Only Halfway Through the Foreclosure Crisis?
EmailABC News’ Z. Byron Wolf Reports from Capitol Hill: Martin Eakes, who runs the Center for Responsible Lending, told the Senate Banking Committee in February 2007 that the U.S. was on the precipice of two million foreclosures for subprime loans. Today, the committee chairman, Sen. Chris Dodd, D-Conn., called Eakes prescient and said the two million figure "seems almost quaint."
Eakes, however, sees no end to the foreclosure crisis in sight.
"We’re only halfway through subprime loans alone, not to mention a third of the way or less through the adjustable or arm," he told the committee today, of foreclosures. Eakes calls the proposal by FDIC Commissioner Sheila Bair (and rejected, apparently by the Treasury Department) to use taxpayer money for a homeowner bailout "just an absolute no brainer."
What was billed as an oversight hearing on the Treasury Department bailout for Wall Street turned more into a meditation on the housing crisis and what banks benefiting from the ever-evolving bailout are doing (and not being forced to do) to help people avoid foreclosure.
There was unanimous confusion among the witnesses – bank executives, academics and consumer activists – that Treasury Secretary Henry Paulson seems to have rejected a proposal by Bair to use authority within the bailout bill and $50 billion of that $700 billion program to help people with subprime loans in danger of foreclosure restructure their loans. Bair’s proposal was modeled on a program enacted by FDIC to restructure the subprime loans of Indy Mac bank when it went into conservatorship earlier this year.
Dodd said the rate of foreclosures demands more systemic approach than the several voluntary programs enacted by the federal government.
"Between now and next Wednesday, some 50,000 families will go into foreclosure," he said. "Some 50,000 will lose their homes.
"It is still confounding to me why the Secretary of the Treasury and others refuse to understand this is the heart of the problem. And until we address this, this problem is not going to go away."
Dodd also accused Paulson of only pretending to look at Bair’s proposal. He said he could offer mortgage relief legislation on the floor of the Senate when lawmakers return for a lame duck session next week. But without buy-in from Republicans, nothing is likely to pass next week.
Wharton Business Professor Susan Wachter told the Senators she was "puzzled why Treasury has rejected (the Bair plan)."
Bank executives were less committal, but said more should be done by the government to systematically address the foreclosure crisis.
Anne Finucane is an executive at Bank of America, which acquired Countrywide, the lender most famously undone by subprime lending. She said BofA is trying to unilaterally restructure many mortgages – 200,000 this year, she said – but said "the more we can do systematically to deal with this issue, the better."
But the bankers differ with the Democrats and activists on whether a controversial proposal to allow bankruptcy judges to unilaterally restructure mortgages would endanger the market.
Sen. Mel Martinez, R-Fla., whose state is particularly hard hit by the foreclosure crisis, said he worried about the bankruptcy provision, but wants to see more done to help homeowner’s specifically.
Dodd also castigated banks for "hoarding capital" given to them under the program and argued that the true cost of the bailout has grown to $5 trillion when you factor in the temporary bump in FDIC insurance to $250,000 per account, the bailout of insurance giant AIG and the nationalization of government mortgage backers Fannie Mae and Freddie Mac.
"It isn’t just 290 billion. It’s 5 trillion. The taxpayer is really behind your institutions," he said.
But still Dodd defended the $700 billion rescue package passed this year.
"If you believe that you would be no worse off than you are today, then I invite you to return to the Treasury the billions of dollars in taxpayer investments, guarantees and discounts that you currently receive, and I wish you well as you try to make it on your own," Dodd said.
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I think we need another $500 billion set aside for the mortgage bailouts, in addition to the $300 billion stimulus giveaways, $150 billion to AIG, $700 billion to banks, $100 billion to automakers, $500 billion yet another stimulus giveaways.
Our Dearest Greatest Smartest Leader is an authentic, 100% real, candy giver.
Long Live the Leader (LLL)!
Posted by: Follower of Dearest Greatest Leader | November 13, 2008, 4:43 pm 4:43 pm
Well, the last person on this earth that I would consider an expert on this topic is Senator Dodd. The Senate didn’t do its job in providing the oversight needed for this mess, and the only time the Legislative Branch seemed interested in addressing this issue is when the Executive Branch came with a request to spend 700 billion dollars. Now we will see how the Senate Reacts. But if you ask me, they are just waiting for the Executive Branch to make a political mis-step, then cash themselves a check for some political capital. This is just disgusting. They are supposed to represent our interests, not their own political ambitions.
