew the public interest of the people was the job of the press, which is why they protected it in the First Amendment.

And where is the press now? Too busy chasing the same old horserace story or running like pack of morons after the faintest whif of plagiarism, infidelity or cat fight.

Not exactly sure if you're serious Raul, but I hope not. If you are, the problem with bailing out the banks - obviously - is that the high cost of fradulent behavior will be added to the already heavy burden of working people who did not assume bad risk, buy the fancy car, take the exotic trip or retire prematurely. It's about the rule of law and ensuring that contracts are in fact binding. If only some contracts are binding, how do we determine which those are? Who gets to decide? (answer: the politicos and the highest bidder)

Sure could use a Teddy Roosevelt.

[Tom]

I need the Bank of America to bail me out. They charge $13 per month plus checks to hold my money in a checking account, and only pay 1.5% interest on my savings account. I can't afford to give them any more money.

[Rational expectations]

No billion dollar bailout for bid-rigging banks. When prices were flying, fat-cat bankers could not keep government far enough away. Now that their massive mistakes are coming home to roost, they want tax payers to foot the bill. Never (sounds like Ian Paisley, but I mean it)!!!

1.) Break up the banks. Firms too big to exist are a violation of anti-trust.

2.) Preclude criminal banks from accessing Fed funds. Why should the U.S. government be helping bid-rigging and fraudster banks to continue in crime?

3.) Get the government OUT of the guaranteed bank profits game. The GSEs and other entities ensure that banks can make money no matter what, but even this is not enough, creating the moral hazard of today (and more tomorrow if we persist in government solutions).

4.) Reform personal bankruptcy to be consistent with the tax forgiveness for foreclosure. Make it socially acceptable to walk away from bad mortgages. This will clear the market quickly and will not force tax payers to foot the bill. Banks will fail, but the resulting industry will be chastised, efficient, and ready to make good loans.

[Michael Snyder]

CD
You can sue almost anybody for almost anything in California. Collecting is another matter. Truth is the bottom line for libel & the disgruntled homeowner needs to show loss as a direct result of his story. Given the current state of the market I'd say the homeowner's position is pretty weak and crumbling fast.

Tom,
Can you say credit union? Actually, if bloggers really want to get their banker's attention, join a credit union. It's amazing just how worked up these executives get over losing even an iota of market share and there's pretty much nothing BofA can do for you a credit union can't.

[sfvrealestate]

Kudos to all of you that have written your representatives. It's a start.

However, one or two letters (about anything) does not a movement make. Write your U.S. House representatives. Write other representatives on the House Commerce committee.

When you're done with that, write your state representatives -- they have a lot to do with local banking regulations.

And don't stop.

And while you're at it, stay involved. I know we're all busy, but corporations hijack governments when its citizens are looking the other way -- and let's face it, the freebooters are running the show right now. Don't just focus on the Feds. Educate yourself about ALL the bodies that govern you. Go to your city council meetings. Get involved in your homeowners groups and neighborhood associations. Host meetings. Go to PTA meetings. Go to your Union meetings. Get involved with local election campaigns. Read. Write. Blog. Read other people's blogs. But most of all, take the time to speak up everywhere you can.

[silverfern]

MSPROMPT:

Here's a web site about writing effective letters to Congress.

http://usgovinfo.about.com/library/weekly/aa020199.htm

Hope it helps.

[silverfern]

Another tip for writing to your representatives: tell them that you are a registered voter and that you actually do vote. Esp. important: if you did actually vote for them. Make sure they know that you voted for them, if you did. The staffers do pay attention to those things.

[And if you don't vote...write them anyway, and get yourself registered!]

If enough letters are received from constituents, representatives will pay attention.

In addition to writing my two senators and one representative today, I also wrote the DNC and the RNC to let them know that I will *not* tolerate either party's support of this "bail out". (Addresses are on their respective web sites.)

While I am sure they will be quaking in their boots at my lack of toleration, it did make me feel better for an additional 5 minutes. ;-)

[Tombstone Realty]

My credit rating just dropped 20 points.

Why? - I haven't touched my credit cards in two months.

And then I have to PAY their debts too. Whatever.

[someday the ants will eat grasshoppers]

If any of you would be so generous, why don't you post one of the letters you have written, and the addresses to which you mailed them? That would certainly help a lot of folks on this blog go from thinking it's a good idea to actually doing it.

Thanks in advance--and the rest of you, if someone is kind enough to draft a letter for you, consider pasting into a document, signing your name and mailing it off today.

Don't let the craziness continue!

[smi2le]

We renters have also been victims of the housing bubble, and now the housing bust. We should also write our senators and congress people and demand they give us some free money too, just like they are considering giving to the banks and builders.

[ShameandScandal]

Write the letters and send the emails. Call. Call their local offices, call their D.C. offices. It takes five minutes, ten minutes tops. Be polite.

It's OK to say 'I am outraged that the same businesses that profited wildly from reckless and potentially fraudulent mortgage lending and investment strategies may now be aggressively seeking protection from the realizing the costs of their behavior.' It's not OK to say 'tell the greedy a*****es to f*** themselves the way they ***k us,' unless you want to start getting monitored by NSA or other other spook outfit.

Make sure to ask the staff 'when did Senator ____ go on record in opposition to bailing out the big banks?,' 'oh, really, then when will the Senator go on record?,' and 'when did the Congressman (or woman) go on record to express concern about potential mortgage fraud and abusive practices? 2005? 2006? 2007?' Ask where on their website a constituent can find verification of the Senator's views. Be polite.

Vote out the old bums -- the R bums, the D bums. Don't discriminate. Vote in the new bums. It's all they understand.

