New Orleans

Reading past the marionette string pullers among big business donors and the professional Republican party operators shrewd and skilled enough to take advantage of the alienation, racism, and desperation at the base, the same “elite panic” in the wake of the Obama election and its administration over the last two years seems to be the driving force.  The fears triggered by race, “otherness,” and the sense of having been displaced and losing control setting off critical elites in a panic at what might come next and how it has to be stopped.  The Tea Party is one of the sharp points of a stick being wielded and thrashed about by the elites.

A recent story about Obama’s lost support on Wall Street, even after essentially betting and mortgaging the whole national farm on the bankers and brokers who hover there is more than ample evidence of my case in point.  All of this is bitter irony given how regularly Obama and his minions including the Wall Street apologists like Treasury’s Geithner and the White House’s Larry Summers, have done pretty much their bidding while millions have traveled the crowded road in the hand basket to hell.

I had a moment’s surge of hope reading a blog by a Chicago Sun political columnist who  parsed an Obama quote yesterday that might be construed as indicating he was ready to throw those fellas out finally, but that was, as usual, quickly dashed by among other things the administration’s recoiling from a Times story that had indicated that finally they might be ready to strap it on and go after the right wing coup that has manipulated the Tea Party so that the Republicans have been taken over by more extremists than is even usual for them.  Eventually, they are going to have to realize that this is a real fight and the elite panic that is driving this fight will not be assuaged by compromise but only by total victory.

We have to oppose that fiercely.

New Orleans

Make no mistake though.  This program is basically another $15 billion bank and Wall Street investor bailout.  The best that one could pretend about this program is that with 6+ million homes facing foreclosure and almost double that many (11.3 million!) underwater that it might prevent the “500,000 to 1, 500,000” the government is spinning who might be miraculously helped by the program avoid foreclosure or maintain their existing modification, if lightening had struck them and they had been able to win one.

I say miraculously, because there is no indication that this program will work any better than the other loan modification disasters the President has had to bless, except that since this is once again a Geithner and Treasury bailout, maybe the banks will actually do some mods in order to actually get the cash.  Only banks and investors are eligible for this bailout program, and once again, repeating the mistake they have made in every other loan modification effort, participation is 100% voluntary.

More than half of the country’s existing mortgages are secured by Fannie Mae and Freddie Mac, which is essentially to say the government, and these new mods will be on Federal Home Administration (FHA) standards, which is pretty much required of all loans now that subprime is dead, but that also means that few, if any, of these loans will include the millions that were Alt A or subprime originally.

A Wall Street Journal piece was even skeptical despite the Wall Street bailout for their buddies:

“But that could be hard to do because mortgage servicers, which handle loan payments and decide which loans should be modified, are overwhelmed. And some borrowers might be discouraged from taking part because receiving a principal reduction will show up on their credit score.”

If anyone needs more evidence of this disaster due to the incompetence of mortgage servicers and the banks, look at the report from Phoenix done by Advocates & Actions here (website under construction).

Luckily for Obama and Geithner the Republicans and Tea Party folks are either clueless about housing financing and the mortgage crises or are so conflicted by courting Wall Street and the donations that they are not raising the issue and making hay of this being another bailout and TARP disaster.  Evidentially people are going to catch on as the pickups and U-Haul trailers continue to relocate working families from their homes into apartments and streets.

New Orleans

I’m throwing in the towel!  I’m putting up the white flag.  It’s time to retreat, while we still have the shirt on our backs!

I’m now convinced the only way to protect citizen wealth for working families and force the issue to a real resolution, is for underwater homeowners to acknowledge the reality that they are only paying high rent with huge anxiety, and to walk away from these mortgages.  This is good for their family and as bad as it is for the community, and this has been the hangup for me, it may finally force the government and banks to do the right thing.

Part of the final straw for me was reading a piece in the New York Times magazine today in which a contributer, Roger Lowenstein, who is also an outside director of the Sequoia Fund, finally says flatly in so many words that the struggling homeowner is little more than a class-A sucker and full-time chump.  When the enemy starts not just robbing you, but making fun of you, it’s time to desert the field.  Fast!  [The Sequoia Fund is a mutual fund which last year reopened for new investments for the first time in a long stretch with their largest holding in Warren Buffet's Berkshire Hathway.  This guy is not a bomb thrower just released  from the radical underground.]

Besides pointing out the total contradictions of banks and others walking away from their contracts and agreements while expecting the little guy to bubble deeper and deeper beneath the waterline, where we can imagine three piece suit Wall Streeters literally making fun of us down here in the neighborhoods, while they get read to cash their federally funded 6 and 7 figure bonus checks, Lowenstein notes that Brent White, University of Arizona law professor, figured out that a homeowner in Salinas, California buying at the top of the 2006 market with no down payment would – theoretically – have to wait 60 years (!) to recover equity.  Walk away, brothers and sisters – it’s time to abandon this ship!

