Seth Myers made a joke on Saturday Night Live this week about banks spending half of the $700 billion stimulus bill to build the world's biggest toilet, which they would then use to flush the rest away. He's onto something.
While cities like Cleveland face urban blight from massive numbers of home foreclosures and spiraling unemployment, executives of banks looking for bailout money are refusing to reveal their compensation packages. Something is wrong here.
Mortgage servicers foreclose on properties because with securitized loans, it is often more profitable than renegotiating the loans. These businesses risk finding their books loaded with vacant and quickly depreciating real estate. Holders of mortgage-backed securities would do well to accept some of the losses voluntarily, lest they find themselves holding worthless paper or the deeds to large tracts of urban wasteland.
A story in the New York Times last week titled, "The Deal That Legitimized Subprime," discussed the entry of financial giant HSBC into the subprime lending market in 2002. Far from legitimizing such lending, HSBC merely joined a feeding frenzy of predatory lenders. Now the bank realizes that people who do not actually qualify for huge loans cannot pay them, and tend to default. CEO Michael Geoghegan says he wishes the company had not bought into the market seven years ago. No kidding. Now that the carcass is picked clean, the piranhas are sorry they killed the cow. So is the cow.
The funds from the Troubled Asset Relief Program (TARP) are evaporating faster than a June snowfall, and the holders of those so-called "toxic assets" are clamoring for more money. They will continue to ask for and receive more until somebody gets the political will to decide that it is acceptable for those who played casino capitalism to lose money.
No one wants to leave investors who bought bad securities holding the bag. Imagine allowing investors who made bad decisions to bear the responsibility for those decisions. The idea is downright un-American. A few Republican senators have hinted that some big banks might be allowed to fail. This seems like an idea that is ripe for exploration. Let the holders of toxic assets have what they bought, and let the zombie banks die a natural and timely death.
No one goes to the track hoping to pick the wrong horse, but a lot of people have to pick the wrong horse for others to win. Those who pick the wrong horse never successfully plead that they have just spent their life savings and get their money back. The financial market was not intended to work like betting on horse races, but investors have often looked at it that way. In truth, the subprime mortgage-backed securities scene was more like a game of Old Maid. However, now the game is ending, and the losers are unhappy. The economy is in trouble because these investors are not willing to let the game end.
If investors feel they were duped by those who sold them securities that were less than secure, they can take their case to a judge. Chances are that judges will find that investors were looking for no-risk investments with astronomically high yields. Such investments do not exist and probably never will.
If judges find that sellers of mortgage-backed securities were guilty of failing to disclose the risk, then the investors can get back whatever money the scoundrels have not yet spent. But the American taxpayer should not be burdened with keeping robber barons in the style to which they are accustomed.
It is time for the business community to acknowledge that not only is it bad form to rob poor people, it is immoral to rob anyone.
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Comments: 35
Letting Lehman Brothers go belly up as a lesson to wall street was something that the Bush Admin seemed to regret after a while. Citigroup is another gigantic Titanic. Teaching lessons is good, but I am worried about who is going to be taking a swim in some very cold water..... I don't know what to think about this proposal, let Citigroup go bankrupt. Heck, let all the banks go bankrupt, most of them are pretty close if you count up all the money. but where would we all be then?
Faced with the same situation, the governments took over the banks, fired the executives, installed competent management, insured depositors (so that they would not lose their money), and refinanced home loans. The stockholders were SOL, but the stock was worthless.
Sweden was able to stabilize the banks. Then, years later, Sweden sold the banks back into the private sector at a profit. The UK is still a work in progress.
There is a temporary solution but it requires giving money to people who don't deserve to have it (the poor). I have not seen any solution proposed by any economist(s) that recommends giving these hundreds of billions of dollars to the poor. That would not only do a lot of good for millions of families but generate income for millions of others as the poor spend the money. But the economists can only see those businessmen, not their customers.
The permanent solution is fully detailed at www.nopom.info.
