- ‹ previous
- 1789 of 2754
- next ›
Pay No Attention to the Party Behind the Curtain
PAY NO ATTENTION TO THE PARTY BEHIND THE CURTAIN....Citigroup has agreed to drop its opposition to "cramdown" legislation:
Key congressional Democrats on Thursday reached an agreement with financial giant Citigroup Inc. on a proposal to make it easier for bankruptcy judges to adjust the terms of home loans and possibly forestall many foreclosures.
....The breakthrough agreement boosts the chances that Democrats can push new laws through Congress that direct bankruptcy judges to rework mortgage terms by writing down the principal on the millions of homes that now are worth less than the mortgages they carry.
Most of the reaction to this announcement has been dismay that Congress had to "negotiate" with Citigroup in order to pass this legislation, but it's important to get clear what's actually going on here. The negotiation wasn't really with Citigroup, it was with Senate Republicans, who have almost unanimously opposed this legislation in the past. With Citigroup on board, Durbin and Dodd and Schumer hope that other banks will hop on board too, and once the banks are on board then maybe a few of those legendary "moderate" Republicans will also see the light and do the right thing.
Maybe it will work, maybe it won't. But it's Republicans that are the problem. Banks are just fronting for them.
But it's Republicans that are the problem. Banks are just fronting for them.
Kevin, I think you may have this exactly backward.
The negotiation wasn't really with Citigroup, it was with Senate Republicans
I don't think this is correct. Citigroup is a major lender, and what is being negotiated is the possibility that lenders will accept changes in the terms of mortgages that have already been written. The government does not have the power to step in and change the terms of a contract between two parties. The parties must agree to the change. This is why Citigroup (and the other lenders) need to give their approval for this. In the linked article, the key sentence is:
Thursday's agreement with Citigroup is important because it gives lenders a strong incentive to modify the terms of distressed mortgages before homeowners opt to seek bankruptcy protection.
Technically, of course, congress can pass any law it wants. But "Republican Senators" are trying to defend what they see to be the rights of the lenders (the banks) -- rather than the other way around. So it's the banks that Democrats need to negotiate with -- which is what they are doing.
I do hope the Republicans won't oppose this bailout effort as well.
JS: Nobody asked consumers to consent when the credit card companies got the bankruptcy laws changed in their favor. The bankruptcy laws exist separate from the contracts.
Does anyone besides me see the irony in the fact that the bailout money is being used by the big institutions to buy out smaller institutions ans that will mean more big CEO bonuses and poor judgement that will result in more bad loans and more mergers and bigger Ceo bonuses! My own opinion is that any institution that is going into failure on bad transactions should have to be broken up into smaller institutions that would not be able to pay their CEO's any bonuses and that would stop the rush to make bad investments....I still cannot believe that CEO's are no longer accountable to their stockholders but can take profits for themselves, It sems noone is accountable to anyone antmore at any level!
Kevin: Banks are just fronting for them.
Whereas usually it's the other way around, Republican senators fronting for the banks.
JS you are utterly ignorant of the law, aren't you. Bankruptcy judges have the power to "rewrite" just about any contract other than consumer mortgages right now. They exercise that power hundreds of times a day.
Republicans aren't the problem, Kevin! Haven't you listened to Obama? We live in a post-partisan kumbaya world! All will be great now! Just trust Barak!
I'm roughly the 10 millionth person to say this but here goes: I'm unclear as to why individuals making bad financial decisions should have an avenue beyond bankruptcy, loss of assets and just the general financial ruin that usually accompanies making a poor decision on a big ticket item. If purchasing a home for the wrong price in the wrong market at the wrong time for the wrong financial terms deserves an eventual rescue from the wreckage by the federal government what is the incentive to think very seriously about any large item purchase or investment? Leave out predatory lender BS, please. Signing a document with rapid and steep escalator clauses relating to the interest rate isn't smart. Taking out a NINJA loan is stupid. Burning up home appreciation via equity loans to buy toys and take vacations is unwise. All but those fleeing the scene of an axe murder and dripping in blood have open to them the option of renting for shelter. Owning your own home is not a birthright. Having a 1200 sqaure foot home but craving an upgrade to a 3500 square foot McMansion, burning through accrued (mythical) equity to get it, and then crying foul when the market collapses is so much "woe is me" whining. Get an apartment. Start over. Clean up your credit. You think you're the first person to lose it all and have to start over?
