What's Really Going On: Foreclosure, Santelli, and Nationalizing the Banks

[alcibiades_mystery]

Here's what I see:

The administration is floating the foreclosure readjustment in order to drive Citigroup and Bank of America toward nationalization. The CNBC Friedmanites understand this, and they're countering with the only thing they have, tedious rhetoric about "paying your neighbors mortgage." Here's how it works:

The admin first talks up a blended solution between the Japanese and Swedish model, with indications that they're leaning toward the Swedish model. But you can't jump right into that. It is a groundshift in policy and society equivalent to Reagan's firing of the air traffic controllers - it signals the end of an entire era. So they have to push Citi and BofA to the point where nationalization becomes broadly accepted (it is already accepted, but they're trying to move a small percentage, maybe 8% of the population, toward the position). The foreclosure readjustment does just that, because these banks are essentially insolvent, with only the illusion of future returns on the overpriced mortgages serving as their mark-to-market fig leaf. This has everything to do with their balance sheets. If their balance sheet magic trick gets stripped away, they have no choice but nationalization. The market understands this; it's why Citi and BofA are down nearly 20% today already.

But the Friedmanites at CNBC and their cronies on the right cannot give up that easily. So they counter with the personal and resentful argument about the neighbor's mortgage. It is the only argument they have left; it remains to be seen whether it will manage to hold on to that 8%. Neither Santelli nor CNBC give a good goddamn about "paying your neighbor's mortgage." What they are trying to salvage is the illusory balance sheets at Citi and BofA, the current valuation of mortgages that will never be paid. But they are trying to salvage that because they are trying to salvage their fundamental principle of deregulation, principles that have been catastrophic and are, essentially as abject a failure as Soviet socialism. They are attempting to salvage an ideology of the dominant class that has led our nation (and the world) into utter disaster. Don't be fooled.

What's really at stake directly is the banks' balance sheets, and with them, the possibility of nationalization. What's at stake philosophically is the whole ideology of deregulation. The debates about the foreclosure readjustments have to be read in this context.

[FreakinDJ]

1. 100K short sale preferred to 50K Write Down

That is the truth about the foreclosures.

The Banks rather lose 100K rather then Write Down the loan 50K. Then Federal Tax Dollars in the form of TARP funds pay back the bank.

So just who's irresponsibility are we going to pay for - and how much will it cost

[alcibiades_mystery]

2. The 100K short sale isn't immediately realized, while the write down would have to be

That's the problem. They're flailing, and want to keep the illusion of current valuation of the loans (i.e., pre-short sale) on the balance books right now.

[acmavm]

3. Well of course they do. But it's not the loans. It's the bets on the loans

failing that they sold over and over and over and over. And those bets were nothing more than a way to game the system. They sold them fuckers 100 times sometimes.

So, if you see the real valuation of these homes compared to the debt the fuckers are carrying, you see the vast difference between the mortgages and the bets.

[alcibiades_mystery]

7. Granted

[Justitia]

4. You mean Santelli, the multi-millionaire former Hedge Fund Mgr who traded in DERIVATIVES?

Who made his personal fortune in TRADING FUTURES?

C'mon, his personal mountain of money is at risk!

He doesn't want his or his filthy rich futures trader buddies to have to carry all the other losers not in their 1% tax bracket!

[uponit7771]

5. RIGHT!!! He LOVES "free markets" but hates containment of rish to those who can take it...

...he loves spread the risk keeping the profits.

[MattBaggins]

12. Derivates?

Can we go back to calling them junk bonds? Wouldn't he just be one of the Reagan era Gordon Geckos who cheated our grandparents out of their life savings?

[uponit7771]

6. Your analysis is right on!! POTM, I just wish the Obama admin would get out and counter the "your...

...neighbors mortgage" BS with being able to refi while a house is over 80% LTV, something like a streamlined refi the FHA would do without the loan being FHA backed.

Also, he's talking about taking down the rates of F&F and forcing the other big boys to go with them. I can refi at 4.5, my bank would prosper from the refi cost but some of these guys hold on to free markets as a reglion.

[DemocracyInaction]

8. Few comments

Today they were interviewing some "insider" (inside what I'm not sure) who has been "asking around" and insists that neither the banks nor the government are interested in nationalization.

However, I agree about the game being played. Geitner's "stress test" is exactly about finally opening up their books and standing bare naked before the world. The Japanese propped up lousy banks for so long that it kept them in a continuous recession. Sweden nationalized them, cleaned up the crap and auctioned them to the private sector. The fat bastards in this country cannot stand to see that their "rape and pillage" playground is about to be shut down. The last thing they want is regulation and a big light on the money transactions in this country. NOW, I suggest the next thing we nationalize (and I hope that that is where Obama is going with these banks---let those who deserve to fail, fail)is to nationalize things like the oil industry. We need to get control of things that are vital to survival because these bastards will never protect the country.

[DemocracyInaction]

9. I'd like to make another comment

What is becoming clear is that these "unbridled capitalists" are now saying: "If I can't have my playground back where I can rape this country at will, then I will, literally, drive this country and the world into total collapse". THAT is what we are up against. I do hope Obama moves fast to grab the playground before they burn it to the ground.

[alcibiades_mystery]

10. The capitalist class is extremely brutal when cornered

As history amply demonstrates.

[MattBaggins]

11. They will get away with it. They have for centuries.

I posted about this last night with the line from Gangs of New York where Boss tweed tells the Governor not to worry about the poor since "you can always pay half the poor to kill the other half". For all their feigned indignation about "class warfare"; they will pull the most evil class warfare stunt of all; trying to pit neighbor against neighbor.

[yodermon]

13. deregulation "as abject a failure as Soviet socialism. " = brilliant!

Permission to use that comparison in future arguments? Thanks!

[elmerdem]

14. The only question

that people should be asking is "where did Santelli stand on the TARP bailout?" We must not let the hypocrisy go unnoticed. I try to shine light on it for everyone who will listen. So much for the 'paying your neighbors mortgage" argument! Add him to the list of McConnell, Boner, and every other fucking repub asshat.