[ash molari]

Here's the address for senator barbara boxer:

Los Angeles
312 N. Spring Street, Suite 1748
Los Angeles, CA 90012
(213) 894-5000
(202) 224-0357 fax

Regarding the content, just use a few lines stating atleast the following four items:

1) you are an active voter and believe the said respresentative (say boxer) listens to the voice of the people (basically boost their egos a little)

2) you do not support a bailout of banks or irresponsible borrowers at the hands of responsible taxpayers who are working hard to provide for their families (dont be shy in dropping the words "family" and "children" as often as you want), in many cases paying close to a third of their hard earned income to taxes and entitlement programs

3) you think that people who are crying "but it is going to save the economy for all of us" dont know any better - they sure cant be trusted now since they clearly did not see any of this coming, what makes them so sure that they are right this time?

4) any bailout has to be supported by either a retroactive or future clawback of these executives' bonuses (by the way this is not unusual or unfair, I work in finance myself and many of the venture capital investors use such language to properly incentivise management and keep them honest)

Hope this helps

[amir]

You guys are awesome. You actually convinced me to write letters and emails to my representatives.

If enough letters arrive, they will be careful, especially if the level of rage is high enough.

Anyway, that's what I tell myself.

[peteviles]

Thanks for all the comments on this. Those of you who have written to Congress on this, feel free to put those letters in the comment section.

The workings of our government are far too mysterious. If someone takes the time to write to the government, and wants to share that communication, I'm happy to help.

[silverfern]

*****Because I now live in NC, not CA, I wrote my senators and congressional representatives for NC. This is my second letter; Burr wrote me back after the first one. I've scanned in the letter from Burr and will send it to Peter Viles via email, in case he wants to post it/review it. Caveat: I didn't write these letters long hand; I typed them on my Mac and printed them out, signed them, then mailed them. I hand addressed the envelopes. Next time, I'll take mbob's suggestion and write the letters long hand.*****

21 February 2008

Dear Senator Burr,

Thank you for your letter of February 8th, 2008, in which you stated that both lenders and mortgage borrowers are responsible for their actions. I agree with you that lenders who issued credit irresponsibly and mortgage borrowers who took loans that they could not afford, should be held responsible for their decisions and actions.

While on a personal level I feel sympathy for the people who took out loans and are now underwater on their mortgage, if they cannot afford the mortgage now, government backed mortgage loan programs that take on the bad debt private lending agencies don’t want is only delaying the problem and passing the problem on to taxpayers who did not act irresponsibly. We need a market correction in housing prices, no matter how difficult or painful for lending agencies, homeowners, and government. Better sooner than later, in my opinion.

I have no problem whatsoever with a company making a profit. I have a problem with greed. I especially have a problem with corporations that claim they want a free market and little regulation, who then go running to the U.S. Government for a financial bailout when their leaders have made bad decisions that are going to drive the company or industry into bankruptcy.

In other words, I’m tired of profits being privatized while the true costs of doing business are “publicized”, i.e., passed on to the U.S. taxpayer. In a capitalist system, if you make bad business decisions, you go out of business. Period. American business people seem to want it both ways – little regulation combined with government aid to save them from their bad decisions (generally caused by a lack of regulation). All I can say is, “Welcome to Capitalism”.

If I run my private consulting business at a loss and make bad decisions, I expect that I will go out of business. I won’t be running to the government for a bail out. I expect large corporations to do the same. It is called eating your own dog food.

I did not act irresponsibly and take on a mortgage that I could not afford, and I have no intention of allowing my tax money to go towards bailing out irresponsible lenders and borrowers who did.

Best Regards,

[msprompt]

ash, shameandscandal, silverfern, sfvrealestate, et al,

great stuff, all! thanks for sharing. Monday a.m.first thing i am writing. i am calling. i will use the official language and include all the elements. I'm fired up.

Blogs. Who knew?

[silverfern]

P.S. Next time I write a letter to a congressional representative, and I do every once in a while, I'll follow the information provided at: http://usgovinfo.about.com/library/weekly/aa020199.htm

My letter could be better in terms of addressing a specific bill, etc., and how the issue in question will affect families, children, etc. As well, I did not mention my professional status, or experience, which in RE is nil. But it gets my point across!

[joannar]

The bailout is for the banks who packaged and sold fraudulent paper all over the world to governments, institutions etc. Now they fear these bondholders who have been DEFRAUDED will demand they take the paper back and the financial system will crash. Maybe it's time this corrupt system was swept away---the last bank bailout, same thing. The crooks walked away, pockets bulging, and stuck the bill on the rest of us. This is not about sub-prime mortgages; this is about FRAUD and the bankers should go to jail and pay MASSIVE fines. No bailout. The Fed system is totally corrupt--this is what Ron Paul was preaching--abolish the Fed and reform the banking system. I guess being given our tax money and then lending it back to us at interest wasn't enough for them; now they want us to pay it again because they squandered it.

[Hugh Jorgan]

Inspired by what I have read here today, I am writing to my Senators, and Congressman. I do not expect a response from Boxer (who has her own spending scandal in her Congressional closet). I expect Feinstein's office will send a form letter that will refer to a completely unrelated topic. As for Representative Miller (42nd District), we'll have to wait and see.

Below is the letter I sent to Feinstein. Identical letters were sent to Boxer and Miller.

Honorable Senator Feinstein
750 B Street, Suite 1030
San Diego, CA 92101

Dear Senator:
I feel I must express my outrage that a taxpayer-funded “bailout” for the huge financial institutions (e. g. banks, Wall Street investment firms) is being considered by Congress. These corporations made their billions by entering into mortgage contracts with full knowledge of the risks involved. That the gamble has not played out in their favor is just too bad. Even with these sour loans, none of the banks will fail. Their assets are far greater than the loan amounts they actually hold because the banks sold the vast majority of the loans to Fannie Mae or Real Estate Investment Trusts.

