A voice of sanity about this "bailout" mess - Robert Reich

[MH1]

If you, like me, are completely tired of the current disaster capitalism panic and only dreading what Paulson et al will cook up to let their cronies off the hook while further looting the Treasury and shafting the rest of us, may I recommend reading Robert Reich's blog?

http://robertreich.blogspot.com /

Of course, what he recommends...

Whether you call it a reorganization under bankruptcy or just a hellova fire sale, the process should resemble chapter 11 under bankruptcy. Any big financial institution that wants to clear its books can opt in. But the price for opting in is this: Investors in these institutions lose the value of their equity. Executives lose the value of their options, and their pay (and the pay of their directors) is sharply limited. All the money from the fire sale goes to making creditors as whole as possible.

Meanwhile, policymakers work on a new set of regulations to ensure transparency on Wall Street -- governing disclosures, minimum capital requirements, avoidance of conflicts of interest, and better ensurance against stock manipulation -- so that, once the bad debts are off the books, the new numbers can be trusted.

... is far too sensible and fair to actually be implemented by the crooks and their cronies in Washington. But it's nice to know there's still some sanity in at least one economist's head.

[opihimoimoi]

1. Get that man a podium...get him on board, get him a position...

[Wickerman]

2. Perhaps it would've been cheaper to have paid up everyone's

mortgages who were short, then refi'ed them into sane mortgages rather than to let the fatcats who made the bad decisions on the executive level off without loss of pay, bonuses and bennies.

[MH1]

3. But then you "reward" poor bums for their mistakes

instead of wealthy bums who hold MBAs, for their massive greed-driven mistakes. Can't have that!

[snappyturtle]

4. Exactly. And, why can't they, the powers that be, still do that? n/t

[PSPS]

7. Impossible

Most of these toxic mortgages are the result of "liar's loans." These no-doc alt-a mortgages were what allowed someone making $25K/year to get a mortgage on a $750K house. There's no way they could ever afford any mortgage, "sane" or otherwise. I certainly don't want my tax dollars buying the liar's house for him.

[Wickerman]

9. It's a double-edged sword, isn't it?

Your taxes are now being used for folks who either underwrote what they knew were bad mortgages, or, invested in what they knew were shady business.

I will say that many of the "liar's loans" as you call them were nothing of the sort. There are tons or examples of folks who could afford a trad mortgage allowing themselves to be duped into balloon mortgages and worse. We are rewarding now, in effect, out and out criminal activity and greed.

Me? I'd rather support the little guy who made a mistake than reward the wall street heavy hitters who knowingly duped the public and govt and will now know they can get by with it.

[PSPS]

13. Sorry, that's simply not true

These alt-a mortgages have started being recast and will continue through 2012. The large majority of them are resulting in foreclosure. Why? Because the borrower can't qualify for a traditional mortgage. Now they have to actually prove their income, and they can't afford the payments. Add to that the fact that, with housing prices drifting back down to reality, virtually all of these loans are for more than the current value of the property leaving the borrower "upside down" anyway.

This is not a case of the "little guy" who "made a mistake." These loans were acquired specifically because the borrower wanted to buy something they couldn't afford.

[Wickerman]

29. that's a little one-sided and simplistic, I think

True, some took advantage of a flawed system to get the loan they weren't qualified for. However, the industry itself willfully gave those loans when they know full well what marks a good credit risk. If they didn't in this day and age then they were too stupid to be in this business of loaning money.

To cast this as all the "little" guy's fault is incredibly mean-spirited. As far as the recasting that is taking place, a lot of it is too little too late. The industry wanted to make money, no matter what. The borrowers wanted a slice of the American Dream and, yes, many of them didn't have the means to get the loans they got. Lenders found a way to give them the loan anyway and now of course they won't qualify under trad rules.

[jazzjunkysue]

31. a year ago, countrywid e didn't ask me to verify my employment or salary

Now, because I'm responsible, my income is real and I can afford my fixed rate mortgage. HTey offered me 100K above what I borrowed and I turned them down.