After spendthrifts, whom? Deadbeats? How about some bailout money for dads who don't pay child support? Shouldn't the government step in and pay off predatory juice loans for gamblers who get in over their heads with the Mafia?
Steve Duncan:
It may be difficult or impossible for the bankrupt to start off in this tough economy that we all find ourselves in.
The working poor and lower middle-class may never get the opportunity.
It's much easier to 'start over' during boom times than bad times.
So have a little compassion.
I've paid off my mortgage so this won't affect me personally. However, it will affect anyone looking for a new mortgage; banks will charge more to make up the additional losses they will take on defaulted mortgages. I guess it's easier for Congress to ignore those people - who are unknown - and pander to those who are currently in trouble.
What evidence is there that bankruptcy judges (most of whom, like the rest of the judiciary, are Republican appointees) will rewrite mortgages in favor of homeowners? I'm not saying it's not true. It's just that I've never seen it discussed over the last few months when this idea has been proposed.
steve,
Morally you are correct. The practical matter, though, is that foreclosed properties in a bad market become a blight on the neighborhood and that affects more people, people who made no mistakes.
This is a fundamental issue when people live in a society.
We can try to minimize this, or we can abandon society altogether and become happy Libertarians.
I guess I should point out that home mortgages are not the only area where lenders are favored in bankruptcy law.
Aircraft and rail financiers are also favored. A bankrupt airline or railroad has 60 days to decide whether to affirm the lease or loan, and cure all defaults, or to turn over the aircraft or railcar. The bankruptcy court has no power to cramdown the lender. This was intended to, and has resulted in, lower financing rates for aircraft and railcars, just as the mortgage rules have resulted in lower mortgage rates.
On the other hand, we clearly have had too many people getting mortgages (which is a major cause of the current financial crisis), and so forcing mortgage rates up to cut down on the number of people buying homes may turn out to be a smart thing.
Luther,
See my response to Steve.
And DBL, you have a valid point. This bailout, whatever the shape or form, will most certainly NOT be fair. It is very difficult to design one that would be fair.
The only solace I can offer you is what many in my state, Minnesota, the state 49th in pork - take.
Being one of the 'strong' is its own reward, and you do it because it is 'right,' not for what you get out of it.
In my view the strong must protect the weak. Period. Looked at a certain way that is completely unfair, and I agree.
Still, there it is. Assuming you are lucky enough to have a choice of whether you are strong or weak, which do you choose? Some people don't have the choice.
If you choose strength, which is the honorable (and in my view) the right choice then accept your own personal choice and quit trying to have it both ways. It is undignified.
You want to be weak? Then do it and shut up about it. Some people are not able to be strong. That is their problem. Your problem is you live with the choices you make.
Sheesh.
I guess I'm not sure why I should be bent out of shape that the banks/GOP would oppose this legislation ansent some arm-twisting. If you owe a dollar at 5%, why would the banks willing accpet .70 or 3%? There's all sorts of pulbic policy reasons why the law is not only a good idea, but probably essential, but its not exactly rational financially speaking from the banks point of view.
Tripp, if society constantly saves people from self-inflicted mistakes the gene pool is eventually polluted and rampant with the very fools and idiots always needing saved. When do people learn which choices and behaviors are bad if they're rescued from those poor choices before negative consequences befall them? I still puzzle over why we allow anything but personal money and assets to pay for medical care when a smoker suffers all the maladies traceable to a lifetime of nicotine abuse. Why aren't injured drunk drivers just left to die in the ditch? Because we're a compassionate people? So compassionate we allow drunk drivers to live amongst us? To kill our loved ones on the highways? So compassionate we lend money to people with no job, no assets, poor credit, no ability to repay and having not the foggiest notion of what it takes to maintain a home? And then bailing them out of their mess? Some want to fault the bank for offering the loan in the first place. Fine. Then arrest the owner of the liquor store when the drunk on the highway kills your wife.
steve,
Your concern over the gene pool is notable but do you not know that genetics and natural selection take thousands and thousands of years to have an effect?
Simply speaking concerns about the human gene pool are based on ignorance of genetics.
So then we are left with the genes we currently have and with a society that is subject to swift changes. It seems to me our current gene pool, for whatever reason, generates a vast majority of people who desire to be, in my word, 'strong.'
