Banks pressuring Washington for big bailout

The banks are making their case, and the government is listening. From The New York Times tonight:  "Prodded in part by some of the nation’s biggest banks, the Bush administration and Congress are considering costly new proposals for the government to rescue hundreds of thousands of homeowners whose mortgages are higher than the value of their houses.

Which banks? "Bank of America, which is in the process of acquiring Countrywide Financial and has potentially huge exposure, has circulated a proposal to create a new federal agency that would buy vast quantities of delinquent mortgages at a deep discount and replace them with fixed-rate federally guaranteed loans. The bank warned that tightening credit conditions were leading to 'escalating levels of delinquency and default among borrowers' and 'an unprecedented number' of homes that would enter foreclosure.' "

Thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Hat tips: BG @ The God Blog, via email, and John, via comments.
Photo credit: Treasury Secretary Henry M. Paulson Jr. by AP

Comments

[amir]

Seething with anger...

Arggghhhghhhh!!!!

Somebody please vote a Republican into the white house. Oh wait... that is a Republican. D'oh!

[AL]

sure I am all for a bailout. but first, the bankers have to give back all of their salaries for the last 8 years. that includes bonuses. for all with the title of VP or higher.

oh, wait, at a bank, they are all VPs, unless you are a teller or a janitor.

still, no bailouts until you give back all your bonuses.

sounds fair to me.

otherwise, **** off.

[arroyogrande]

From the NYTimes article:

"Mr. Breakstone, a 42-year-old lawyer, and his wife, Lori, chief of customs agents at Memphis International Airport — who together earn more than $250,000 a year...Now the Breakstones are saddled with $4,000 a month in house payments, and $14,000 more in fixed outlays, including child support, car leases, taxes, consumer debt and utilities, using up the bulk of their income."

They are making $250,000 a year. Why are consumer debt and high car payments considered "fixed outlays"? I don't see why my heartstrings should be pulled for anyone making $250,000 a year just because they are used to spending more than they earn.

However, I do think that the government should find a way to use my tax dollars to bail them out, as it's "the nice thing to do".

“I used to think,” Mr. Breakstone said, “that I would pay the piper later and enjoy life now. I’ve totally reversed that view.”

However, soon he and others will know that they should have been planning to "enjoy life now, and have my taxpaying neighbors pay the piper later".
- arroyogrande

[M. and E. Steadmann]

How about an executive order to round up these banking executives and stick them in jail. This sub-prime "disaster" is looking more and more like one of the biggest, pre-planned rip-offs in history.

[david hass]

America has NO ONE TO BLAME BUT ITSELF for its coming misery.

Sad indeed, everyone needs to go and learn Chinese NOW.

[Willie]

Oh my gosh!!! I want a bailout too! What is there for those of us that make the right decisions, did not overstend ourselves, but are otherwise struggling to make ends meet. Prices for gas and necessities keep rising up, salaries cannot keep up and don't anywhere else to go to, but to feed our children Maruchan (cup-o-noodles) a couple of times a day and boiled beans in the morning to strech our meager budgets. I want and deserve a bailout too! Wuaaaaa, wuaaaaaa, wuaaaaa! I want a bailout, I want, I want, I want! Buah!!! I want a bailout, pleeeeeeeeeease! Cherry on top?

[JK]

My head is going to explode!

[Ann]

"Mr. Breakstone, a 42-year-old lawyer, and his wife, Lori, chief of customs agents at Memphis International Airport — who together earn more than $250,000 a year...Now the Breakstones are saddled with $4,000 a month in house payments, and $14,000 more in fixed outlays, including child support, car leases, taxes, consumer debt and utilities, using up the bulk of their income."

They are making $250,000 a year.
________

$250,000 is in the top 1 1/2% of ALL households in the US.

They shouldn't whine in public when in that bracket- it is exceptionally bad bad manners.

A J,D. degree is not a degreee in economics or finance.

If that couple divorces they would be screwed on making the payments - neither income could handle that house on their own. Stupid to buy more than you an pay for on one income if you could possible do otherwise.

Bet they voted for G.W.Bush and his daddy.

___________

RE: Why are consumer debt and high car payments considered "fixed outlays"? and the $14,000 more in fixed outlays, including child support, car leases, taxes, consumer debt and utilities

These are considered "fixed" because the bill will come every month for a set amount for a time certain (ie the debt is paid or ends.)

Child support - yes
Car leases -yes (and car loans too)
Taxes - yes
Credit card - yes

Utilities - NO. Shouldn't be called "fixed." They can reduce the electric usage ad dump the cable.

[jL]

I think in addition to commenting on this blog, everyone should email their senators and reps daily to vent our frustration and tell them "our story"

[MyLessThanPrimeBeef]

So, our banks are asking us for help.

In turn, we are asking our bankers - the real money people. And this is what they say -

From Russia: Niet!

From India: Naheen!

From China: Bu xu!

From Germany: Nein!

From Dubai: La!!!!!!!!!!!!!!!!!!!!!!!

From Mexico: Give me my California back!

[Michael Snyder]

Ann,
Dump the cable? How about getting out from under the BMW and the Hummer, learning how to cook, cutting back the maid and actually saving a few bucks since most folks are raising families on a quarter of what these two narcissistic bozos earn. The Breakstone's don't need a bail-out, they need bail.