Do not be seduced by Wall Street lobbyists telling you that “the sky is falling” – nothing could be further from the truth. I bought my home because the previous owner sold short. Many other potential homeowners are waiting for the same type of opportunity. As irresponsible borrowers walk away from foreclosures, those of us saving our pennies are eagerly waiting for the chance to invest in our own futures.

Sincerely,

[Brian]

Hey guys, I hate to be the bearer of bad news, however; both Senators Boxer and Feinstein are co-sponsors of proposed "cram-down" legislation (allows bankruptcy judges to reduce a borrowers mortgage balance to curent values) which is also a definite bailout proposal. Unfortunately CA is so left-wing that I am sure these letters will fall on deaf ears. For the record I have sent emails to both on the topic.

[CD]

SILVERFERN
This is great , I am writing and I will make everyone around me write as well. This is a good start. Then maybe the million people's march trough downtown LA
around flower street in the financial district.

[LeavinLA]

Your indignation is too precious for words. Truly. It's sweet... in a diabetes-inducing way. But it's also pathetic and short-sighted.

I was a SWAT team member with one of the financial institutions that took over failed S&L's in Houston in 1979, and I can guarantee you that the country would not have gotten out of that mess as quickly as we did without the RTC.

When you finally take a second to look at the economy at large in comparison to your cute but desperate belief that you should be able to move out of your LA rental simply because you didn't buy a house and saved your money, then you'll see why this really isn't an awful idea. And you'll get to buy much sooner than if you wait for the market to shake out unaided. Be a sad little whiner or be a homeowner... it's your choice.

[Cynt]

Thanks for the inspiration! I'm tired of staying on the sidelines on this issue. I wrote my letters!

[Mark Too]

Bank of America is looking for a bailout. A quick look at the Yahoo financial info on Bank of America indicates that the company has a market capitalization of $190 billion U.S. dollars. It also shows that that they have 4.44 billion shares outstanding. The closing price of BAC's shares on 2/22/08 was $42.60.

If they need money to extract themselves from the hole that they are in, I propose that they sell more shares. If BAC were to sell an additional 4.44 billion shares to the public, or possibly the federal government, at $21.30 per share, they could raise nearly $95 Billion in cash. If they need more cash than that they could increase the the number of shares offered, at a reduced price of course.

Isn't that the way our capitalist system works? If Bank of America, or any other bank for that matter, is having problems let them work it out in the free enterprise system that we live in. Let the shareholders shoulder the responsibility, it's their company.

[arroyogrande]

"arguments for rescuing home prices...likely to argue that what is good for Bank of America is good for the rest of America."

I think it's a good idea...just like it's a good idea for Congress to keep the prices of other necessities high, like food and energy. If the price of oil begins to fall, the US government should do all it can to keep oil prices from falling. If food prices start to inch down, the government should do all in it's power to make sure food prices stabilize at a high level. And if house prices fall to much, the US government should do all in it's power to keep house prices high. And then, when people complain about "affordable housing" (and food, and energy), the government can spend even more money to subsidize people so that they can 'afford' them.

Risk taxpayer money to try to keep house prices high, and then use taxpayer money in order to make housing "affordable".

Stop the ride, I want to get off.

- arroyogrande

[ash molari]

Another way we can have a much bigger impact -

If you really think about it, writing this letter is really a "one-time-expense", to use the language of these bankers, and once written, the text can be used again and again in a very powerful way. Here is how:

There are basically three-four opinion influencing media on a national basis -the wall street journal, new york times, the washington post, and the la times. All of these papers have online editions where they actually list out the emails of the journalists who wrote that news analysis. In fact, I have actually developed a few good contacts at the journal and new york times (meaning I get individual responses back), just by emailing them every once in a while commenting on their stories.

Now all it takes is a copy and paste into a new message text, and voila, you have a solid email listing your case (that you can tell the journalist you already sent to a particular politician), doing this will probably take a minute at best for one journalist. Do it for a few, and pretty soon they become aware that there is a developing constituency that they can use to justify a story to their senior editors (because they have to sign off before anything gets published). Basically you have to help them make their case. While doing so, also gently point them to this blog, LA Land.

Which brings me to: dont forget that we have in Peter Viles, a great connection to the mainstream media and a charismatic spokesman - lot of other bloggers are indpendent entities and dont have the same access Peter does. He was featured on news stories on forecloures recently, I am sure he will be sought out and hopefully be available to give a public face to the genuine grievances being discussed with respect to this particular issue.

Full disclosure - I myself work in middle management (not related to mortgages though) at one of these large investment banks and am disgusted at the way banks are laying off the rank and file while preserving the politically connected and their bonuses. They never fail to amaze me by their ingenuity in packaging bailouts in friendly political language - many of them hire consulting firms such as Booze Allen (charging $500 by the hour) and Mckinsey working side by side with lobbyists to see what will work, what will not with the political community - in fact many times these consultants are the ones writing the actual soundbites used by politicians when proposing these "rescue" packages for the "average americans" - These is not the stuff of political fiction conspiracy theories. This country used to be the beacon of capitalism and fairness(which inspired me to immigrate here 15 years ago from a socialist developing country) and is now being increasingly replaced by "socialism for the rich".

[Tex]

For everyone's information, here is the response I got from Senator Boxer back in August 2007, when I emailed her complaining about prior bailout proposals.

"Thank you for contacting me about subprime mortgages, which are loans that are marketed to borrowers with weak or imperfect credit. I appreciate hearing from you.

In order to purchase a home during the recent housing boom, millions of Americans turned to lenders offering alternative mortgage products such as interest-only and adjustable-rate mortgages. Lured by low interest rates and easy access to credit from predatory subprime lenders, millions of Americans purchased homes they cannot afford.

