January 22, 2010
“They are turning this from a legitimate program to try to save people who have the ability to hang on their homes into one that says, forget the willingness and ability to pay, let’s just postpone foreclosures.”
∙ Treasury Weighs Fixes to Foreclosures Program [New York Times]
First Published: January 22, 2010 9:15 AM
Comments from "Plugged In" Readers
What a shame. The President is less about Hope and more about Hype. I wanted to like the guy, but he is definitely more of the same old politician, if not worse.
Let the foreclosures happen - the vast majority is due to the fact that people bought properties they couldn't afford. Don't delay the inevitable, and make the working man pay.
Posted by: SFRE at January 22, 2010 9:41 AM
It's a shame. Bad decisions should not be rewarded but this is what's going on. Obama is afraid to pull the band-aid all at once and all we have is this protracted painful thing where we can feel each and every hair pulled one by one. Ouch!
Obama's a Democrat. He thinks that by being flexible and open he'll get things to work his way. He is looking for consensus and cooperation from all parties, but banks are cashing in while not cooperating, just like Republicans didn't cooperate for his Health Care reform (well played on health care reform. They had Dems water down their project beyond recognition. Now the Dems lost precious time and they are finally screwed).
The same thing will happen for banking regulation or housing. Making a lot of wind and not accomplishing anything because they will always compromise. We need Democrats with guts.
Posted by: wow at January 22, 2010 10:13 AM
"The Treasury has resisted calls to push lenders to write off loan balances, concerned that such a course would either threaten the health of banks by forcing them to swallow billions of dollars in write-offs or cost taxpayers additional money." Japan when through this years ago...until the banks get real and show it on their balance sheets and work through it we will have the problem. Its the crazy aunt in the attic...we can't ignore the or hide it.
Posted by: Learn from Japan at January 22, 2010 10:17 AM
This is nonsensical. Foreclosures are a good thing for many reasons:
1) they get the current renter (realistically not an owner) out from under the burden of a crushing debt, but still takes a hit to their credit for being irresponsible;
2) a new owner gets to live in a house, which we think of as good national policy;
3) the bankster takes the hit, which is incredibly reasonable considering how irresponsible the bankster was;
4) there is new liquidity and pricing information in the housing market; and
5) even the realtors get a fee.
But most importantly, we won't have a "normal" housing market until the crap is worked out of the system. Foreclosures are a necessary part of this, and a moratorium on foreclosures only lengthens the period during which we will feel pain.
Posted by: JimBobJones at January 22, 2010 10:22 AM
"such a course would either threaten the health of banks by forcing them to swallow billions of dollars in write-offs or cost taxpayers additional money."
Possibly, but then maybe we would make some of the truly insolvent banksters file bankruptcy, like they should have a while ago, and the solvent ones would pay what they should be paying for rolling the dice for several years. This would be a good thing, because it would tend to discourage such behavior in the future, vs. encouraging it (and even rewarding it) by bailing out these gamblers.
Posted by: JimBobJones at January 22, 2010 10:35 AM
And in other deflation nation news:
The average monthly rent in the San Francisco-Oakland-Fremont metro area in the fourth quarter was $1,502, down from $1,627 a year ago, it said. The occupancy rate went from 95.4 percent in December 2008 to 94.5 percent last month.
Posted by: EBGuy at January 22, 2010 11:11 AM
This is nonsensical.
I agree, but you must first see from where this derives.
Our leaders believe or at least publicly state that the banks are illiquid (wrong) and that they have temporary impairments to their portfolios (wrong)
They also believe that Main street can only prosper if we have a functioning Wall Street. And they have definied "functioning Wall Street" as the way things were in 2005.
Once you set up these limitations, then you see why they do what they do.
Everything must be done to save the banks. The banks are not illiquid, most of the big ones are insolvent. They only can pretend to be illiquid due to accounting gimmicks.
Foreclosures accelorate the realization of losses, and the banks DO NOT HAVE THE ABILITY to absorb those losses.
Thus, we must extend this out for a long time, and pretend the securities have value (many do not) and allow the banks to earn their way out of this. It will likely take decades.
it would likely have been better to nationalize the banks (or "pre-privatize" if you like that better) and write down the losses in the first place. The losses have already happened, now it's all just how we account for those losses.
however, that path would have shown how sick our country's economy was, and would have thrown us into instant super-recession or depression. Nobody wants that on their record.
Thus, it's better to talk about "green shoots" and "recovery" and pretend it's all better. And then hope that the banks can earn their way out of this in time before the losses roll in.
Unfortunately, the foreclosures keep coming. thus,
-create programs to keep people in "their" homes
-change accounting rules so that the banks can mark to fantasy.
-give unprecedented support to the housing market.
it is the only way. I don't think people understand how much losses the banks really have, and in how bad of shape they are. They are called "zombie banks" because that is what they are. They are DEAD, but appear to live.
this is why they do not lend. Because they don't have the ability. (and because they need to pay their "talent" big bonuses).
people ask me "what's the right answer"?
there is no right answer. There never was. The answer was to never let the credit bubble get so big. Once that happened there are no good options.
that's why I like the cancer analogy. it's too late once you have the cancer. Now you gotta just suck it up and either die or try using toxic chemicals (chemo) and radiation to deal with it. and you hope the chemo/radiation can kill the cancer before it kills you.
keep throwing out programs and hope and pray. pretend and extend.
they are hoping to blow a bubble to goose GDP to help the banks earn their way out of this. that's what they did when the tech bubble burst. (they blew a RE/credit bubble). the problem is that the bubbles are getting bigger each time, and the damage greater as well.
Posted by: ex SF-er at January 22, 2010 11:22 AM
The scenario where our government just lets the mass-wave (tsunami?) of foreclosures hit is just not realistic. And forcing lenders to take write downs on equity is not going to come easy, or not without bearing the same implications of a short-sale tax liability, and a potential pay-back on any sale/gain. The biggest issue is for those that simply cannot pay any morgatge due to unemployment. Those are going to be virtually impossible to stem short of forgiving 12 months of payments (i.e., interest) until the owner gets a job. But, for anyone that can afford anything close to reasonable on their current home, it absolutely does make sense to provide assistance and to delay the crisis. Anyone suggesting otherwise is really just not looking at the big picture. At issue, is whether or not the government can delay these housing issues/problems long enough for other macro-economic conditions to offset the situation. I'm skeptical, but that doesn't mean that we should let the problem run its course now, because running its course now would have massive social / economic ramifications.
Posted by: eddy at January 22, 2010 11:49 AM
The old Soviet Union operated under the theory of "no one makes a profit", we see how that turned out. In the states, "no one fails". No child left behind, Special Olympics....we're all winners. A nation of heroes. We'll bail out the typewriter industry next right after we fix GM.
Real estate has been the great american flyer for the past 60 years. Some people turned a nestegg into a substantial fortune. More importantly, local governments saw an opportunity to raise taxes based on increasing property values.
Wall St paid out $120 billion in bonuses this past year.....TARP money. What should've been a bailout has turned into a feeding trough for the same people who caused the problems.
At some point, the loses will have to be taken. I don't see this boding well for local taxing entities.
Posted by: jon at January 22, 2010 12:33 PM