People who were stupid enough to do this deserve to lose their homes.

People who used these homes as an investment were cheated. (Buying stock in a mortgage company).


People who used these proterties as collateral for other loans are criminals and should be jailed.

I did nothing wrong and should not have to support everyone else who did.

[Wickerman]

32. But, my point is, you are supporting them. We are all supporting Countrywide's

extremely poor business model. That business short-sighted business model was also held all the way through on Wall Street.

Yeah, a lot of private individuals took out loans they can't pay; but the industry, as a whole, went apeshit. Now, you and I are paying for the industry's mistakes. Kinda pisses me off.

For what it's worth we took out a new loan last year. We were offered twice what wanted. We said no, of course, and bought a house within our means. No personal axe to grind, just hate to see big bidness, as a systemic practice, fleecing our country once again.

[jazzjunkysue]

37. I re-financed with Wachovia at a great rate, and for 10 less years.

And they did everything right. They don't sell subprime mortgages.

[Wickerman]

38. I don't know the percentage of subprime action Wachovia covered

but they wrote down $1.1 billion and had, as late as a year ago, another $2.7 billion in remaining exposure:

http://www.bizjournals.com/atlanta/stories/2007/11/05/d...

Wachovia Corp.'s chief risk officer said Friday morning that while the bank can learn some lessons from its subprime-related write-downs, its remaining exposure is "fairly modest."

In a securities filing, Wachovia disclosed that it would take an additional $1.1 billion write-down related to its portfolio of subprime-mortgage related collateralized debt obligations, which fell in value during the month of October.

The bank said its remaining subprime exposure totals $2.7 billion.

[jazzjunkysue]

39. I read they bought another bank that had sub prime loans.

In my application, one of the forms said they didn't offer them. They did check my salary and employment.

[magellan]

36. And the lender didn't have a clue about the risk?

Right.

[Miss Chybil]

41. Yes, they did. That's why they charge a higher rate for no income qualifying

loans and they make more money on the backside when they bundle those higher rate loans into packages and sell them on Wall Street. And as long as there were people to buy them, i.e. investors looking for a bigger return and willing to take a higher risk (gamble), lenders were going to be there to sell them.

What's messed up is, all these people from the loan officer to the brokerage houses on Wall Street have already made a bundle of money just in the originating, packaging and servicing of these loans. Now that a bunch of them have gone south, we all have to cover their bets. It's not right. It's really not right.

[magellan]

42. Precisely my point

I don't understand nor do I have patience for anyone who only wants to blame the borrower in this mess. Certainly there was a lot of finger-crossing going on on the part of the low income families who bought into the dream. But they weren't stopped by the lenders; on the contrary, they were coaxed and in some cases their information was manipulated without their knowledge to secure the loan.

And then those sleazy lenders turned around and packaged these risky mortgages up and sold them on, KNOWING there would be many defaults. Not their problem!

And even more stunningly, big financial institutions, whose job it is to understand risk, bought them up! I would imagine they often didn't care what they were getting, they were just looking for profit.

Blame to go around, but as always it's only the little people who are being shafted while the major criminals are being handed rewards. And Mr PSPS upthread is happily piling on. Fuck that.

[nashville_brook]

22. actually, there'd be a very simple solution to that: require proof of ability to pay AND homestead

b/c MOST of those liars loans were marketed to investor/flippers. it's up to us to create the rule to the fix and they won't support irrational original purchases.

[AdHocSolver]

35. The people making the loan have the responsibilty of determining whether the loan can be repaid.

The money loaned by the banks is not their personal money. It is the money belonging to their depositors and shareholders. The banks and mortgage companies have a fiduciary responsibility to make a good faith effort to determine if the party getting the loan has the means to pay it back.

I have no doubt, that many of the people getting the loans were pressured to get in over their heads by real estate agents and loan officers.

I worked for a bank and when new employees attended orientation class, a large part of it was exhorting us to promote bank products to relatives and friends.

When we bought our house several years ago, I approached the "major" bank I had been doing business with. I was told that I shouldn't even apply because I would be turned down.