Though subprime loans have initial monthly payments lower than standard mortgage loans, the payments are structured to increase either suddenly or slowly over time. As a result of recent interest rate hikes coupled with abusive loan terms, payments often grow beyond what borrowers can afford to pay, forcing many families into delinquency or even foreclosure.

Although there is no legislation in Congress to bail out subprime borrowers currently in foreclosure, several bills have been introduced to protect future buyers. The STOP FRAUD Act (S.1222) would impose civil and criminal penalties on lenders who defraud borrowers, and require those same lenders to go through state judicial foreclosure process. The Homeownership Protection and Enhancement Act (S.1386) would create federal grants to enable state housing agencies to create home ownership counseling services and homeownership protection. The Borrower's Protection Act ( S.1299) would require mortgage lenders and brokers to verify a borrower's ability to repay a loan, and prohibit lenders from steering borrowers toward predatory home loans.

Please know that I am monitoring this situation closely and will keep your views in mind as the Senate considers these bills.

Again thank you for writing to me.

Barbara Boxer
United States Senator"

[jivnivan]

The obvious question is why aren't the banks offering a loan discount and reduced interest rate to current defaultees? Answer is, because then people whose loans are also underwater and who are also paying high rates, but are not yet behind would cry foul. Hence the banks need a middleman to ride to the rescue. Enter Uncle Sam. Problem still exists though bacause of the investors who were just riding the speculation highway and have taken the nearest off ramp. They don't live in the homes and only have something to gain if Uncle Sam can restart the game. So what's the solution? PANIC. But give Uncle a cheer for proposing to rescue capitalism at its worst.

[Victor the Predictor]

Here's a bittersweet little epilogue from the Mortgage Insider blog at OC Register. Roland Arnall, pioneer of very questionable lending practices (Ameriquest) is resigning his Dutch Ambassadorship as of March 7. I had previously predicted that the state department would remove the glowing decription of his previous business activities from their website. I didn't expect this would happen as a result of his resignation, however. Read the comments

http://tinyurl.com/2kce8f

[Uncle Billy]

Let us all stand tall and proud with Hugh and other uplifted Angelenos to communicate our passionate concerns.

[Chris]

NO! NO! NO! I stayed on the sidelines during the lunacy because I knew that even as a well paid professional I could not even begin to think of carrying a mortgage at the super-inflated prices every property was fetching. When the historical average annual appreciation has been 3-5% since WWII, how can prices be expected to go up 25-40% every year in some "new" economy. At that rate none of us could ever think of owning unless we had bought before the lunacy began or we could inherit our parents' homes.

I agree with the other posts that say this needs to go away. I would only agree with a program FORCED onto lenders that in bad faith (inflated appraisals and looking the other way to buyers who could never afford the payments) originated these mortgages. I think the only way anyone would go along with even the smallest bailout would be if everyone in the industry with dirty hands (everyone) was hauled into court and fined enough to wipe out all their ill-gotten gains. Sadly this would impact everyone in the real estate industry and the lending industry and would need to include all the lax government overseers who were pocketing cash and floating out to sea in their new yachts.

[Maria]

Ron Paul has an answer. If anyone would take half the time reading about what he proposes as they have writing or reading these blogs - you will see that he has been offering up answers to the economic problems in this country for quite some time now.
Instead, we read blogs, gripe about the state of the union, and vote for charisma or someone "my mom likes" while we digress further - while our dollar loses value, while the bank continues to charge us interest on loans from money they print out of thin air - (which should be a reason we all protest in the streets - why should we pay a bank interest on money that belongs to our government?) Let's get back to the constitution - VOTE RON PAUL - IT IS NOT TOO LATE

[Bobc]

I don't see our government bailing out US businesses that went bankrupt or had to shut down due to outsourcing and allowing some of our best paid jobs go to China!
The loan companies that made loans to people who didn't understand English, or were too ignorant to understand what their payments would be, should not be bailed out either.

I write politicians constantly on illegal aliens and these trade deals that have caused massive job losses....I suggest those here that are writing, also go to

www.congress.org

Let the world see your letters, and that might make others to write their politicians.

[sunsetbeachguy]

Leavin LA:

Nice little incoherent post that is dripping with condescension.

Try staying on topic.

RTC was a somewhat controlled liquidation.

BofA's proposal is a bailout of BofA so they can turn around and sell more of the same dreck.

[Truth2Pwr]

Here's the problem with any of these solutions from tax rebates/credits, to bailouts:

The money has to come from somewhere, and that somewhere isn't a printing press at the US Mint. It's from the wallets of taxpayers, and so all these solutions do is move the pain from the banks and investors to the taxpayers under the guise of "keeping people in their homes" AKA "keeping people in their LOANS"!

How about this plan?

If the banks want a bailout, and the government wants to give it to them, raise taxes massively on those in the top 1% of Net worth. After all, they were the ones who came up with, and benefited from, this ponzi scheme writ large in the first place.

Who better to foot the bill for the damage?

[Tex]

Maria: To tell you the truth, I considered voting for Ron Paul because he is being endorsed by patrick.net and also because of his "hands off" economic policies. However, I went to his website and saw that he is in favor of repealing the 14th Amendment -- one of our nation's proudest and most significant accomplishments in civil rights. Anybody who wants to amend the Constitution just to keep Mexicans out of the country is not going to get my vote -- sorry.

Any Democrat who is outraged about the bailout should vote for Obama. Unlike HRC, Obama does not want to freeze interest rates or have a moratorium on foreclosures because he understands that will just cause higher interest rates for future buyers; notice his rhetoric is always about "innocent" homeowners -- not people who lied about their income. Obama doesn't emphasize his position on the housing market because it's not a popular position in the Democratic party, but if you read between the lines, you will see his proposals are much less extreme than the bailout proposals advocated by HRC and John Edwards.

