After subprime debacle, U.S. wrestles with question of bank bailouts

[flashl]

A big change in the financial industry's laissez-faire attitude

WASHINGTON: Over the past two decades, few industries have lobbied more ferociously or effectively than banks to get the government out of its business and to obtain freer rein for "financial innovation."

But as losses from bad mortgages and mortgage-backed securities climb past $200 billion, talk among banking executives about a major government rescue plan is suddenly coming into fashion.

A confidential proposal that Bank of America circulated earlier this month to members of Congress 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.

The proposal warns that as much as $739 billion in mortgages is at "moderate to high risk" of default over the next five years and that millions of families could lose their homes.

To prevent that, Bank of America suggested a new "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.

International Herald Tribune

Maybe BoAs great strategy for purchasing CW was going to Feds seeking taxpayers bailout instead of using CWs losses to offset its own taxable income?

[pretzel4gore]

1. Penny Pritzker's role in this:

There are serious problems for Obama. Given the context of standard corruption any politician must work in, the Pritzer famile's role in the 'change' Obama promises suggests at least a misguided trust in provably crooked members of the pig class (ie the super rich) by Barack. It's not being diletante to raise the subprime mortgage issue (which will be still killing a hundred years from now, experts say) in light of the glib approach Obama is using succesfully, with the complicity of the mass media- whose very integrity has to be questioned even again seeing as how they for the most part overlook Penny Pritzker's role in and her benefitting from the subprime loan disaster ...hasn't bushregan thievery taught us ANYTHING?
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http://www.bostonnow.com/blogs/oldmole/2008/02/12/obama...
snip>
Penny Pritzker is the National Finance Chair of 2008 Democratic Party presidential candidate Barack Obama's campaign. Yet the Obama campaign's national finance chair served as chairman of the Superior Bank from 1989 to 1994, before this savings and loan institution collapsed in July 2001.

Created at the end of 1988 as the successor bank to the failed Lyons Savings Bank, the Oakbrook Terrace/Hinsdale, Illinois-based Superior Bank was 50 percent owned by Chicago's billionaire Pritzker family. Yet, according to an Oct. 16, 2001 statement before the U.S. Senate Committee on Banking, Housing and Urban Affairs by Ely & Company Inc. President Bert Ely, the Pritzker family's Superior Bank "started life with enormous tax benefits and a substantial amount of FSLIC-guaranteed assets under a FSLIC Assistance agreement." In a December 2002 article ("Tremors In The Empire) that appeared in "Chicago Magazine," Shame Tritsch noted, for instance, that for investing $42.5 million in the failed Lyons Savings Bank before it was reopened as Superior Bank, the Pritzkers and their business partner received an estimated $645 million in federal tax credits and loan guarantees; but “by one estimate, it would have cost the government $200 million less simply to shut Lyons down.”
Yet according to Ely’s Oct. 16, 2001 statement, “Superior’s trick, or business plan” under Penny Prtizker’s chairmanship was apparently “to concentrate on subprimelending, principally on home mortgages, but for a while in subprime auto lending, too,” after the Pritzkers’ bank acquired its wholesale mortgage organization division, Alliance Funding, in December 1992.

With a business loss estimate of between $350 million and $1 billion, the 2001 failure of the Pritzkers’ Superior Bank represented the largest U.S.-insured deposition institution to fall between 1992 and 2001. But according to a Feb. 7, 2002 report of FDIC Inspector General Gaston Gianni Jr., “the failure of Superior Bank was directly attributable to the Bank’s Board of Directors and executives ignoring sound risk management principles.”
<snip
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Obama has to have people who can SCORE repeatedly, and who can intimidate the pigmedia, as the Pritzkers clearly can, but- they're going to have to not only hide their role in the subprime affair, but also try to unload the costs to the innocent, which means more busheviki deceit and thuggery (obviously, all this character stuff is known about, by the same criminals who assisted putting bush in office, and that's the crucks of the issue. The pigmedia needs nothing so much as...we need pork chops, and Obama maybe hates pork chops!)

[greengestalt]

2. Thou shalt not devour usury

The "War on Terror" garbage puts an interesting perspective on things. It makes total sense why in the struggle against "Radical Islam" they are so willing to do everything possible to commit cultural genocide against Islam... Islam is the one remaining "Book" religion that is still adamantly against the model of banking as we know it. (well, I don't know about the remaining Zorastrians, but there are not too many, but certainly the Christians and of course the Jews have allowed it)

Not that the other prophets haven't spoken against it, such as Isa/Jesus, but despite himself being a merchant (and the former a tradesman) Mohamed was steadfastly against Usury. That is lending for interest and / or making a living out of profits from such transactions.

The bankers are afraid of Islam to the core; Not just that they face a 'religion of social justice' fighting their attempts to strip-mine the middle east. But that the very system of robbery of the people they want to set up is so forbidden they can't get their foot in the door.

[CGowen]

5. Jews didn't allow it against their own, but it allowed it against foes.

Also the Protestant Reformation changed the Christian attitude in favor of usury.

[Warpy]

3. BoA bought Countrywide for pennies on the dollar

and expects a large return on its investment. I think their return will be a modest one, if at all, because even prime mortgages will default when people in the "hot" markets find themselves owing twice as much on a house as that house is worth. They'd be nuts to keep paying, especially if they could rent for less.

The acquisition of Countrywide was a boneheaded move on their part and not some larger grand strategy. They saw an opportunity to swallow a mortgage company up at a fire sale price and took it. Greed took over for good sense.

The subprime market is just the tip of a very large iceberg. We folks on the bottom will see fallout from that and from the restriction and then collapse of the consumer credit market (meaning once you charge those cards up, they will be full and you'll have to start paying them off at a higher interest rate than you signed up for, meaning more defaults). However, the real collapse will happen like it always does, from the top down, when people realize that the emperors running the derivatives market have no clothes and hundreds of trillions of dollars of assets held by financial institutions evaporate overnight.

Remember, wealth is built from the bottom up. Collapse happens from the top down. Anyone who forgets these simple facts might win a Nobel prize in economics, but he will be setting the stage for another bust cycle if he gets the people in power to listen to him.

[Dave_Fl_50]

4. I WIsh

"even prime mortgages will default when people in the "hot" markets find themselves owing twice as much on a house as that house is worth. They'd be nuts to keep paying, especially if they could rent for less."


The reality is you can't just mail in the keys. I would if I could. I bought in Spring 2005 after being booted out of 2 different apartment complexes that went condo. At this point I owe at least 60,000 more than the property is worth and that's after having made early payments on a standard fixed 30 year loan.

If you mail in the keys in most states (Ca is an exception for the original purchase loan) you'll end up with your wages attached for the rest of your life.