I was very surprised since I have always had an A-plus credit rating, I had enough money for a decent down payment, and I had a decent paying job. We wound up at a small bank which was more than happy to give us a loan.

Years later, in fact, just now, I realized why this big bank would have turned me down. The loan I was looking for was for "too little" money. I was looking for small change. The paper work alone would eat into their profit.

People who would have a problem getting a traditional mortgage would be susceptible to being pressured to ask for more money than they could afford in order to be able to buy any house.

It is the responsibility of the bank loan officer to determine whether the borrower can pay the money back. That is ostensibly what they are paid to do. They are not paid to give out loans like candy.

[lonestarnot]

14. No one crunched those numbers.

[Miss Chybil]

40. You're thinking of a different country.

One that puts its people's interests above that of the corporation. Do they still have such a place? I don't know anymore. I really don't know. When one company can bring down the entire world economny it makes you wonder...

[azul]

5. Can't blame you, but tired and dreading sound a little negative.

The outlook is not good for the continuing plundering and looting of the US, but this crisis is also an opportunity to expose these pirates and educate citizens on the correct direction the economy should be taking.

The good fight is over these special interests entrenched in the government and their control of the media's messages. Bad money talking stuff and nonsense.

Get the word out and kick your representatives around or out until this thing gets back on track.

[coalition_unwilling]

8. Please stop insulting pirates -- these

are parasites (and no insult to "productive" parasites intended either

[InkAddict]

6. Bring manufacturing and IT jobs back to America!

and rein in healthcare costs while making sure ALL have coverage for the everyday illnesses correctable w/medication, early diagnosis, and PREVENTION. Those not willing to make the attempt to stay well and able-bodied, screw 'em. (I'm talking about those that won't lose weight, make dietary changes, wear their glasses and ear aids, stop smoking/drinking, etc...

I'd be willing to bet that at least 30% of the housing mess happened due to these two factors. Another 50% due to the fast-talking mortgage salesmen and exotic loan set-ups.

That leaves only the 20% that made bad life decisions, like drinking and drugging away the mortgage money, not honoring their vows, beating their spouses, and spending on credit cards like wild Wal-Mart was gonna close tomorrow.

Financial punishments need to be erased for that first 30%,regardless if they are still homeowners or have been wiped out. The 7 and 10 year credit shunning should immediately cease for those that have found jobs again in their field, are actively training for a new job, or have been seriously disabled. Many who lost jobs in this group have pre-retirement last 10 working years status, and they need less punishing to recover the losses that "criminal" free marketeers have foisted on American workers.

Circumstances of the 50% need to be examined and POSSIBLY re-written.

No help should be given to the remainder; they need life lessons in personal responsibility.

[elehhhhna]

10. Hey! Let's just ethnic cleanse all the poor & stupid! Cheap and efficient!

Much of what you say is valid, but oy! That's a high horse you're riding.

[Tansy_Gold]

11. Oh, yeah, let's just kill the fat people, the smokers, the blind. . . .

What would you propose? We have mandatory weekly weigh-ins and anyone tipping the scale over their limit be shipped off to a fat-prison? Who sets the limits?

What would you propose to do to or for the spouse who is a victim of their partner's "sins"? My late husband had an addiction to pornography that sucked our bank account almost dry. I confronted him as to where the money was going and he never had an explanation. This went on for YEARS and I knew nothing about it. Should I also have been "punished" for his profligacy? Well, I was. I struggled to cover the bills and find the money, but he died rather suddenly and left me far less financially comfortable than I had a right to expect.

And I offer that not as a plea for sympathy but as a first-hand illustration of how stupid such blanket morality pronouncements can be.

If anything should be done regarding mortgages, let that come a little later. Let's first take a deep economic breath and then start figuring out WHAT WENT WRONG, WHO DID IT, WHERE'S THE REAL MONEY and HOW DO WE GET IT BACK.