Posted by: John | November 13, 2008, 4:58 pm 4:58 pm
Hey, mom, you missed the point. Our Greatest Leader first need to take care of the CEOs of banks and automakers, who make 10s and 100s millions per person per year, by injecting another $100 billions into Detroit, so that they can take care of you.
Even the 3 CEOs of the big Autos make $100 million a year, that’s only 0.3% of the bailout. Good deal, worth it!
You need to look at the broader picture to understand the Harvard Smartness of our Greatest Leader and his vision for a better united state of america, for the common good of the society.
Posted by: Follower of Dearest Greatest Leader | November 13, 2008, 5:00 pm 5:00 pm
Instead of given billions to banks, they should have given $200,000 to every tax-paying citizen. Then they could pay off or down their mortgages and debts instead of giving it to the greedy financial institutes that put us in this situation to begin with. The American people are hurting while financial institutes are hoarding the bailout money. It isn’t right nor fair. The banks only care about making money, not helping the people. Look at AIG who through a party with tax payer money. Whatever.
Posted by: Mel | November 13, 2008, 5:01 pm 5:01 pm
Mel, you think like mom.
Posted by: Follower of Dearest Greatest Leader | November 13, 2008, 5:03 pm 5:03 pm
I can’t imagine why anyone would listen to a thing Chris Dodd has to say. Connecticut kicked the wrong Chris out of office. Chris Dodd is a large part of the credit crisis…. see his support for ACORN!
Posted by: SL | November 13, 2008, 5:06 pm 5:06 pm
Well then…I’m right on schedule. I should hit forecloseure status right about March. (Shrug)
Posted by: DobermanSpencer | November 13, 2008, 5:08 pm 5:08 pm
I wonder, if the politicians just stop tinkering with the market – stop with the bailouts, stop with the news conferences, stop with trying to prevent catastrophe – how quickly the market will just hit bottom so it can start to rise back up. When you’re bouncing a ball, you have to let the ball hit the ground before it can start to bounce back up – the markets are really no different.
Posted by: Justin Thyme | November 13, 2008, 5:10 pm 5:10 pm
Congratulations Barky, you have just won the captainship on HMS Titanic, post iceberg. The faster you spend, the faster she’ll sink! What’s that faint noise in the background, oh look, the band is playing…
Posted by: hmn | November 13, 2008, 5:12 pm 5:12 pm
scanny: “Obama gets what he reaped. Obama and his friends of MOVEON created this mortgage crisis but the news refuses to mention that little bit of tidbit information”
They don’t mention it because it’s an absurd little fantasy not supported by any actual facts. Obama and MOVEON is to blame now? Are you serious? Could you please decide if Obama is the empty suit with no record or the source of all evil – it’s getting tough to follow “logic.”
Posted by: jhw539 | November 13, 2008, 5:19 pm 5:19 pm
Why does this not surprise me that all this money has not done a damn thing but swell the pockets of these banks. Here is the solution and if anybody wants to listen. Please don’t say the cost of Milk and Bread will go up with what I am about to say! Who cares if it goes up with the savings the american people will have monthly we can afford $6 gallon of Milk.
1) Each Tax Paying American get $250,000
2) For a Husband and Wife they get $500,000.
3) We all sign a letter agreeing to use our money to pay down or off our Mortage.
4) The average home loan is approx $250,000.00 that means all home loans would be paid in full!
5) Any extra cash would be used to purchase consumer goods.
This accomplishes the following
1) Banks get whole real fast. Most bad loans paid in full.
2) Money is being pumped into our economy and companies will than be able to make profits.
3) Very few people would have a monthly house payment, on average $1500 per month. They could use that money to purchase the everyday goods (even at a higher price)
WE NEED TO GET OUR GOVERNMENT TO GIVE USE THE MONEY AND LET US GET THIS THING BACK ON TRACK! ENOUGH OF GIVING MONEY AND NO OVERSIGHT
Posted by: chuck | November 13, 2008, 5:20 pm 5:20 pm
Justin Thyme “I wonder, if the politicians just stop tinkering with the market – stop with the bailouts, stop with the news conferences, stop with trying to prevent catastrophe – how quickly the market will just hit bottom so it can start to rise back up.”
You could try reading up on the Great Depression, where the federal government’s stimulus programs were insignificant relative to GDP and did nothing. It took WWII to get government spending up to the point it goosed the economy.