In summary your gene pool argument is based on a flawed assumption and does not describe the current state of humanity at all.
Look around you. Use your eyes and ears. Trust scientific sources. The vast majority of people desire to live productive and independent lives.
steve,
Sorry, I forgot the 'let the drunks die' part.
On the topic of 'ethics' I have given you one of mine - The strong should protect the weak. This comes in part from my choice to embrace Christianity as one of the influences on my personal ethics.
I think I have discredited your 'selfishness is good cause it saves the species' ethical claim. Do you have any other support for the ethics of selfishness? Or perhaps you have a better name for your ethics?
Then arrest the owner of the liquor store when the drunk on the highway kills your wife.
Depending on the circumstances, those people are punished quite often, though usually through civil courts.
Is it moral hazard to put out the house fire of some one who was careless in the kitchen?
Is it moral hazard to put out the house fire of some one who was careless in the kitchen?
No, it's damn smart public policy. Fires spread.
Tripp, it didn't take millions of years for a great many lifeforms in Appalachia and elsewhere to evolve into a teeming horde of alcoholic, nicotine stained wretches that seek out and venerate snake handlers as fonts of wisdom regarding morals and the mysteries of life. Let the lions take the weak off into the tall grass once in awhile. Didn't your God create lions??
Ron Buyers, if, as you say, "Bankruptcy judges have the power to "rewrite" just about any contract other than consumer mortgages right now" then the law is that consumer mortgages are out of their reach now. As I said, congress can pass any law it wants, but it has not passed this one yet. And the point is that the interested party on the other side is the banks, not the Republican Senators as Kevin said. Congress is trying not to "cram down" any laws without consulting the affected parties.
Did Congress pass the bailouts without consulting consumers (or taxpayers) as jimbo said? It could not consult every taxpayer, of course, but had consultations from many quarters on this as well.
Of course, Ron Buyers is flat-out wrong that consumer mortgages are the only contracts protected from bankruptcy cramdowns. See my post above at 11:09.
I'm unclear as to why individuals making bad financial decisions should have an avenue beyond bankruptcy, loss of assets and just the general financial ruin that usually accompanies making a poor decision on a big ticket item.
Everybody's house is on fire: do you just put out the fire for 'deserving' homeowners?
About the only distinction I might make (maybe) is that we should work first to save mortgages for people actually living in their one home. That way our efforts to save the entire economy also serves this other purpose of keeping people in their homes.
If purchasing a home for the wrong price in the wrong market at the wrong time for the wrong financial terms deserves an eventual rescue from the wreckage by the federal government what is the incentive to think very seriously about any large item purchase or investment? ...
Posted by: steve duncan on 01/09/09
The incentive is that you don't know for certain whether the government will have any reason to help you later.
steve,
You are misusing the word 'evolve,' you are dehumanizing the people living in Appalachia, and your analogy sucks because lions do not eat their own. Even if lions did eat their own lion morality is not pertinent to human morality.
I've told you some of my personal morality. If you do not share some of yours I will continue to assume it is the morality of selfishness.
This is an old, old debate, but I suppose it needs to come around every now and then.
In a nutshell, while humans have come from animals, and while humans remain animals, humans are also more than that.
If you wish to behave like an animal then that is your choice. I choose otherwise.
It really is that simple.
steve,
I apologize for misunderstanding your lion reference. I now understand it.
You are asking "Why not let the weak suffer and die?"
You are asking in another way "why should the strong protect the weak" and my answer is still the same - because it is the right thing to do. I could make this all flowery and noble and create a "Chicken Soup for steve duncan" but I won't.
Your job is to figure out the meaning of your life. I've told you the meaning of my life. I'm not going to do your work for you. Feel free to pursue selfishness if that brings meaning to your life. To me that would be a sad, lonely, and un-fulfilling way to live but if that brings you satisfaction then go for it.