That, of course, requires some thought and time and effort. And most people don't want to do that.




from


Tansy Gold

[InkAddict]

23. To address some of your concerns:

a) Weight - show your doctor proof that you are simply ATTEMPTING to follow his recommendations on diet and exercise; otherwise, why should he/she continue to treat diseases brought on by the person's lack of personal responsibility - see below.

b) Smoking - First, and unfortunately, it's still a legal activity; Second, I'm a smoker and intellectually realize it's an addiction but emotionally and chronilogically being on the down-side of my lifespan and having been financially infanticided over the last administration, otherwise, I've little hope of reclaiming adult financial status though I know quitting would help reclaim some cash. I've tried to quit three time, Nicoderm, will power, and even got hypnotized once; all unsuccessful. My brain thinks like a grown-up about quitting, saving, keeping things tidy (a yard), and working (a car); however, it seems that everything I could do won't reclaim what the crooks have undone at this stage of the game. I've also come to the conclusion that it would probably be more cost effective to just shoot the stupid along w/the victims like us and bury the bodies. But how would that help if the status quo non-regulation and accountability continues, i.e, first they came for the...but and why should I want to take a little pill so the larger amorality would be less noticeable while the distractions would clearly be able to "cheer up" my mood. See below.

c) I well understand your bitterness re: a spouse's sins. It's a constant conflict determining who has the most rocks in one's head - the sinner or me, the deceived and enabler/bailer-outer who has slept with the enemy for far too long already because it was "for better or for worse; in sickness and in health." Unfortunately, I can't entirely condemn the victim of the Admin's crimes against workers, both of us, nor say with determination that it would have been better to not provide assistance to educate my kids who seem ungrateful though they now provide the roof over our heads w/attitude, and as the spouse of an only child, say with certainty that the feable in-law should have/would have perished more quickly and at less cost to his next-of-kin, my spouse, if we had made the choice not be his caregivers. That would have been very Repug, no? Social safety nets that actually work those that choose to walk would go a long way in my having the confidence to quit enabling. Alas, not in this economy nor without additional personal debt.

[Yuugal]

30. I think I've paid enough already

Mostly to people with mindsets like yourself. Of course, once your kind gets in a jam, then they run to the govt for their corporater welfare, or you get a fancy lawyer because you being a drunk is a once in a life mistake but my mistakes warrant death. I'm all to familiar with the holier than thou crowd, even on DU.

[InkAddict]

34. Huh?

Are you responding to me? Where'd you get the idea that doing the right thing is always so easy and clear-cut or that the torment of the conflict to do right only for oneself or for others somehow makes one somehow holier-than-thou. Just what are your mistakes for which you seem to feel already condemned - I'm dying to be empathetic to your case. You see, empathy is all I can offer now. Did I even suggest that you "pay up in additional suffering units." Perhaps you've just misplaced your troll-like response.

[Yuugal]

45. Did I even suggest that you "pay up in additional suffering units."

yes you did. If I don't follow my doctors advice? Listen you smug piece of shit, you try being disabled for 13 years and living on 30% of your original pay and you see if you dont gain any weight you judgmental fuckhead.

"a) Weight - show your doctor proof that you are simply ATTEMPTING to follow his recommendations on diet and exercise; otherwise, why should he/she continue to treat diseases brought on by the person's lack of personal responsibility - see below."

[lonestarnot]

15. And kill all pets too!

Taliban much?

[stillcool]

16. Real life lessons and personal responsibility...

let the country crash and burn. That will be a real life lesson, and we will all have to take personal responsibility. The silver spoon and the orphan living side by side, next to the veterans sleeping under bridges. Perhaps I should suffer a little bit more because I shopped at Walmart 2 years ago while others shopped at Bergdorfs. Maybe get a smaller piece of the cardboard box.

[tomp]

17. when you say "rein in health care costs"....

...i hope you don't mean restricting nurses' salaries and benefits, which is where the fight usually begins.

people have to understand good health care costs money. if you can find places to reduce costs you will still have to invest more in retaining nurses and recruiting and training more nurses before you will have solved the overall health care problem. good luck!

