WSJ: The Biggest Housing Losers

[El Pinko]

http://online.wsj.com/article/SB121055143706183847.html?mod=opinion_main_review_and_outlooks

The Biggest Housing Losers
May 12, 2008; Page A14
You may not know it, dear reader, but Congress is playing you for a sap. During the housing mania, you didn't lend money at teaser rates to borrowers who couldn't pay, or buy a bigger house than you could afford. You paid your bills on time. As a reward for that good judgment and restraint, Barney Frank is now going to let you bail out the least responsible bankers and borrowers.

The Massachusetts Democrat's housing bill passed the House Thursday, and it makes us wish we had splurged like so many others. In the name of helping strapped home buyers, Mr. Frank is giving lenders a chance to pass their worst paper onto Uncle Sugar. If both borrower and lender agree to participate, lenders can accept 85% of the current appraised mortgage value and in return get to dump up to $300 billion of those loans on the Federal Housing Administration (FHA). Guess which loans they are likely to dump?

Looking at the details in Mr. Frank's 45-page first draft of this bill, FIS Applied Analytics estimated that taxpayer losses could reach as high as $27 billion, more than four times Mr. Frank's estimate. The next draft, clocking in at 72 pages when it passed Mr. Frank's committee, was miraculously scored by the Congressional Budget Office at "only" a $2.7 billion cost to taxpayers. CBO lowballed it in part because it assumed that most people eligible for this assistance will not apply for it. It is true that some lenders may be wary of taking a 15% haircut off the top, but watch out if bankers and borrowers do take the taxpayers up on Mr. Frank's offer. This is especially likely because at the same time that Mr. Frank touts the lowball estimate, he is also making mortgage servicers an offer they can't refuse.

"I want to put the servicers on notice," the celebrated liberal declared at a recent hearing. "If we see a widespread refusal on the part of servicers to cooperate voluntarily in what we see as an important economic problem . . . they can expect much tougher regulation in the future." And they called Tom DeLay "the Hammer"?






Okay - I've already been public in my opposition to this bailout - but this statement by Frank is even more bothersome.

Cooperate in the bailout or we'll regulate you? :wtf: Why weren't the lenders being regulated in the first place? And shouldn't they be regulated whether or not this stupid bailout passes or not?

UGH.

[Arctic Dave]

1. El Pinko did you just drink some coffee?

You are whipping them out faster then I can read them.

I have agree with about the regulation. It should be a given not a negotiation chip. Lack of oversight is the entire reason this mess has ballooned to the size it is.

[El Pinko]

2. LOL - I get on posting jags...

I find a bunch of things I find interesting and post them one after another.

I do them all together so as to hopefully be time-efficient.

And yes, I have had a bit of the java...

[Arctic Dave]

3. I think that picture is animal abuse.

:rofl:

[StClone]

4. Consider the source: WSJ

When Murdock bought DirecTV I ripped it out. He divested recently but I now like my Dishnet.

Murdock now owns WSJ...and I wouldn't trust any more than I'd trust Bush.

It's NewsMax now to me.

[PSPS]

5. This WSJ piece is using a straw man argument

I don't know where that 15% is coming from, but it is this write-off that the banks are loath to do in the first place. This RW hit piece is trying to stir up a clamor against the bill so the banks can avoid whatever the write-off is and, instead, get 100% from the taxpayer. At least Frank's bill would force banks to eat some of the fraudulent overpricing of the property, plus it would re-impose regulation on them anyway. If Glass-Stegal had not lapsed, all of this never would have happened.

This opinion piece is intentionally misleading, but that's what you expect from the WSJ.

[El Pinko]

7. "fraudulent overpricing of the property"

In almost all cases, it was not the lenders setting the insanely high prices. It was homebuilders, used-home sellers, house-flippers and bandwagon-jumping fools who did that.

The lenders are clearly at fault for creating vehicles aimed at getting people into homes they could not afford, but the lenders were not the only ones at fault.

[notesdev]

6. Guess what?

>During the housing mania, you didn't lend money at teaser rates to borrowers who couldn't pay

Oh, yes you did! You just didn't know it at the time, and no, it was not consensual and nobody is going to ask for your consent. All these people in the business from borrower all the way through to investor not only knew the taxpayer was the ultimate guarantor for their transaction, they relied on it.

Now that TSIHTF, they want you to help them keep the ill-gotten gains from this Ponzi scheme and paper over the widespread fraud, rather than what should be happening, which is a lot of investigation of deals, and recovery of the profits derived from those transactions, and prosecution of the people responsible.