Wednesday, February 25, 2009

If the money guys hate it ...

It must be a good idea:

Yesterday, Nancy Pelosi announced that a housing bill which could come up for a vote this week would include the "cram-down" provision, which would allow bankruptcy judges to modify the terms of mortgages for borrowers on their primary residence (currently judges have the ability to do this on secondary residences). This is an important provision, which most economists believe will be the best tool homeowners can have for them to stay in their homes, and for lenders to agree to loan modifications. The banksters hate this idea, mainly because they know it would blow the whistle on their consistent violations of the spirit and the letter of the Truth In Lending Law, in their mania to lock as many people into mortgages as possible without regard for ability to pay, so they could sell those mortgages on as securities, and so on and so forth. This ultimately is the fault of the lender, who are clearly the irresponsible ones in the whole scenario. [my em]


Spot on. You can't tell me that these guys didn't take advantage of human nature. Whenever I take out a construction loan (I'm using their money while mine makes more interest than their loan costs), I'm besieged with questions: "Are you sure you don't want to take more, Mr. Fixer? You know you can borrow up to 150% of the value of your house; don't you? You certainly qualify." And they look at me like I'm crazy when I decline.

That's the thing they counted on; people accepting whatever the mortgage lenders say they can afford. Who wouldn't want the best home possible to raise their family? Who wouldn't want their kids to live in a nice neighborhood and go to good schools, given the opportunity? Now, when this house of cards is falling down, they point the finger at those who "bought homes they couldn't afford". As if Joe & Jane the Homebuyer held a gun to the banker's head and forced him to offer the loan.

I remember the first time I tried to buy a brand new car. It was 1981, I was 19, had a steady job (U.S. Air Force), and paid my bills and I tried to get a car loan. $6995 for a Chevy Chevette (remember those shitboxes?) and was laughed out of every dealership and bank I went to. Even the Military Credit Union wouldn't give me a loan. In hindsight, I wouldn't have given me a loan either (A nineteen year old kid in the service spends too much money on beer and pussy).

Now, a guy making $35K a year, the sole breadwinner in a family of four, is not a candidate for a mortgage on a $500K McMansion by any rational measure (let alone the loans they wrote for 'flippers'; those who suddenly thought they were Bob Vila and bought second and third homes for profit), yet mortgage bankers wrote hundreds of thousands of them. While I'd question the homeowner's judgment for accepting, it is up to the bank to assure the buyer is qualified to pay. These 'bad mortgages' or 'Big Shitpile' were nothing more than a means to an end; a vehicle with which the banks could make more money.

The bankers have to feel some pain for it was their bad judgment that got us into this mess. Akin to giving a 2 year old a loaded pistol and telling him to have at it. They can't be allowed to divest themselves of all these bad loans without loss at the taxpayers' expense. It is the reason the stock market is taking these big hits lately; because they all see their profits and perks evaporating as the President calls for actual responsibility, not the lip service the concept of "responsibility for one's actions" has been given for the last decade.

The banks are responsible for a lot of the mess we're in now and they know it, and they don't want to step up and take their medicine. They have gotten enough of our money and have been allowed to use it for everything but what it was intended for. Their corporate boards are still seated and their CEOs still have jobs, and they are back with their hands out. It's time for a little giveback before they're allowed to take any more. It's time for the banks to voluntarily modify the bad mortgages they wrote in return for taxpayer help and if they don't, they should be forced to.

As regulars around here know, I'm not one for nationalizing anything* (the government sucks at running businesses) but if the banks won't cooperate than tough shit. We're on the balls of our ass and these idiots think they can walk away from this unscathed. I applaud Mr. Conyers for trying to make sure they don't.

*With the exception of health care, wherein all of the HMOs and pharmaceutical firms should become property of the U.S. government.

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