[InkAddict]

28. Absolutely not...

and I wish I were young enough to take on a nursing career...though I'm rather the impatient sort, so probably wouldn't be very empathetic with patients who can't seem to follow medical advice. However, my doctor visits jumped from $65 to $115 when they hired nurse-practioners just to refill routine scripts to save the doctors' precious time, which is now even more precious to be sure.

As a medical transcriptionist, I am well aware of the importance of good nursing care. I know, because I paid for it with my home - for an elderly spouse's relative on his way out. Yup, dumb, but I wasn't the kin w/the DMPA.

While my own career opportunities and those of my IT-experieced spouse were sent overseas for big profit for TPTB; now they're bringing IN foreign nurses because no one can afford quality teaching programs (gotta support the football teams, you know) to train the number of new nurses we need.

I was once trained and certified as a coder, touted to be an in-demand occupation, but soon realized the evil that was being perpetrated through third-party administrators playing God w/codes and opted for something more invested in actual patient care. I could have continued an education into public health, perhaps, but the programs supporting Health Information Management all pulled out of my state and have only recently begun again. Alas, one needs to be certified at the lower level and I'd have to start all over again.

While my office visits have gone up, my pay per line has decreased. My employer once paid my health insurance premiums; my spouse's were contributory; now we have no insurance and are not eligible for assistance either. IT contractors make big money for 3 out of 12 months. The other nine are spent on unemployment looking for work. Hah, the best way to get healthcare now is being hit by an insured driver. Then, what, debtors prison while we wait on the law suit and payments to come in? Already bankrupted and foreclosed.

[tomp]

43. sounds like some tough times

good luck and stay healthy.

[rucognizant]

19. Oh I don't know

Smokers die off fast...compared to the cost of treating say a diabetic for years and years.................
Do you hold the consumer responsible for the fact that Krafts,coke,campbells, unilever...................................
put HFCS in all their food causing the diabetes...........
how about those who use up a lot of medical treatments on the amputations needed after, getting lost on a mountain top in a snow storm.....everybody knows climbing and hiking are GooD for your health?\
or the results long term use of Tylenol or aspirin
We'll have to reincarnate SOlomon!

[InkAddict]

24. I'm well acquainted with that argument...

In fact, now I'm sort of counting on it. I'm truly free now to be as imprudent as I wish because someone else will HAVE to pay for it.

Also, I was the involuntary caregiver for an elderly parent w/ESRD, a fiercely independent kinda guy who wouldn't follow medical instructions about dietary restrictions nor ask for help with daily activities. It was frustrating trying to do one's best for that person, read his mind about what he'd like to eat, wear, when he needed to stop, go, or rest. What we did know was when he needed to go for dialysis, when he needed to take his medications, and that he did have social needs and a need to be useful to, at least, others. He was useful alright - he helped break our piggybank because he outlived his resources, not that he had much saved up, invested, or was insured for anyway. Now, as a pre-retirement age person, after being financially infanticized, why work at being healthy, wealthy, and wise? Who will benefit except drug companies, the school loan lender, and eventually the cremation service.

[Wilber_Stool]

12. Freeze the

assets of anyone that ops in. I want these guys living in trailer parks until they pay back everything we give them.

[stubtoe]

18. What you said, Wilber. K&R for Robert Reich

n/t

[Hawkowl]

20. Phone your Senator and Congressman

Demand what Reich is advocating. If there is going to be a bailout, it must be along a bankruptcy. I would further advocate that upper level management's personal assests should be seized exactly as the govt. does for drug dealers.

Taxpayer bailout? Sure. But. They. Must. PAY!

[kentuck]

21. Alas! A Democrat with some common sense...

Don't buy into this panic bullshit!

[coffeenap]

25. Just an aside: a friend of mine went to grad school with him and

says he is the smartest guy he knows (and this guy himself is brilliant) and the ONLY reason he will not be president of the US is because of his size. (Stupid genetics!)

[TxBlue]

26. Voice of Reason - so relieved to see Reich again on tv

I thought, oh, good, maybe we can have someone that can really help the economy back in power.