Oh back to work now. Gotta pay bills.
Foreign property ownership is not necessarily good or bad, but I wonder why the families who were evicted in the foreclosures weren't given first chance to re-purchase their homes for $10,000. If the bank is only getting $10,000, does it matter who buys the houses? Families could then stay in their homes, in their own neighborhoods.
Wanting something is not enough. You must hunger for it. Your motivation must be absolutely compelling in order to overcome the obstacles that will invariably come your way.
In the end, it is the person you become, not the things you have achieved, that is the most important.
I have always thought we should let businesses, banks and individuals fail when they make poor financial choices. It's the only way they'll learn. If we have to give money to banks or businesses, it should always be in the form of a loan.
The buyer then had two years - 24 months - to establish themselves, and increase their credit scores; and at the end of the two years, had the option to refinance at a lower interest rate. If they defaulted (which they did), then they could not refi- and their interest rates went up.
These are not "poor" people ~ they are people that didn't take responsibility for their actions, or lack thereof. Now, I do take my comment away from those who lost jobs, divorced, etc....life changing events. This happens to everyone.....but I don't think we should "blame" the lenders soley......They were extending hope to those who deserved a chance.
Out of the 25 houses or so I closed (real estate agent) ~ only one was foreclosed on...and two people had to endure the interest increase for another year prior to being able to refinance.
As far as "who should pay" ~ what happened to all of the mortgage insurance the buyers paid? That insurance was in expectation of foreclosed homes. And, whomever received the insurance is the one(s) who should take the loss. MIP for someone with a 560 credit score was around 140/month - sometimes more, sometimes less.
And, as far as the investors, well, chancing on money is what investors do. AND, as stated above, the land/property is their security. And, why aren't the foreclosed properties back on the market for sale? And, why are lenders making harder for the people with decent credit, as home buyers, or as rental investors to buy these homes? The people who were able to save money, and/or save their credit should be buying these houses......putting money back into the economy ~ but instead, the houses sit vacant. And the "investors" who own these properties should be selling them. Unless they are afraid to flood the market perhaps? (I am talking myself through this thought) Because if the market is flooded with lower priced homes, then that could affect property values?
I don't know the "answer" the problem ~ but I do know we shouldn't lay blame on anyone, nor should anyone have to take a fall. Put the houses on the market ~ let the people who CAN buy them buy them ~ rent them out ~ lease purchase ~ Wells Fargo has a lease purchase program, where a buyer can lease from a seller for twelve months, and the come to WF for a home loan at a decent interest rate ~ I am not sure of the credit requirements, but if a lease purchase client can make 12 consecutive and ontime rental payments, then they become a good credit risk for home ownership, dont' you think?
We have to get the money flowing again. Sitting on the vacant properties is not only a bad thing, but the worst thing that we can do. These are just my opinions, and very simple......but if things are already complicated, perhaps we need to go back TO simplicity. Jean
This stabilization is not the job of the government. The government is our servant. Since everything comes first from thought, and then materializes -
WE THE PEOPLE must first THINK/VISUALIZE: STABILITY-FREESPONSIBLITY FOR ALL.
This is the real way to govern ourselves: the balance of Union workers[WE THE PEOPLE] and Boss [GOVERNMENT], if you will.
In truth, WE THE PEOPLE come first, with our power of visualization.
We set the stage, as a groupmind.
Then our servant, Boss - GOVERNMENT, must do the job it's paid to do: manage the assets we've created.....
And in our creative visualization, we must create HONEST servants.
NO!
Sometimes, out of the ashes of a complete and total snafu can come new ideals. We're caught up in thinking we only have a couple of options. Let's get outside the box and look at all the variables, without the distraction of punishment and blame.
As we work through the process we can identify a new "do not patronize" list of people, and ban them (debar them, in a sense) from ever conducting banking business again. But let's don't focus on WHO did wrong. Let's look at what is broken... with all the parts laying on the ground, and rebuild it right.
