It’s been too long since we’ve reposted one of old Doom friend Bill Maloni’s articles. In this piece Bill puts some forthright suggestions on the table. He certainly has some definite ideas as to how the new Administration should proceed in dealing with the present crisis.
Please welcome Fannie’s former chief lobbyist back to Doom Castle. I hardly ever agree with his policy prescriptions, but they’re always intriguing. (The version below has been edited; click on the title below to see the original.)
… Let’s discuss what the Obama Administration needs to do to fix this problem of banks slow-walking the process of rewriting billions in toxic mortgage loans.
First off, there are too many Administration “chefs” trying to cook this mortgage meal: Treasury, the Fed, FDIC, CoC, Fannie and Freddie, etc. etc. etc., all positioning themselves for "huzzahs" when the job is completed. But they are using different operating systems and rules and not coordinating with each other well at all.
Geithner would have done far better picking on the GSEs and paying them $500 or some similar amount for every bad loan successfully converted to a good one.
A motivated Fannie or Freddie could have produced 2 or 3 million mortgage refis by now.
Last week, the Obama Administration was hyperventilating and gnashing its teeth about the snail-paced effort by the mortgage industry to restructure underwater loans. Treasury published a bunch of names of the least successful lenders / mortgage restructurers, i.e. those that had most successfully avoided their responsibilities. But while that’s a positive step, it ignores a major part of the “pace” problem, and it is hardly enough. These guys have armadillo skins, while claiming they are sensitive.
But look at the banks. One reason why the mortgage investors and servicers are moving so slowly is that the government has supplied them with so much money that they think the Feds will give them even more just to do the necessary mortgage work they should have been doing all along. So if the individual institutions aren’t going to lead us out of the mortgage mess, that job should go to the Treasury.
Instead of just publishing the names of the miscreant big bank lenders, Secretary Geithner should fire as many major banks execs as it takes until the larger members of the industry get the message. Take away their status, cash, and perks and they can move quite quickly.
The banks don’t respect anything but brute regulatory force. Once displayed, you’ll see how soon they move to overcome the problems they claim are stopping them from doing the required mortgage restructuring.
Do it, Tim. Just do it and then step back and enjoy all of the rose petals and congressional praise aimed at you.
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is this the stupid entry of the month???
My neighbor got a “workout” last year: Don’t pay the bank at all! that’s right, he got twelve months of zero interest loan, no principle, just pay the tax and insurance (200 a month) on a home that would rent for 1500. Well, he is back in default again, after the year ended turns out he just doesn’t want to pay the mortgage. Zero down purchase, 2 years fee living! he is buying a cheap condo for cash, since he saved a ton.
another acquaintance got his 1900 a month mortgage reduced to 900 a month for five years. Ok, the house will rent for 1400 a month, so naturally, he isn’t going anywhere. Well, technically, he already went somewhere: Chicago. But hell, keep it rented, don’t fix much and pocket $5k a year, courtesy of the banks…
Anybody who says “we need to do more to stop foreclosures” can go F themselves for all I care; I know more scoundrels and cheat fighting to get a workout, or else a shortsale tossed to a cousin than I can count. [plenty with licenses in the business]
you want to ‘fix’ housing? quit screwing it up!quit baling out the worst of the scum who got us here: bad banks, bad Loan officers, bad agents, and bad owners.
azrob -
Bill is aligned more-or-less with Democratic Party principles, but to put it into perspective, here’s what they were hearing at the right-wing American Enterprise Institute way back in October 11, 2007 (I’m slowly working my way through the transcript for their Subprime II seminar).
John-
Roubini and Schiller also favor these bailout plans, but I’m just disappointed in them. Because Bernanke and the boys managed to kick the can down the road a bit, they are being hailed as genuises.
I can’t remember the gentleman’s name, but I watched an interview with the most interesting man on T.V. some years back. He had been named Black Entrepreneur of the Year.
He said that government should tax the things it wanted to discourage and subsidize the things we wanted to encourage. He pointed out that we taxed income and subsidized welfare and said this was a mistake.
He said that it made more sense to invest money in making people be producers- to invest in education and business.
The interviewer asked where this money would come and he said that we could either spend the money on education and business or we could spend the money on welfare and prisons.
I can’t help but think of his comments now. A helicopter bailout is subsidizing welfare. Giving people money to buy foreign cars and spend money at Walmart on imported goods will not solve our problem.
We need to find a way to make America competitive again. We need to get people back to work. This of course could not happen without a loss of jobs in China, and I believe the administration lives in fear that moves like this will tick off the Chinese and they will stop lending us money.
I think that’s going to happen anyway, so we might as well come to grips with a harsh reality now rather than waiting and making things worse.
Igor is irate and so am I