This article from "The Nation" criticizes Obama for being "subprime on the subprime crisis" -- essentially the article complains that Obama is not proposing to do enough for distressed homeowners. That was enough to solidify my decision to vote for him!

http://www.alternet.org/election08/75489/

[Anthrodiva]

Here is my letter:

NO ON BAILOUT

Please drop any idea of a TAXPAYER FINANCED bailout for the banking industry, housing developers, and foolhardy purchasers of homes. Let the market correct to its historical normal levels. This problem was created by artificial tinkering with the fundamentals underpinning our system of exchange; first the stock market, then housing. In each case, people chose to accelerate growth by forcing the picture to conform to their needs in the short-term. Thus we have builders continuing construction even as the market slowed; we have buyers using exotic-no-doc-NINJA-negative-ARMS; and we have financial institutions slicing and dicing risk profiles into derivatives even they did not understand. It seems that every few generations we need to re-learn the lessons of the past. Many people have pointed out that these tools were not new; they had been used immediately preceding the crash of 1929 and the Great Depression.

Corruption

There was plenty of time to see this coming and avert it through regulation and education. The fact that you did not choose to do so in 2005 does not entitle you to spend MY money on a corrupt project in an election year. For the same reason, I am against the tax ‘rebate’ as well, which is only intended to placate voters and trick them into spending money that they will have to pay later in the form of a reduced return in 2009 (how many members of the lower economic strata whom you hope to entice into spending in order to stimulate the economy truly understand the nature of this gift?)

Bad Math

Similarly, there has been a lot of media attention about the raised limits for conforming loans under Freddie and Fannie Mae – but most people don’t realize that it is not across the board – it is only up to 125% of the median home price in their region. The reason that we got into this mess in the first place is the woeful state of science and math education in this country. For example - many people with adjustable rate mortgages did not seem to realize that a shift from 1% to 2% would DOUBLE their payment, not increase it by 1%.

Wage Monkeys

All of this goes together: poorly educated, overly entitled, wage monkeys, who have bought into the belief that the American dream is represented by a gas-hogging SUV (tax rebate!) and a fat 4,000 square foot house (mortgage deduction!) with granite counter-tops financed through a HELOC that only holds water due to manipulation of our currency through foreign bond holders – these poor saps have spent and spent and spent and never bothered to notice that their wages have stagnated over the past six years relative to inflation, and that while they were shoveling their way out from under their debt load (savings at a negative national debt!) their limited resources (it is reality after all, laws of physics cannot be denied) meant they had to choose between making the payments on their jet skis or purchasing ever-higher health insurance premiums. We can see the consequences in the skyrocketing numbers of uninsured, another potential burden for taxpayers (and primarily tax payers from California, like me, or New York, Massachusetts, and anywhere else that actually pays INTO federal coffers as opposed to being a receiving state like New Mexico or Kansas).

Idiots

Do you not wonder why your approval rating is worse than George W Bush, the worst President in United States History? People wonder what is wrong with you and why you keep making such bone-headed decisions like investigating steroid abuse in baseball (who cares?) while thousands of soldiers and hundred of thousands of Iraqi citizens die in an optional war. Did you ever even get that S-CHIP Bill veto over-ride? Do you have any idea how the Imperial Presidency has frayed the fabric of our country through its use of executive orders and strategic hirings and firings throughout key federal agencies? Policy changes are much harder to undo than creating stupid unnecessary laws that meddle in other branches of the government (like the judiciary – did you guys not have basic Civics class or what?). The toxic culture the Bush Administration has brewed up for us will percolate for decades!

What to do

We elected you to impeach those rat-bastards, in case it missed your notice. Fine, forget that. But here is what we need? We require a moratorium on law passing. You ALL need to coordinate, legislative, with executive and judicial branches, Federal with State. We need a comprehensive audit of all laws and funding passed in the past 35 years and how they intersect, oppose, conflict, and undermine each other. Plenty of programs have been passed and never received adequate funding, while others refuse to die (like Ted Stevens) and suck down money year after year with little-to-no apparent oversight. If you were a business, you would need to occasionally take stock of your inventory and present your figures to your stock holders. We need a CLEARLY explained yearly report, maybe distributed to libraries (they could use some funding too, by the way).

Once you have a handle on the damage you have already done, only then is it time to craft a new national policy on spending, defense, foreign policy, education, business regulation, healthcare, social security. You know - all those things that we the taxpayers consider to be way more important than terrorism or baseball scandals.

[Anonymous]

No legislation or tax payer bailout will ever balance out the simple fact that house prices are too high for potential buyers.

You can paint the pig all you want, but it's still a pig.

Those that pretended it was something else for the last five years should take the brunt of the pain. Whether it's our Wall Street friends, or Countrywide, or IndyMac, or Dewey, Cheatum & Howe they should bear the brunt of their own debacle.

[silverfern]

Yaaayyy!!!

I'm glad to see the letters.

As cynical as I can be at times, I still believe in this democracy. Keep the letters going!

Yay!

[LeavinLA]

sunsetbeachguy: the condescension is well-deserved for all of you. try to stay on the side of logic. any "bailout" is a bitter pill, but it's an inevitable event. it's what the government does. and the sooner you swallow it, the sooner you'll get to buy.

[TA Webster]

*Like a bank that leaves the vault open, lenders are "surprised" that the values are inflated and property conditions mischaracterized. What rational person or entity lends without knowing the collateral's value? Lenders do business exactly this way.

*A Bank or Lender controls the entire appraisal process from beginning to end using their preferred vendors (wink wink). FIRREA gave way to AVM's and they are a flat joke! Do you know how many local appraisers went out of business due to AVM's. Answer: a lot!