Or, if you don’t like messy things like reality and facts, you can just post random musing to boards on the internet .
Posted by: jhw539 | November 13, 2008, 5:21 pm 5:21 pm
jhw539,
In case your memory is so easily fading, you ought be reminded that Pres. 0bama made the boneheaded mistake to push for Bush’s money giveaway, one year ago, so that he could buy vote, sweeten some of your pockets with $600. He ridiculed Hillary Clinton’s solution to use that $300 billion to save the mortgage and financial crisis.
If he had followed Clinton’s lead, the economy might have not tanked as is now.
Pres. 0bama is either clueless about the economy, or he was putting his personal gain of pandering voters like you to buy votes to give money away.
You pick whichever you like.
Posted by: Coke2 | November 13, 2008, 5:25 pm 5:25 pm
the sad fact of all of this is that the world wide depression that we will see is something that has occurred on a regular cycle in the history of the western world and we will just have to adjust to this until the leaders of our countries come together and agree as a group to have a unified approach to managing the whole worlds debit issues.
Posted by: don edwards | November 13, 2008, 5:55 pm 5:55 pm
Congress does have the power to hold back the second half of the $700 billion if it thinks the first half isn’t working out. BINGO!
Posted by: glenn_2099 | November 13, 2008, 5:56 pm 5:56 pm
Thanks GWB…. Real good presidentin you done there.
Posted by: BlueJersey | November 13, 2008, 6:01 pm 6:01 pm
Oh for Pete’s sake people. The reason buying up bad mortgage loans is a BIG mistake is because banks want to sell the loans to the government for 100 cents on the dollar when the related collateral is worth 50 cents on the dollar. The government isn’t going to profit in that scenario unless they restructure the loans and take a principal loss (hence a taxpayer loss) or hold the loans for 10 years, until the real estate market returns. Second, the VAST majority of subprime loans were made to either (a) people who could not afford the home they purchased at any price, but took advantage of low teaser rates (I will agree, with some coercion from crafty mortgage brokers and the very greedy banks that are looking for bail out) or (b) investors who rented the properties out and made money while the teaser rate was in place but walked away when the interest rates ‘jumped’ to market and they couldn’t refinance or sell the property. There is only a slim margin of ‘real’ property owners who bought homes they thought they could afford, and have either lost jobs or been unable to refinance based on the credit crunch. Banks have yet to mark their bad loans to market (take the “loss” of loan collateral value on their books) because they need cash for their balance sheet to increase their loan loss reserves. So, when banks receive bail out funds there is no money left over to re-lend, because they are juggling numbers to stay solvent.
Posted by: RohnertPark1 | November 13, 2008, 6:07 pm 6:07 pm
jhw539 … your math & accounting skills seem remarkably similar to El Presidente Bush’s. If we were to exercise your suggestions, it would cost, oh, somewhere in the neighborhood of $37.5 TRILLION DOLLARS (assuming approximately 150 million taxpayers). Do you have any concept what would happen to our economy, our country, our trade capabilities with other countries? Go examine Germany in the 30′s or Argentina in more recent years. Milk at $6? Try more like $600 per gallon, and I’m not exaggerating. Look up hyperinflation on wikipedia, you’ll see the picture of a German woman feeding her stove with money, because it was worth more as kindling than as currency. We’re already in danger of increasing our national debt to an unsustainable level (and that’s before the massive wave of social security payments hits us in the next couple of decades) with the bailout we’ve funded so far. Bottom line, we’re still way above the natural level of home ownership (i.e., only people who can actually afford mortgages have them), and any attempt on the government’s behalf to artificially keep us above that level is just delaying the inevitable pain and suffering. Face it, we (and I mean everyone, wall street & main street!) gorged ourselves on the cheap tequila of overly-easy credit, & now we’re all trying to avoid the massive hangover. Only one thing cures a hangover for certain … time. Hopefully next time (and there will be a next time) we all learn to sip more slowly from the bottle.
Posted by: Frank | November 13, 2008, 6:19 pm 6:19 pm
BlueJersey.
How is it Bushs fault that people took out loans that thay shouldn’t have.
I’m no fan of Bush but I can’t blame anyone but myself for the bad decisions I’ve made in my life. |
Posted by: Hippie Smasher | November 13, 2008, 6:24 pm 6:24 pm
banks should never have given loans to people they knew could not pay—-they had strict standards years ago—to many uneducated people in this country that did not know what would happen
Posted by: rodney | November 13, 2008, 7:21 pm 7:21 pm
If this is half way, we’ll be broke when it ends. Is anyone even remotely considering where all this money will come from ? There aren’t enough rich people in the USA to pay the taxes on the $trillions this will all cost in the end.
