Okay, folks. Here's the deal. The entire financial system risks collapse if those toxic mortgages aren't taken off their books once and for all. Simply foreclosing on those homes and selling them at auction isn't going to stop the bleeding, if the banks take those losses (basically putting housing prices back at 1998 levels, or roughly a 60% markdown) they are bankrupt. Actually, they're bankrupt right now, they're just holding foreclosed houses off the market so they don't have to make it official (if they have a home on their assets list that they say is worth $600K, but manage to sell it for only the $200K that it's worth today, then they have to actually report the $400K loss they've already incurred).
Okay, so now we propose to take those toxic mortgages off the books. It has to happen, or we risk the 1930-1932 scenario. But these stupid bastards simply can't help themselves. The current proposal is just a friggin' blank check for looting. The Treasury Secretary is authorized to give out money to anybody for any reason as long as he states that it is "mortgage-related". And there is no proposal to take over management and/or ownership of the institutions holding these toxic mortgages in exchange for taking the bad loans off their books, which is the only way to keep them from writing more toxic mortgages. Instead, it's just money thrown at the same bastards who got us into this situation in the first place.
What we need is a new "Resolution Trust Corporation" that takes over the ownership of troubled institutions and runs them on behalf of the taxpayers who are bailing them out. At some point in the future we can then sell these organizations back to private investors and have them open up under new management, but they're basically bankrupt now, the whole lot of them, and we need to make it official, take the bloodbath of writing down all those toxic loans, and take over ownership of the banks and mortgage that wrote these bad loans. Bad for investors? Oh sorry! You shoulda appointed better managers for your money, huh? But the important thing is a) to get the toxic mortgages out of the system, and b) make sure that the people who profited from the toxic mortgages are not in a position to do it again. The solution is not to throw money at the same goddamned looters who make it possible to write those bad mortgages in the first place -- but sad to say, the first instinct of any Bush Administration official is, "how can I loot the government treasury for the benefit of my cronies in private enterprise?". Sigh. Government of the people, by the people, for the people. It'd be a good idea.
-- Badtux the Financial Penguin
Thank you, Tuxy!
ReplyDeleteI've spent the whole weekend writing what just comes out in daggers trying to say what you've just said so well.
What country in its right mind would allow the criminals to write the laws defining their punishment (after the fact even)?
Amurrika! Land of the free and Home of the you better be brave.
Amen (and women)!
Suzan
It's kind of an Authorization to Use Military Force (you know, the hasty 2001 legislation that CheneyBush uses to justify all of his executive excesses) for the looting class.
ReplyDeleteI can't help wondering, if they are going to find seventy billion to bale out banker-wanks, would it not have been better for America to bail out the homeowners themselves with that cash? They would have been happy to pay it back at reasonable rates! I mean, wasn't it the exorbitant interest hikes that killed the golden egg laying geese in this story?
ReplyDelete