Friday, February 10, 2012


It's remarkable, it really is.  Yesterday, The Leader put forward a program designed to address the housing crisis based on the theory that five large banks needed to be punished for malfeasance in the forclosure of homes on which mortgage holders were past due.  The Leader, surrounded by various Attornies General from the states and his own mob from Justice, announced that this settlement would go a long way in solving the housing crisis.  It will do no such thing.

Around the same time, 6000 miles away, the Greeks announced that tthey had reached political settlement between all governmental factions and had submitted an agreement to the EU and the Troika that would substantially ease the crisis facing the country.  No they hadn't.

At least the poor Greeks had a go at trying to do something that was impossible in an honest manner, but on this side of the pond the activity was a sham from the get-go; cheap political theater in an election year.

For an understanding of what this is all about one needs to remember a bit of history in the housing crisis.  A lot of people got screwed.  So much for history.  But it is important to recognize the different circumstances in the events that occured.

In some cases there was genuine fraud or at the very least highly questionable practices on the part of loan brokers and originators in pressuring people to contract for homes that they couldn't possible afford on the theory that they were buying a piece of the American dream or that they could make a lot of money by "flipping" their house in a very short period of time given that, "Prices were always going to go up."  Certain banks were not without fault either...ever heard of CountryWide and it's Chairman Mozillo?  As an aside, a lot of people made a lot of money by flipping, but there were a lot more who, when the music stopped looked around for a chair and found none.

The law of supply and demand is a pretty tough one to get around and in this period of euphoria a lot of homes were built.  The market crashed and prices dropped through the floor and low and behold it came to pass that there were a lot of homes under water; even today it is estimated that approximately 20% of ALL houses are worth less thatn the purchase price.

Now the way to remedy this situation is to--horribly for the families involved--foreclose on homes where the mortgage is past due and resell the homes at the lower market rate.  There were a hell of a lot of homes in which foreclosure was deemed necessary and mortgage holders rushed to be the first to get out.  It was a situation that no one had ever experienced.

One also had to remember that many of these mortgages were not held by the originator be it a broker or a bank.  They had been packaged and were being "serviced" as is the term by third parties, often a bank.  And so the race was on and in the rush enabling documents. need to bring an action in foreclosure were often "robo signed..."signed by machine or by individuals specifically hired to create signatures of the authorized party.  It was stupid, sloppy and probably illegal, but it would appear that there was no instance of any forclosure being made that was not warrented as a result of these actions.  But it sure looked bad (and was) and of course when discovered all hell broke loose among the AGs in a number of states and law suits exploded halting all proceedings and leaving the status of many properties in limbo.  Such is the nature of the practice of law in the United States.  The banks were facing billions of dollars of law suits, criminal actions and years of litigation despite the fact that no one was really harmed by their malfeasance.   It was a legal hold up but one that received great public support from a fuming populace.

In the real world, what was going on was some home owners walked away from their property, some stopped paying and continued living in their homes, others, despite being "underwater" continued to amke mortgage payments, the goverment came up with a number of plans that did nothing and the banks twisted in the wind.   It is interesting to note that the most vocal attorney general throughout all of this was none other than Richard Cordray of Ohio, now the head of the Consumer Protection Bureau created under Dodd/Frank and responsible to no one except the Leader.  The ink was hardly dry on this very questionable recess appointment when up popped The Leader and his AG to announce the formation of a task force to investigate the banks from the standpoint of bringing criminal charges against them for their actions in creating and dealing with the financial and mortgage crisis.  Ouch!

The announcement received great press which is what the administration desired but anyone with half a brain realized that if the investigation went forward billions would be spent and the chance of getting convictions as to the banks' activities was very dicey unless stupidity was declared a crime.  Furthermore, it would take years and the only date The Leader cares about is November, 2012.  Nevertheless, the cost in time, money and manpower to the banks would be enormous and destructive;  the game was now in place for the greatest PR coup of all.  Monday we'll explore just how it went down, what it really means and what the future holds for the banking and financial system...not to mention the taxpayer scal in re Fanny, Freddie, and the NHA....

Oh yeah, if anyone cares, the Euros (Germany) rejected the Greeks' efforts claiming they didn't do enough.  Maybe Massimo was wrong.  It may not drag on a couple of more months; it may end over the weekend.   Stay tuned.

No comments:

Post a Comment