As for the banks; we all know GWB will do whatever it takes to bail out his Wall St. buddies before he leaves office. The only questions are; when, how much and under what pretense. This administration still thinks they can "fix" this by throwing dollars at it. To quote Dick Cheney, "We're not running for anything."

There is no amount of "capitol infusion" from any source that can prevent the impending "corrections" not only in real estate, but commodities and stock pricing as well. All have been artificially inflated by a merry game of "hot potato" as traders bet on the future prices but add nothing to the value of the product. Stock values have been inflated by gutting companies to show "efficiency" and revenues once allocated to R & D or expansion are now diverted to dividends. As prices climb, wages are falling and something's gotta give.

I'm just tired of giving to "charity cases" that squander four times my annual income then have the chutzpa to ask me for a hand out. Perhaps they should cash out some of their Chevron shares...

[areles]

And so you all continue to miss the point.

You aren't bailing out homeowners, and you aren't bailing out wealthy bank presidents. You're bailing out the economy.

Does anyone know what happens when banks fail? Anyone?

[areles]

Further, does anyone know what happens to local economy when foreclosures rise? It is decimated.

While all of you suck on sour grapes and cheerlead the imminent depression (DEP, not REC), your roads are going to go unrepaired, your children's schools are going to shut down (anyone bothered to read this? http://www.latimes.com/news/local/
la-me-schools21feb21,0,3850513.story) , your jobs are going to be lost, and your savings accounts are going to dwindle.

An economic flush needs to happen, and WILL happen, no matter what the government tries to do. But to watch you all cheer it on out of jealousy and spite is, honestly, disgusting.

[Dish76]

At first glance, the negative-amortization refinancing / lien plan being floated looks like a fair idea because it doesn't involve taxpayer dollars. But if I were a homeowner underwater in a falling market, I would sell immediately after securing such financing. No dent to my credit and I get out of a bad investment for free. What bank in its right mind would agree to this?

[Michael Snyder]

areles,
I'm not missing a thing. We are the economy and we're tapped out! Where do you think the funds for this bank rescue are going to come from. The Wall St execs & traders who've gutted the economy or workin' stiffs making under $100,000 a year? Like it or not we're in for a bumpy ride and if B of A, Goldman & UBS tank in the process that would be the cookie crumbling. To continue enabling the financial practices of the past decade will only exacerbate their effects. If you're that worried about a run on a bank, buy some of the overpriced gold in the market and put it in a mattress.
BTW, gold knocking on $950 should scare the begeebers out of you.

[MattJ]

The question is, which mortgages and at what discount? First mortgages at a 50% discount would probably not end up costing the government anything over time; 2nd mortgages in CA at 5% discount would be a total bailout.

I'm in the 2nd depression, ITEOTWAWKI camp if the government does nothing, so I'm open to at least hearing the details.

[Bailmeout]

I would wager that B of A is looking beyond avoiding losses with its bailout plan; its looking to make a profit.

[MyLessThanPrimeBeef]

The choice is not between banks failing and government bailout.

The choice could be, among others, a choice between banks failing and bankers giving back their loot...or whoever is responsible.

Some also might say, looking at different things, it's between 3 years of sharp pain or 15 years of lingering disability.

In that respect, I think we owe it to the next generation, future generations...the children, think of the children. We must clean up this mess and not push one more problem into the future, like we are doing with Social Security, with the fiscal deficit, with the current account deficit, and with our national debt and our praviate debt...

Once upon a time, people in this great country worked hard and saved. When are we going to say, yes, we will sacrifice ourselves now, let the chip fall where they may and bite the bulelt so to speak, so our children don't have to become multi-lingual beggars?

[bailmeout]

Beware of Banks bearing Thrifts. (Sorry)

[MyLessThanPrimeBeef]

W I I, CYE?

Sorry, in English, What is ITEOTWAKKI, can you explain?

WAIANS. (Well, actually I am not sorry)

[peteviles]

MattJ wrote, "I'm in the 2nd depression, ITEOTWAWKI camp."

MyLessThan asked, "in English, what is ITEOTWAKKI??"

My humble guess (google) It's The End Of The World As We Know It.

MattJ is a real doom and gloomer, an ARDAG

[baruza]

Did you guys actually read the article? Breakstone paid for the cost of his short-sale. He's not asking for anything, just admitting he got in over his head and had to take a loss. No reason to get upset at him.

"For Stuart B. Breakstone, the problem hit home when he was forced to come to the closing on the sale of his eight-year-old custom-built house with a check for $65,000. The money, out of his own pocket, was to pay the difference between what he still owed on the mortgage for his home and the lower selling price."

As for the banks, there are definitely other options than just having the taxpayers absord this risk. The UK nationalized Northern Rock, and they expect to get their money back, through profits and returning the company public. If US banks want funds *now* to save the economy I say fine. Just give the federal government all your profits plus interest until the money's paid back.

[ray]

Instead of a passing a "bail out" legislation, pressure Congress to pass a "cram-down" legislation. The best of both worlds, take foreclosed borrowers, and lenders/investors through bankruptcy and make them eat the losses.

http://www.washingtonpost.com/
wp-dyn/content/article/2008/02/21/
AR2008022102687.html

Please see article.

[MyLessThanPrimeBeef]

TYP.

[Hugh]

When will the federal government bail me out of my credit car bills and car payments!?????????????