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Wednesday, August 24, 2011

Obama wants you to lose your house

New York Attorney General Eric T. Schneiderman has been pulling a Spitzer, going after the corrupt banks that the administration prefers to slap on the wrist. Obama wants Schneiderman to agree to a deal which would more-or-less forgive the banks for their mortgage schemes that brought the world's economy to the brink. Yves Smith:
Revealingly, one of the Administration’s allies said: “Wall Street is our Main Street.” And the worst is that this remark may not be a cynical Ministry of Truth pronouncement. Team Obama bears all the hallmarks of being so close to banks and big corporations that it has lost all contact with and understanding of mainstream America.
A member of the Administration who was involved in the settlement talks confirmed what we have long said on this blog: there was no investigation of any kind, despite Iowa attorney general Tom Miller’s [lies] claims to the contrary. They didn’t even bother getting to first base, namely making document requests.

And that is why at least some of the AGs are so uncomfortable with what is going on.
For her part, Marcy Wheeler says that this settlement will be "the last nail in the coffin of the rule of law in this country." I think there are rather more nails yet to be pounded, but I take her point. Marcy links to this important piece by David Dayen of Firedoglake which demonstrates that a real solution to housing might create one million new jobs -- and it would keep people in their homes. The trick is simple: Refinance existing loans, reducing the principle.

That, as I recall, is pretty much how FDR did it. In the end, the agency he set up for that purpose, HOLC, broke even.

Dayen draws, in turn, from this report by a group called The New Bottom Line. They say that their plan would lower underwater mortgages by $500 a month. Dayen:
So it’s not really an outrageous number, or a way to give people “free homes.” It’s helping out people who were ripped off or through no fault of their own bought mortgages at the wrong time from the wrong people. And remember, there practically is no legitimate mortgage market, given all the shenanigans in securitization from the banks. This should be the bare minimum fix just to make the system legal again.
The NBL report says, basically, that underwater homeowners owe $700 billion more than the homes are worth. This is from the report itself:
If banks wrote down the principals and interest rates on underwater mortgages to market value, it would save homeowners $71 billion per year.Banks received $14 trillion in taxpayer-funder bailouts and backstops so that they would start lending to the American people again to jumpstart the economy. That never happened. While some of this money has been paid back, much of this $14 trillion has not and will never be returned. They should just subtract this $709 billion off the trillions they still owe us.

$709 billion is a fraction of the trillions they took, and it would go a long way towards reviving the economy. Further-more, the bailout money was also intended to cushion the banks from losses on their toxic assets -- a technical term for “bad loans.” We gave them money so that they could write down bad loans without going under. It only makes sense that they now write down underwater loans.
Let's repeat this. Part of the rationale for the big investment bank bailout in the first place was to help the banks deal with bad loans. The bankers were happy to take the money. So why can't they live with a quid pro quo?

Alas, libertarian propaganda has so thoroughly brainwashed our population that even people now living in their cars would probably disdain any "big gummint" solution that would make mortgages more affordable.

Obama no doubt hopes that, by laying nice with the Wall Streeters, they will give him the same kind of loot they gave him in 2008. But they hate him. They shouldn't hate him (arguably), but they do.

Traditionally, banks do not want foreclosed homes. Frankly, there are times when I think that this entire crisis was engineered to allow certain capitalists to scoop up lots of cheap properties.

You know -- sort of like the early 1990s, when Russian sleazoids bought up everything in the former Soviet Union for pennies.

Speaking of propaganda: I never thought I would see the day when Republicans openly ask for a tax increase on the working class, but that's now their agreed-upon position -- going into an election year. God damn but they are cocksure of their abilities to control the narrative through propaganda!

Meanwhile, the Republicans denounce Obama's stimulus -- which was largely a matter of tax cuts (of the wrong sort -- that is, not directed at the wealthy). Yet the Republicans are thought to be in favor of lowering taxes, and Obama is widely perceived to have raised taxes.

Perception is at a 180 degree variance from reality. When does it become time to declare the country ungovernable?

Jon Stewart, in a recent bit, noted that if the Republicans took half of the earnings of the lower-class wage-earners, the haul would come to about what we would get if we returned to "soaking" the rich at a Clinton-era level. If we returned our tax structure to those much-higher, long-gone Reagan-era levels, our problems would disappear.

Am I the only one who recalls that, throughout much of the Reagan era, George Will routinely pronounced America to be "under-taxed"?
Comments:
First of all, I was a bit late to the party, but it is definitely worth reading Matt Taibbi's piece from last November Invasion of the Home Snatchers.
http://www.rollingstone.com/politics/news/matt-taibbi-courts-helping-banks-screw-over-homeowners-20101110

I was a bit late reading but it pretty much reflected my understanding of the situation.

Now to understand this from the Administration's side, you should consider the rumours surrounding Bank of America, and its stock price. Ya see, banks dont do well when their stock is trading in penny stock range. People start to worry whether they can survive. I worry about whether BoA will survive. Hence the trial balloon in the WSJ about JPM buying it.