MarkH, I purchased a home in an old, established neighborhood. I specifically investigated the market, knocking on doors and talking to other owners in the area and presenting myself as possibly a new neighbor. I inquired about turnover in ownership, looking for other "for sale" signs in the area. I became convinced this was not an area subject to rampant foreclosures, as many owners had been there a great while with mortgages predating current instrument shenanigans (or the homes were owned free of bank liens altogether). I then made sure to procure a sane mortgage, fixed, no monkey business. When banks started peppering me with inducements and offers to borrow against my equity I declined. Now I'm relatively insulated from the calamities suffered by others. Guess what? Many if not most could have taken the exact same steps I took. Leaving aside the few that didn't or couldn't for whatever valid reasons, what of the responsibilties of those left that weren't as prudent and cautious as me? My tax dollars to at least some degree are now needed to rescue them. I have to shell out money for their carelessness, negligence or laziness yet the reward for my prudence is, what, I get to continue living in my home? I was going to get to do that whether others ignored due diligence or not. Some reward. I'm told I have to help with a rescue because all these foreclosures are depressing my home value, the "hose down your neighbors fire before it spreads to your place" logic. Fine, gimme a hose. When the fire is out somebody needs to answer for playing with the goddamned matches. I just have a sneaky suspicion there won't be anyone called to account for it all. What say you?
Just want to jump in and mention that I'm an atheist, and yet my ethics are almost identical to Tripp's. I'm not the only one, either. You can think of it as enlightened self-interest taken to the next level, if you like.
steve,
Ah. I can relate to your last comment.
You ask "What is your reward?"
From what you say it sounds to me that you are an honorable (aka strong) person.
I am afraid the only reward you get is the respect and acknowledgment from other honorable people.
Walk with dignity, self-confidence and your head held high.
I know it ain't much but on the other hand self-respect is also da bomb. It is funny the way humans are, huh?
The reward for being strong is being strong. The reward for being strong is controlling much of what happens to you. One reward for being strong is the privilege of helping out someone else.
Finally, Tripp, my analogy is not one of letting the "weak" perish. It is one of letting the careless, criminal, negligent or lazy suffer the consequences of their actions. You say they should be rescued and for the most part set back on a path in life undisturbed despite their responsibility for the predicament they're in. Signed a bad loan, borrowed against it, got in trouble. Give them some of my and your money, re-do the note, forgive a portion of debt they agreed to, life goes on. OK. Wouldn't the same logic apply to others making mistakes? Rob a bank, get caught, you made a bad decision, now your freedom is threatened for that bad mistake. Guess what, being Christian and forgiving we've all decided you can go free. Don't do it again please. Here's a helpful pamphlet regarding societal norms, give it a read. Seeya. Yeah, that'll work. Is that the way it is, no penalty for making a bad or reckless decision in your Christian world?
thersites,
Yeah. The label "Christian" has become so ubiquitous it has lost much meaning. Plus it is used by some people I don't agree with. It is kinda like "Islam" in that way.
I dunno the word for people who's morals are "The strong protect the weak" and "We should help each other out."
steve,
Wow. I guess you didn't want the succinct answer, or maybe you are simply not ready for it.
I dunno.
I think you need to study the concepts of wisdom, justice, and honor.
To answer your question - Wouldn't the same logic apply to others making mistakes?
No.
It's very telling quick Steve Duncan is to blame the buyers, instead of the fraudulent mortgage brokers, the negligent banks, or the again, fraudulent financiers whose models deceived big money into investing in shite.
It is true that buyers were often irresponsible in their financial decisions, but the greater responsibility lies with the actors with the greater amount of wealth, power, and knowledge.
This all is complicated because there are so many mixed motives, abilities, and culpabilities are wound up in this mess. I do not have much care for a person who was speculating, flipping properties, and just got stung by a market gone bad.
However, there were many who, in essences, either mislead or outright conned buy mortgage companies. Many of these were work-a-day folks who lived in areas of expanding demand and just wanted to buy a modest house for a family. Growing house prices + stagnant wages = trouble getting a traditional mortgage. These folks were told what they needed to hear, but often not what they should have been told, in order to make this important decision. Remember also that many experts and officials were sure that the history of ever strengthening housing prices could not be derailed.
I would like to see the guilty punished, and the serial speculators left to suffer, but that takes time, and as I wrote above, the house is ablaze, beginning to endanger neighbors, so I am thinking that this is not the time to argue about the carelessness of the cook.
I thought I was the only person who had taken finance and banking in college in this converstation. There is a reason that credit card debt and auto debt has higher interest than mortgages. There is a reason teenagers pay more for car insurance. If we make everyone pay the same for car insurance do you think the rates will go down? Mortgage rates will go up to allow for the added risk of a judge annuling the contract.