This, In My Honest (somewhat financially undereducated) Opinion, is what Americans do best. We pick ourselves up, dust ourselves off, and build something better...
Did we forget that?
NOT for the "robber barons," but in the best interest of "we the people." Those same people who own the government (as mentioned above.)
Later on, after we know what we're doing, we can hang the witches and stone the adulteraters...
Jes' Sayin'
Wilka
They are OUR "them," if you get what I'm saying. We always say that their job is to represent us--and yet we don't tell them what to do. We're also responsible for them. Like a parent who has a teenager, if you don't watch them and monitor their activities, and guide them, they just might get into trouble. Witness the 2004-2008-activities that led to this crash.
Nobody wants to read a bunch of dried up vebiage and bills and potential laws? Tell them to write them in the people's english. NOT the fancified legalese language that they adore. Ever wonder why they speak in that language? So you DON'T read all of it. Hell, THEY don't even read half the bills either.
One bill-one vote. No add ons. Get rid of it. Let something stand or fall on it's own merit. Don't tie an education bill to a wastewater bill. That is stupid, and breeds the kind of gov'mt we now have.
If you're interested in minding your congressional teens, but don't know how, send me an email, and I'll shoot you some really cool links that can get you involved enough to make some difference. In the sense that Americans are the owners of America, we best mind the clerks we hire to work the store, and the drivers we hire to steer the buses.
'Nuff Said,
Blessed be,
Wilka
And I like your "common sense" approach, once again.
You're right: "No one goes to the track hoping to pick the wrong horse, but a lot of people have to pick the wrong horse for others to win." Killing the horses, or the jockeys shouldn't be the plan. But, I also agree, we need a new, clean plan.
In the meantime, it is a buyer beware world--as it has always been. (Just a friendly reminder.)
W
People who sell bad products to those who can't afford them should be punished and not rewarded. Period.
The saying about "Opinions" is so true.
The are just like A**holes.
Most people have one, and most of them stink.
I agree with Wilka in that the Congress intentionally complicates things
to keep the average citizen out of the process.
As for who 'owns the Government', although the "People" SHOULD be the main focus and purpose of and for Government, most know that, in actuality, the individuals who are Congressmen, Senators, or even Dog Catchers all too often end up working for those willing to 'Pay' them the most in what ever way they can (IE; Campaign Contributions, Free Lunches, or Outright BRIBES).
Sadly, we do need a banking system and I don't believe we can afford to 'Throw the baby out with the bath water' so to speak.
This will be a long arduous process like it or not.
My main hope is that all involved can try and focus on the task at hand without bringing in their own personal agendas (such as Republicans trying to rebuild their dying party) into the mix while we let all parties try and work for what is best for the future generations of Americans, OUR KIDS.
NO one group is blameless (except of course me LOLOL!!).
If all else fails, let us start tarring and feathering the Madoff's of this Country on the Mall in Washington as incentive for the "Powers that Be" to get it together!
Although I loved the article, I have to take issue with this statement found in a comment by Ann.
I understand that all you prudent folks don't want to see foreclosed on homeowners getting their houses back because they were stupid enough to have signed a predatory loan agreements, but likewise, I don't want to see the predatory loan givers get bailed out by the government AND keep the property while their victims are made homeless.
The errant and ignorant home owner paid a steep and inconvenient price, by losing their home; while the predatory lenders GOT to keep the fees, the payments that had been made AND the property deed.
Seriously, do you want to live in a country and society where the predatory lenders get to keep their booty, receive additional government bailout money and leave the victims homeless and piled with blame and shame?
Rewarding the con artists and punishing the victims just seems so wrong.
and now they are getting rewarded for thier stupidity?
have we as a nation really sunk that low? rewarding the robbers and thieves for putting us in this situation to begin with?
AND the American taxpayer should not be the guarantor of the racetrack betters who bought the subprime assets because of the income stream and got stuck. Why is that fair? I didn't play the poker game. Why should I have to indemnify the guy who did?