Nasty "solution". No bank competition in the US. And taxpayers will no doubt be asked to sweeten the deal for JPM. Nonsense isnt it. We give JPM a "sweetheart deal" aka $100bn backhander to avoid "communism". Since when was massive crony capitalism better? Who voted for that? And who says we wont have to bail another bank out next year?

See, the next question you should ask is why is BoA so sick. As you read NC, you already know. Lots of bad loans, bad mortgages, cos it bought Countrywide among others. And a cost base that makes sense in a finance bubble but makes no sense in a great depression. It doesnt help that Countrywide committed fraud on an enormous scale. Since they already gave Countrywide a pass there isnt much they can do. Apart from bless the frauds and screw the little people, to protect BoA and the other halfwits. If they dont they will own the mess anyway. And it would be politically unpopular to "nationalise" a really big bank. Cos the loans were illegally securitised (they cut corners) then there is every risk that proper examination of the issue will result in bank failure again. And cos they are securitised, you cant offer debt reduction (well you could but the banks dont want it, and the investors dont have control). It turns out that securitisation was a really stupid thing to do. And you know what? The authorities still dont recognise this.

F*cking morons.

This isnt over. Its on such an enormous scale that everyone will be astonished by its ultimate effects. You have a choice - great depression or great inflation. I hope and pray for the great inflation. But a lot of your leaders are keen on the existing status quo, and not afraid of fascism so they say that there can be no debt forgiveness for the little guy. They must PAY IN FULL.

Oh dear. Oh very dear. Why do you think the tribes of Israel forgave all debts every 49 years? To prevent the entire nation being enslaved by the rich. For if this happened, who would fight for the nation anymore? The rich and no one else. Solon understood this. Look it up.

Selfish idiots.

Harry
 
Put the blame where it belongs, on the print and broadcast "journalists".

If the Founding Fathers knew how an in the tank news media would become a propaganda organ for the new aristocracy they would have scrapped the idea of a free press.
 
Marcy Wheeler was an OBOT tool, is that changing ?
 
I don't know about Marcy, but Jane managed to resurrect the "Clintons dogwhistled Obama" lie not too long ago.

*I'll repeat, until a full "accounting" of 2008 happens, the left will forever be fractured*

I humbly volunteer to contribute to any such project.
 
I grow weary of the misleading figure of $14 trillion in bailouts and, as they say to be more technically correct without explaining why this hurts their point, 'backstops.'

Nothing like $14 trillion was loaned or went anywhere.

This is what is meant by the phrase, using their term of art.

The FDIC limit of coverage for bank deposits per person on the account was $100k until 2008. That only covered about 60% of all deposits. Anything over that amount in the account normally has no insurance guarantee coverage from the FDIC, so people were at risk to lose anything above $100k, in whole or in part.

The FDIC limit was temporarily raised to cover $250k, and then an unlimited amount of covered funds (for certain kinds of accounts).

At the same time, the money market funds received 100% guarantee backing insurance temporarily, so as to assuage people not to create a panic run on money market funds.

It is these extensions of the already existing FDIC coverage limits that adds up to the $14 trillion in bailouts and backstops (therefore, mainly in the backstop category).

The money market guarantee has ended. The unlimited coverage program covering deposits of all amounts has ended. The temporary extension of the $100k to the $250k level has been made permanent.

So it's untrue that the $14 trillion total figure has mainly not been repaid. It was never issued to anyone, and some large portion of those extended insurance amounts have actually been reversed by ending them.

Using that figure and conflating the actual loans or bailouts with these extended guaranteed amounts paints a false picture of huge largesse, at about an order of magnitude beyond what was actually given the banks, in either loans or bailouts, per se.

XI

-- complaining about a pet peeve in the standard reporting
 
Well here I go telling everybody I told you so.

If you still go to the dailykos then you can check abbeysbooks for what I said in 07 or 06 about bank mortgages. The loyal lawyers on dk grouped, got their clubs out, and doughnutted me out of there. These blogs were done late at night while I was taking a guerrilla law seminar for 2 weeks, 10 hours a day and it was an awesome time. It was also before I began studying Foucault. So they are pretty hyperbolic. But the info is pretty much correct.

All these mortgages except the owner ones, and the ones still held by local banks, can be broken, especially the derivative ones. They all are in violation of Federal Lending Law called TILA for Truth in Lending Law. You do not have to pay your monthly payments, and you can blackmail the shit out of them. You can end up with your house free and clear or clear out with no credit black marks and cash to start over.

Yes you can. It takes some doing but it can be done. You are in the catbird's seat. But everyone is playing the well known victim card instead of the predator card.

Anyway read my legal diaries over at dkos to get the info and then google TILA. Be careful as their are lots of scammers saying they will do this for you for 5000 or so. Do not give them any money up front until you really check them out good. Or you can do it yourself.I am seymourblogger at gmail
 
Mr/Mike is right. The end.
 
You have an interesting Freudian slip in there, using principle instead of principal to refer to the amount on which interest is charged in a loan. Used slightly differently, "reducing the principle" could be an apt comment on this situation.
 
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