[susu369]

27. I'd like to see the executives

of say, Lehman Brothers, be subjected to what ordinary citizens have to go through:

http://bankruptcy.findlaw.com/new-bankruptcy-law/new-ba...

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, a major reform of the bankruptcy system, was passed by Congress and signed into law by President Bush in April 2005. Changes instituted by this new law took effect on October 17, 2005. Below are some of the key changes that came about as a result of this new bankruptcy law.

Mandatory Credit Counseling

As of October 17, 2005, before filing for bankruptcy most applicants must now undergo credit counseling in a government-approved program. You can get more information on the procedure for pre-filing credit counseling (and a list of approved credit counseling agencies) from the U.S. Trustee Program (a component of the Department of Justice responsible for overseeing the administration of bankruptcy cases).

-snip-

Mandatory Financial Management Education

After the conclusion of bankruptcy proceedings, but before any debt can be discharged, bankruptcy debtors must participate in a government-approved financial management education program. You can get more information on the procedure for financial management education (and a list of approved debtor education providers) from the U.S. Trustee Program (a component of the Department of Justice responsible for overseeing the administration of bankruptcy cases).

[susu369]

47. Hey, someone thinks as I do

http://www.openleft.com/showDiary.do?diaryId=8374

This email is from a lawmaker and it should give you a flavor for what's going on right now in Congress.

Paulsen and congressional Republicans, or the few that will actually vote for this (most will be unwilling to take responsibility for the consequences of their policies), have said that there can't be any "add ons," or addition provisions. Fuck that. I don't really want to trigger a world wide depression (that's not hyperbole, that's a distinct possibility), but I'm not voting for a blank check for $700 billion for those mother fuckers.

=snip=

I also find myself drawn to provisions that would serve no useful purpose except to insult the industry, like requiring the CEOs, CFOs and the chair of the board of any entity that sells mortgage related securities to the Treasury Department to certify that they have completed an approved course in credit counseling. That is now required of consumers filing bankruptcy to make sure they feel properly humiliated for being head over heels in debt, although most lost control of their finances because of a serious illness in the family. That would just be petty and childish, and completely in character for me.

I'm open to other ideas, and I am looking for volunteers who want to hold the sons of bitches so I can beat the crap out of them.

Matt Stoller :: Yes, There Are Deeply Angry Democratic Members of Congress

==

They write better than I do, but we share the same idea.

[mrJJ]

33. We Are Getting Hosed

Pulson's BLANK CHECK

The man overseeing the bailout is the ex-CEO of Goldman Sachs, a Wall Street Company. He helped cause the crisis.
Paulson helped obtain the SEC exemption which allowed brokerages to increase leverage to 60:1 from 12:1.
The money is Paulson's to use for buying commercial and residential mortgages and mortgaged backed securities as he chooses. No one has any oversight over him, and he can pay any price he wants to, including face amount of the debt.
Courts cannot review his decisions, not can any regulators. He has to report to Congress once every six months.
He gets 700 Billion dollars to use as he sees fit, looking after the taxpayer is a "consideration" not a requirement.
Bet on that 700 Billion dollars being gone before January 20, 2009. Bet on Treasury asking for more.
That is $2,324 dollars per man, woman and child in America
There is no bailout for mortgage holders. Banks get bailed out, but not ordinary people.
Banks and brokerages made record profits these last eight years. Ordinary Americans barely broke even.
In 2007 Wall Street paid itself bonuses equal to the raises of 80 million Americans.
Banks bailed out by this plan need make no changes in how they do business.
Banks bailed out need not replace the management which drove them into insolvency.
Shareholders and bondholders of such banks do not lose a cent.
The securities which caused this crisis are still allowed.
Expect the 700 billion dollars to increase inflation, especially in oil.
Bush is asking you to trust his administration with 700 billion after spending 580 billion on the Iraq war. Do you trust him?

http://firedoglake.com/2008/09/20/paulsons-blank-check/...

[chimpymustgo]

44. "But there's no reason taxpayers need to be involved in this." That's the key to the kingdom.

[baldguy]

46. And who thinks the BUSH REGIME is going to tie any strings to this bailout?