If a family is worried about damage to credit, just rent for what you can afford, and SAVE some money.  Heck, save the difference in what you would have been spending to try to keep the house (including your payments for taxes and insurance!).  When the market right sizes on the value to loan ratios, if you have cash and have stabilized your own finances, you will easily be able to borrow money to get back on track, if you really want to own a home.  I know friends who have bought homes while  still working their way out of bankruptcy for goodness sakes! And, yes, then is not now, but now is also not going to last.  The robber baron wannabe conservative free marketeers are already arguing to let people lose their houses to foreclosure to rightsize the market and allow builders to start doing new houses at today’s prices to regenerate new home building and sales.  Believe me, there will always be credit for people with some money to put down, so it’s time to do that, not hang on and be the last sucker to go down with the ship.

In fact as a strategy for a family’s citizen wealth, it now make sense to keep renting and

look at other ways to build income security.   Many of us have always thought that too much investment was going into home ownership as a citizen wealth strategy, but that will take longer to change and to right size.  It’s an important fight, just not one that we can win right now.

If you owe more, especially significantly more, than the current value of your house, I hate to say it, but it seems to make sense to walk ticket and let the bank sort it out rather than going deeper in debt to hold on to what banks and the government have clearly by their inaction decided is a sucker’s bet and a white elephant.  Run while you still can!

Playa Coco

To start with the headline is absurd and just right wing, free market, robber baron capitalism at its worse, arguing simply that in the law of the jungle, let’s have the suckers go over, bleed out, get it over, and as wild as this sounds, start building again.  This part of the article was pure “blame the victim,” and tried to infer that they never should have gotten the loan anyway.  But, if you read to the end, the facts started slipping out again, largely because it’s hard to hide them.

First, let’s say hello to our old friend, Jack Schakett, who is pulled into the story again to admit that, “oh, yeah, gee, fellas, this sounds bonehead, but this is the way we roll:”

In a telephone conference with reporters, Jack Schakett, Bank of America’s credit loss mitigation executive, confirmed that even borrowers who were current before agreeing to loan modifications and who then made timely payments were reported to credit rating agencies as making only partial payments.

Jack’s a good ol’ boy from Houston and was a key negotiator when I dealt with him in his position with Countrywide where he was Executive Managing Director and Chief Operations Officer for Countrywide (before it was a farm property of Bank of America) so he knows a little bit about how all of this mess came about!  He’s a semi-straight shooter in negotiations but only if you keep leaning on him with a boot on his neck.  This quote is a classic example.  Jack and B of A know they are wrong to report timely payments as partial payments and damage their credit rating.  I know he knows better and has done better, because part of the ACORN-Countrywide agreement, which Bank of America accepted in full at the merger in 2008 picked up all of the terms.  But, like, I say, if you don’t keep on them, they will slip up.  And, this seems to be the point that Treasury Secretary Geithner is totally missing.  Or not?

The biggest source of concern remains the growing numbers of underwater borrowers — now about one-third of all American homeowners with mortgages, according to Economy.com. The Obama administration clearly grasped the threat as it created its program, yet opted not to focus on writing down loan balances.

And, I hate to break the quote, but just to remind you, the story started out trying to get us to swallow that the real problem in foreclosures was that people never could afford the mortgages.  Now, we see the real problem is hardly that when 1/3 of the houses now are valued at less than what is owed.  So right wing friends, why blame the victim, when these good people are still trying to save their darned houses rather than simply walking away and mailing the keys like we saw in earlier decades with the savings and loan mess.

But, here’s still the kicker:

“This is a conscious choice we made, not to start with principal reduction,” Mr. Geithner told the Congressional Oversight Panel. “We thought it would be dramatically more expensive for the American taxpayer, harder to justify, create much greater risk of unfairness.”

Mr. Geithner’s explanation did not satisfy the panel’s chairwoman, Elizabeth Warren.

“Are we creating a program in which we’re talking about potentially spending $75 billion to try to modify people into mortgages that will reduce the number of foreclosures in the short term, but just kick the can down the road?” she asked, raising the prospect “that we’ll be looking at an economy with elevated mortgage foreclosures not just for a year or two, but for many years. How do you deal with that problem, Mr. Secretary?”

A good question, Mr. Geithner conceded.

“What to do about it,” he said. “That’s a hard thing.”

Geithner keeps drawing the picture if anyone wants to take a look.  Since Treasury was not willing to write down principal and them make the value and the mortgage finally realistic, these billions of dollars in subsidies are not for mortgage holders but for the banks and their balance sheets.  Geithner is still whitewashing his own walls from the mess made on his watch with the Bush bailout when he was with the New York Federal Reserve and running the giveaway train.  To write down principal forces a restatement on the balance sheets of Citicorp, Bank of America, Wells Fargo, Chase and a lot of other institutions and exposes the fact that they then have to raise more money from investors or the government to stabilize their balance sheets, and we’re in the same mess.

It’s been clear for a long, long time, certainly even before the meltdown, and as chief negotiator for ACORN with Countrywide, our team raised the issue then before the meltdown many, many times that principal had to be rationalized with the market and the loans.

Eventually, the pretending is going to have to stop, and the government is going to have to force the real solution and make banks stop playing funny money with their balance sheets and payrolls and face up to the facts of the market today and what the loans are worth and the owners can pay.

Mr. Treasury Secretary, that’s your job now!

And, yes, “that’s a hard thing.”