Fixing this could get interesting if anyone stands up for the mortgagees. No one thinks that real estate values are going back to even 2005 levels any time soon. There is considerable sentiment that mortgages need to be written down to something closer to the true market value of the houses at present, if only to reduce the incentive for "jingle mail." A price for so doing could be extracted. This could take the form of Chris Cook's solution or others that have been proposed.
Dealing with the slice and dice Mortgage Backed Securities situation with different parties holding different "tranches" of these MBSs is a different matter. Clearly the high risk, high return bottom tranches should be wiped out. But the decline has put at risk even the top tranches. And when four different classes of investors all have a stake in the returns from a pool of mortgages the question arrises, "Who has the right to sue?" And when no one can come up with the original document, when the mortgage broker who arranged the loan is long out of business.... As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
Are you saying then that the originating bank doesn't even have a the note underlying the mortgage?
That's insane. I understand that there is slicing and dicing, but I'd think that the originating bank actually has the note. And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
I'm not going to vouch for the reliability of any of this, but he seemed a sensible sort. According to him the banks don't want people to hand their keys because it costs them a fortune to sort out the paperwork.
Legally, if there's any charge on a property - which there is in the case of slicing and dicing - the bank does not own it. At best it owns a share in it.
And it's actually possible for a bank to be in the equivalent of negative equity. If a foreclosed property sells for much less than the loan book mortgage cost, the bank is still on the hook for for the difference in somewhat the same way that the original buyer was.
So if the original buyer moves out of the country and can't be chased for the debt, the bank is left holding - something - of indeterminate value and ownership, which it can't necessarily sell.
He also said he knew of at least one case where someone handed their keys in, and a few rounds of financial pinball later a holding company contacted the owner and said he could have the keys back for a nominal sum.
Effectively the holding company either needed a quick cash sum or didn't think it was worth trying to sell in a dead market - or possibly it was hoping that the former owner wasn't going to ask any hard questions, and his house is still co-owned by most of the financial industry.
naked capitalism: William Black: "There Are No Real Stress Tests Going On"
My nightmare scenario which I fear is often true is that A) because the biggest originators of nonprime loans were mortgage bankers, B) because every large mortgage banker that specialized in nonprime loans went bankrups, C) because many of them went into Chapter 7 liquidations and even those that went into Chapter 11's had little incentive to hang on to files on mortgage loans they had sold to other entities -- the loan files on many nonprime loans may no longer exist. (My fervent prayer is that the loan servicers have tapes with copies of the underlying loan files, but I fear that this prayer will not be answered.) Under this nightmare scenario it will be extraordinarily hard to determine loan quality and losses and very hard to foreclose against borrowers that can afford attorneys (admittedly a minority) and that claim fraud in the inducement.
Under this nightmare scenario it will be extraordinarily hard to determine loan quality and losses and very hard to foreclose against borrowers that can afford attorneys (admittedly a minority) and that claim fraud in the inducement.
and how is that a nightmare for the majority of people involved? Any idiot can face a crisis - it's day to day living that wears you out.
Nationalization is the answer, but there's an idiot streak that runs through the US when it comes to the government being involved in the economy.
I just had someone challenge me today to give one case where nationalization solved anything, and I look em in the eye, and say, Sweden 1995.
And they get flustered, and argue that the government made things worse there.
These days, I feel like we are repeating all the mistakes of the Great Depression. i.e. a belief in self regulating markets was popped by reality, and now the lingering of free market ideology has created the equivalent of the Bavarian redoubt who are damned if they won't trash the whole economy before pragmatic solutions like nationalization get in the way of the way they think that the world works.
And so the crisis grows deeper. And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
Not good, not good at at all. And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
Don't worry: This is a problem only for the investment banks who were stupid enough to go in at the second tier of this ponzi scheme.
This won't affect the taxpayers at all, unless they are stupid enough to try to keep the banks afloat by bailing out their bad paper . . .
Doh. The Fates are kind.
Now maybe the answer is to nationalize -- or alternatively to simply let them fail -- and wipe them out anyway. (I think that's what I would do.) But it seems there's a major problem sitting there that isn't being talked about that might help to explain why the government is so hesitant to make a serious move.
Just something to consider. Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
Social Security was invented during the Great Depression for a reason. Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
It's not so clean when you add the political consideration. Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
There is nothing wrong with letting private pension plans collapse that higher public pensions cannot solve.
Maybe Americans need to have their collective 401(k) investment cleaned so they realise that the "state pension insolvency crisis" was a bogus argument...
Obama is now playing Hamlet. I fear he will become Tony Blair and that the Democrats will become NuLab. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
For that matter, last time I checked, sovereigns presiding over even remotely functioning economies cannot be insolvent, full stop. And if the economy isn't even remotely functioning, what's the chance that private pension plans are solvent anyway?
Now, here's an idea: What about y'all confiscate all the 401(k)s and all future revenues going into them, and set up an equitable public pension scheme instead? If that's insolvent, then sure as Hell the 401(k)s are insolvent. And if it's not, then what's all the squealing about public pension plan insolvency about?
What is the public pension insolvency crisis?
I fear that too many of the Democrats are unwilling to take it on because they need contributions from the same people who are financing and benefiting from the work of these "think tanks." That is why campaign finance reform needs to be rammed through before they start on the really difficult stuff. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
I fear he will become Tony Blair and that the Democrats will become NuLab.
I (unfortunately) refer you to many similar comments made by UK posters before the election. Any idiot can face a crisis - it's day to day living that wears you out.
The note has been sold half a billion times, and, in the process, a lot of these notes have been lost or even destroyed.
I understand that there is slicing and dicing, but I'd think that the originating bank actually has the note.
But the actual banks -- as Krugman calls them, the "big marble buildings that we think of when we say 'bank'" -- had very little to do with giving out mortgages. They were buying and selling mortgage-backed securities, but I believe the money for the actual mortgages, especially the high-risk ones, was coming from investors, brokers and other elements of the shadow banking system.
After all, who needs real banks when you have Angelo Mozilo?
(facepalm) Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