Posted by: garand911 | November 13, 2008, 11:10 pm 11:10 pm
Surprised I’m not as far as increasing taxes go the rich will be 40K and above.
With the contracting tax base at federal, state, and local levels all those who think the check is in the mail are going to be disappointed.
Posted by: Hippie Smasher | November 14, 2008, 12:48 am 12:48 am
The term “bailout”, at least to me, can be defined as a method to put up funds or collateral so that a person in need of a bailout can be temporarily relieved of their obligations until they settle what they owe. Do the crime, go to jail, get bailed out, go to court and take what is given to you. Could be back to jail if found guilty.
In the case where one borrows beyound their ability to repay the consequences are the same. You must still be responsible for your own actions, NOT ME! A bailout should not be a free ticket to get out of jail (or debt).
I have always bought what I could afford. A lot of people seem to think the American Dream is just that…a dream. Reality seems to be a bad word.
NO ONE (I MEAN, NO ONE) needs a shinny new car, a home with a swimming pool and etc. These are all (pipe dreams in a lot cases) dreams. Dreams do come true but only after one has earned it.
Sure, blame the banks and etc. if you must but please make sure you understand who signed the contract…neither the bank or myself!
Posted by: Floyd | November 14, 2008, 10:17 am 10:17 am
Maybe I should stop paying my mortgage too. I cant sell the house and I already have to pay for 10 other peoples houses anyway. Ill just move in with them.
Posted by: RegularGuy | November 14, 2008, 10:37 am 10:37 am
People need to stop daydreaming about getting a piece of the bailout.
bailout 700 billion = 700,000,000,000
US population 310 million = 301,000,000
If the bailout money was spread evenly to every citizen, it’s still only about $2300 per person.
Posted by: Math Lady | November 14, 2008, 6:30 pm 6:30 pm
Oh ye unfaithful! The trillions of dollars being spent to right the oppression of the Dark Lord of Business are but mere baubles in the Kingdom of THE OBAMA! He will watch over you, save your home, your car, you vacation and much. much more! The Dark Lord is finished! Redistribution has already begun, all ye meek shall inherit their money! Yes, the financial cris is no more than a tiny step in the incredible new Kingdom of Obama.
Posted by: TheDisciple | November 14, 2008, 9:14 pm 9:14 pm
I agree 100% with Chuck. Give US the money and let US pay down or off our mortgages and debts, thereby stimulating the economy through our purchases because WE will have the liquid cash to put into the economy… not the ignorant, self serving morons who are supposed to represent us who THINK they are smarter with OUR money than they are…
Posted by: Gooch | November 15, 2008, 1:36 am 1:36 am
Let’s say I agree with Chuck then:
a- Renters will get a landfall that I partially pay for
b- Those who make $25,000 per year get a ten year bonus
c- Let’s face it, even if someone would sign an agreement to pay off (or down) their mortgages, there will be plenty of people that would get around this system.
d- What’s the difference between doing it Chuck’s way or the government’s way….It’s still my money. Why would I want either one?
If people in general knew better how to spend this (not theirs) money how did we get into this situation in the first place? Greed……..period. Getting a 10 year bonus using my money will increase the greed even more. We would be back to where we are now and most likely much, much, much worse.
I have enough trouble paying taxes (which I pay and willingly providing we can still vote), why would I want to take on the additional burden of paying for others people’s mistakes and greed?
Posted by: Floyd | November 15, 2008, 3:24 am 3:24 am
Deregulation caused this mess. The heavily regulated post-1929 stock market was fairly consistent until the Republicans decided that the “market” could regulate itself. Ronald Reagan gave us the S&L deregulation disaster that cost 1 trillion dollars (1980′s money), the 1987 stock market crash, the GOP run Congress from 1994-2007 gave us a housing bubble, insanely low interest rates when they should have been high, multiple double dip recessions and now the big crash of 2006 (yes it started in 2006, long before Democrats took power on Janary 4, 2007). You think the GOP would have learned the lessons of 1929 but the very same script is playing out, straight our of the Herbert Hoover playbook.
Posted by: Rick Cain | December 25, 2008, 11:24 pm 11:24 pm