Why: because 'AVM's' cleared out anyone in the business that challenged over-valued loan amounts given to them in advance (aka target price) by the client who ordered an 'appraisal'. Banks and lenders are totally driving the bus on property valuation and that
should be changed immediately!

I'd compare it to picking your own umpires in a game where you have home field advantage. To fix the problem we need to focus on relieving the bank or lender from their duties re: ordering, scheduling and paying for over-valued appraisals, paying for it
with the purchasers money, and selecting appraisal 'vendors' that simply roll over and comply. After all, someone has to look at property valuations objectively.

See "Appraisers on Pressure and Reform" online at Mortgage Daily News. Also look for the online article written by Larry Levy entitled "The fraud of appraisal regulation".

[mark g]

My plan:

For those who qualify (those of us whom stayed on the sidelines wisely during the housing 'surge' and/or have not taken a mortgage loan since 2000?),

- An intro 5 year rate of 1.0% (or equal to the amount of % of defaulted loans).

- Upon reset, the loan rate adjusts to market value best qualified for by borrower for term remainder.

- Any depreciation in home value as market declines, the difference becomes an end of year tax deduction for borrower and/or equity to borrow at the default % rate.

This gets smart, qualified buyers into the market, gets banks business, keeps contractors working, and lets those who purchased during the past 8 years figure out for themselves...

The "bailout" focus has been on the wrong group of people...

[atcguy]

http://financialpetition.org

Hi everyone, good discussion. Here is an easy way to "write" to your representatives. Take a few minutes to read and see if you agree. If you agree then please follow the link which will allow you to electronically "sign" and send the petition to your representatives.

Make no mistake; we are in a serious situation here as the foundation of our economy rests on the banking system. Contrary to popular belief inflation is NOT about rising prices. Inflation/deflation are monetary phenomena related to expansion/contraction of the money supply (Currency and CREDIT). Prices, rather, rise because of supply and demand. Lets face it more people using more oil is going to cause the price to rise. As a result of widespread misuse of the terminology most people believe we experiencing inflation, but we are NOT. Rather we are facing large scale DEFLATION as banks are unwilling to extend credit due to their collective impaired financial state. There may not be any active solution to this except time and certainly some pain, but what you can do to prevent an even more severe consequence is sign the petition above.

Thanks,

Atcguy

[Truthful James]

We can do better than get the US Government involved. Based on the rationale that we need to keep people in houses, consider the following:

The time has come to build a better asset model for a property.

The current problems in the mortgage market can be traced on the one hand to overzealous (if that is the term) appraisers and brokers, and a mortgage which upon repricing adjustments become unable to bear. The result is inevitably foreclosures and self protected bankruptcies -- making an inefficient marketplace even more fragile. Given the securitization of most mortgages, we have now a fragile financial market and reverberations in the economy.

If we can develop a process which avoids a good percentage of foreclosures and bankruptcies, our economy will be the better for it.

The general solution is simple if the objective is defined as keeping the asset in existence and the mortgagor as an equity holder in the asset, in possession and making payments.

Consider a balance sheet in which the asset does not change but the liability and equity positions are modified.

On the liability side, the loan principal is reduced to to reflect the an amount whose payment stream is consistent with the fixed market rate of interest on a mortgage of a certain size qualifying under GNMA criteria. The remaining 'unamotizable amount slides down to a newly derived equity osition so that -- as in normal financung the market value of the asset equals the liability plus the equity.

The equity section of the balance sheet is divided into two parts: first, a Preferred Stock position is created, with an amount representing the unamortized remaining portion of the principal part of the loan; a common equity position represents the remaining value of the asset and is held by the property owner.

The use of the Preferred Stock mechanism is to keep debt to asset ratios in good order.

As the interest rate on the mortgage falls, the value of the liability falls and that of the common equity portion increases. There will have to be a required buydown of the Preferred Equity position by the property owner as this occurs.

As the mortgagor's financial position as analyzed annually improves, the Preferred position decreases and the remainder is added to the liability under the note and mortgage..

As judgments are obtained against fraudulent Appraisers and mortgage brokers, proceeds are used to pay down the mortgage amount.

Upon sale of the asset, proceeds would be used in the traditional priority order. The great minds in the investment banking community having invented the slice and dice method of securitizing packages of mortgages can surely invent, to their profit, a means of creating new packages of Preferred stocks.

We do not need a Bank bailout, withouth them bearing financial responsibility for their non feasance. Nor do we want globs of foreclosed properties clogging the marketplace and further endangering the housing market.

[Realist]

I see a lot of angry people posting here. Can someone explain to me ,I mean legitmately, why so many are mad? It would appear that the well off are the most angry. If there was a bailout then, guess what ,the banks lose the goverment will profit from this. I saw so many different compaints on here. Someone even had the audacity to write give Hillary Clinton free reign. Well that guy apparently likes paying more taxes. That is exactly what is going to happen if Hillary becomes president. I read somewhere that the law firm she used to work at and learned from has a very communist belief system. Under her reign we will see a further decline in the middle class. We will possibly see a health plan that will provide poor health coverage and long waits at the doctors offices and hospitals. We will all see less money in our own pockets This is not going to fix the economy. We need to come up with some type of bail out and keep it out of the hands of the "profiteers". We need to find better ways to control the banking industry. I am for the bail out. It is unfortunate but may be needed for long term security. Stop complaining about paying your "fair share". B of A is not even American anyway. Yes do a little research it may be an Asian owned bank. We all prospered during the good times. We will get there faster if we just roll with it. Yes we will all lose a little and some alot however we will get it back faster if we all bite the bullet and do what needs being done today and then set our sights on tomorrow.

[arroyogrande]

"We all prospered during the good times. We will get there faster if we just roll with it."

'We all prospered' by people spending more than they made (ie easy credit). How is having the government go on the hook for further losses going to "get us back faster"? Is easy credit going to magically come back? Will we again allow people to lie about their income on their loan applications, and borrow over 100% of the value of their homes so that they can buy consumer goods? If not, then guess what, there IS NO GOING BACK.

You can only go on so long buying junk with money you borrow. That's why we are in an economic slowdown. Are you advocating getting back to a time of people buying things that they cannot afford? That's the only way we can get back to "what we had".

In other words, that prosperity was all an illusion based on people borrowing money they didn't have. That only lasts so long before the economy has to pull back. Welcome to the pullback.

[sunsetbeachguy]

Looks like Realist and Leaving LA has gotten their handles confused.

Try posting complete thoughts and when you make unsubstantiated points, use a citation.

I wish Peter had an ignore button.

[msprompt]

Realist: Are you for real?

"We all prospered during the good times."

I'm not sure who you're talking about when you say "all" but I am not in that group. Nor am I one of the "well off."

And what does the following list of tired cliches and vague generalizations MEAN, exactly? What are you saying here:
"Sounds a lot like cliched We will get there faster if we just roll with it. Yes we will all lose a little and some alot however we will get it back faster if we all bite the bullet and do what needs being done today and then set our sights on tomorrow."

Set our sights on tomorrow? OK, you're savings interest rate decreases; the rate at which you borrow money increases; your ability to borrow decreases; your taxes increase; your abilty to buy a home decreases; the dollar deflates further; you are held to contracts you sign while some others are not; justice and the rule of law becomes a joke.

You're for the bailout? You don't mind the government (translation: us) picking up the tab for what has been at best gross irresponsibility and greed and at worst outright fraud, corruption and manipulation?

I think you're fooling yourself.

[Lewis Cabeza]

If the loans were so toxic, why did Bank of America recently buy Countrywide? I'm not a conspiracy minded person but jeez, this is all reeks of a well coordinated plan.

[Enlightenment]

It is NOT the governments responsibility to SAVE banks and home buyers from financial ruin after gambling their money and losing.

Banks were suppose to ensure the people taking out the loans could pay the loans. Don't ask for protection when it was your fault for loaning to liars and losers! If banks were more picky they would be in this mess.

The governments responsibility is to create laws to prevent banks / realtors / home buyers creating another mess like this in the future!!

Need laws to do the following...

A law to ensure a home buyer MUST provide at least 2 years of 1040 forms as proof of income...thus no more liar loans. There should be a simple method to validate the 1040 forms with the IRS. If a 1040 isn't available, then must provide proof of income for last 24 months. Any one who doesn't supply a 1040 must be charge a higher interest rate.

A law to ensure a home buyer must have current income high enough to make the maximum payment during the life of the loan...thus no more unrealistic teaser loans. The income must also be able to cover all known housing expenses such as taxes, insurance, association fees.

A law to make loans very simple to understand, and universal formated coversheet that states: all interest rates, monthly payments for each known interest rate (i.e. for balloon rates), penalty amounts for paying off the loan early, list of estimate of all taxes / insurance and other monthly expenses related to the house, and other important information that shouldn't be buried in a loan, on page 2 must display a simple table that lists the year and maximum monthly payment for each year of the loan. This prevents people saying "oh I didn't knowthe loan was going up". (to those people shut the hell up because it is your responsibility to understand the loan you sign".

A law to prevent realtors from recommending or directing buyers to individual or business that provide loans, inspections, insurance, and any housing related business. The realtor must sign a form they didn't do this. There must be a very large fine and possibility of loss of license if lieing. This is to prevent collusion and kickbacks.

A law to prevent loan agencies from recommending or forcing a specific title insurance provider on a home buyer. Must require home buyer to sign form that state this didn't happen.

A law to penalize home buyers who state they are going to live in the house to get a lower interest rate, but instead are lieing to get a cheaper loan to buy a 2nd house or for flipping purposes. If the bank discovers a buyer doesn't live in the house their interest will increase and they will have to pay retroactive amounts to pay for their lie.

A law to make everyone who got house foreclosed or car repo'ed must take 24 months of financial responsibility classes and credit counseling. Either be responsible or society will make you learn to be responsible.

A law to keep foreclosure and car repo on credit report for 10 years.

A law to keep financial fraud on credit report for 20 years.

There are lots of banking laws that should be enacted too.

[Aaron Kramer]

Lewis,
B of A bought Countrywide because they have 18 - 24 billion tied up in credit lines and loans with Countrywide. If Countrywide went bankrupt than B Of A would get nada, so they escalated their commitment to protect themselves.

[craig]

The only fair way I've thought of is to refinance the original mortgage to 30-40-50 years at current long-term rates. This reset allows the homeowner to lower their payment and stay in their house (hoping the price will eventully come back) and the financial institution to get something out of a bad decision. This plan is not as good as letting everything foreclose that is going to foreclose, but is a compromise that keeps the solution between the two primary parties. Many will still fail, but bringing taxpayers in to chase bad money with good is simply not appropropriate.

[sunsetbeachguy]

Craig:

You are no math genius, stretching mortgage terms beyond 30 years provide very little payment savings and radically increase the total interest paid.

Besides, as Thomas Jefferson has said, if debt terms were allowed to be greater than 30 years the world would belong to the dead and not the living.

[Chumley]

Let's make a deal: The banks get their bailout on the following conditions:

1. Their corporate tax rates go to 45% on the next chunk of profits equal to what they made from 1997 through 2006, adjusted upward for inflation. This applies to succeesors in any mergers, and the liability is not dischargeable in bankruptcy.

2. Any executive of a bank taking part in such a program pays a 10% personal income tax surcharge for the rest of his or her life, regardless of where he or she works. Same for new executives.

3. Any bonuses, including stock, paid since 2003 are forfeited to the extent they exceeded $5 million in any year. Retroactively.

Then let's ask them again if they want a bailout.

[Kathryn]

According to an article on CNNmoney.com, 11.2 percent or 300,000 subprime mortgages made in 2007 have already defaulted, and those are loans were the rates have not even reset.

Okay, I get that there are some families don't deserve to loose their homes, but if 11.2 percent of 2007's subprime mortgages are defaulting, then loans were made to people who could never hope to make their payments. The loans were bad from day one. and the banks are the culpable for this. Why should the tax payers pay for bad business practices?

If the government will swoop in and save people who lied or overextended themselves in buying homes, doesn't that just reward the liars and financially irresponsible amongst us? I didn't lie to buy my house, but had I known the government would reward such behavior, maybe I should have?

[silverfern]

LeavinLA, Raul, Realist, et al:

I'm not angry because I can't buy a house and feel some kind of entitlement. I'm angry because banks and other mortgage lenders knowingly gave loans to borrowers without due diligence in terms of background/income, and without requiring any down payment. If you can't afford a down payment on a $600k house, then why the heck are you buying it? And why am I supposed to bail out a bank that made multiple bad decisions like this?

Then there are the borrowers who refinanced their houses, took the home equity, and bought a Lexus and went on expensive vacations. Now that housing prices are correcting, they are underwater. Why the heck should my tax money go to save their butts?

Sorry, not willing to "help".

[Lewis Cabeza]

Hi Aaron--

Thanks for the explanation.

However, is BofA putting good money after bad a good reason for justifying a bailout? These highly sophisticated firms invested in securities that are so complex, no one knows seems to fully understand them (and no one can prove ownership for the underlying assets). Is it our fault that they made bad unsecured investments in the first place? (pardon me if I use imprecise financial terminology, I'm not an expert).

I really would appreciate it if someone could explain these things.

[Fourth Generation]

The only way such a bail out plan will be barely acceptable is if the government buys the mortgages at a price tied to the median income for the region. A second option is if the government buys the mortgages at a price tied to a specified year prior to the market upswing (i.e., prior to the bubble). And even with such provisions any bail out plan is not acceptable at face value. PERIOD.

[barnibus]

the banks can go #@%* themselves. AS their cost of borrowing has gone down they have increased the spreads on mortgages and have not decreased the rates to consumers. They are worsening their own problems by exacerbating foreclosures. While a larger spread may seem ot be more profitable, it will not be inthe log run

[JohnnyB]

This mortgage scam developed, prospered and crashed under the current “watch” of Waxman, Feinstein, Boxer and Pelosi. I’ve sent the letters too… and am encouraged to see more folks doing the same. But seriously folks, they are not interested in lower housing prices and ultimate home affordability. Period. LOOK AT THEIR COMPLICITY in this scandal.

This current generation of banking/finance LEADERS are out of control. Their MAIN actions, policies, products, tactics and strategies are designed to distribute wealth to themselves, the top 1%. Because they can, they DO rip us off. They will continue to do so with impunity until they are properly regulated with vigilant oversight and transparency… by elected government leaders and institutions that are accountable to their constituents and citizens.

WHO ARE THESE BANKING LEADERS? Does that “who” reveal anything about their “common” agenda? Is there anything to be gained from putting these folks up for public scrutiny and accountability?

Why are they allowed to HIDE the garbage they sell off their books and obscure their methods for VALUATION and RISK… at our expense? Why are they so determined to promote and facilitate the financing of RAPID GLOBALIZATION at our expense? Why are they so determined to promote and facilitate the financing of PERPETUAL WAR IN THE MIDDLE EAST at our expense?

These things are inter-related. They don’t happen in a vacuum. There are causal relationships to the housing bubble and subsequent collapse. We can go on and on about home buying idiots, flippers, speculators and all the other small potatoes that just reacted and adapted to the environment established by these bankers and our complicit government.

Ron Paul is awesome on many levels, but unfortunately has no chance in hell… he’s been shut out by the media from the get go and simply doesn’t communicate well enough verbally. He is unable to LEAD.

Obama is seriously intelligent, is saying all the right things and promotes the kind of government transparency and unity of purpose needed to move us forward. The more folks that support him into the presidency, the more likely he will have an unstoppable MANDATE to implement the hard changes required.

Don’t fall for more of the same or we’ll still be talking about taxpayer bailouts for mega wealthy bankers, how to end their endless wars and even more useless “letter writing” to insulated government leaders in bed with those same bankers and their lobbyists.

[MyLessThanPrimeBeef]

What about the governement taking all the distressed properties, the foreclosed homes from all the troubled banks at a deep discount and letting people homestead them?

Start your wagon trains, ladies and gentlemen!!!

Also, another suggestion. Any competent broker would tell you the key to selling is get them to go to your open house. So, how about giving each and every open house goer anywhere in America a coupon redeemable for a free visit to the Treasury Dept in Washington DC where Secretary Paulson will personally serve the visitor afternoon tea in the finest Wedgewood china? That's what I would call 'making an effort to help,' especially when the price of tea, like all soft commodities, sorry, all commodiites, is soaring like Disco dancers were on dance floors on Sunset Blvd back in the Seventies.

[Canadian Homeowner]

Let me see if I am getting the details of this bailout package correct.
Irresponsible greedy flippers who got caught with their pants down will get to continue living in their million dollar McMansions for the same monthly payments that responsible purchasers, who saved up their downpayments and bought within their means, are making on their 1000 sq.ft bungalows. You Americans sure have some strange economic policies.