“You can play that game when it doesn’t matter.”
Apparently (according to Senator Johnny Isakson), all the posturing the Republicans have done to rip up the safety net and push families into bankruptcy over the last 8 years didn’t really matter. In the last two weeks–since Isakson returned home to Georgia and realized such policies have real consequences for real constituents–they matter.
"Unless every member of the Senate was in a cave over the two-week recess, it’s pretty obvious that gas prices and housing crisis are the two most important issues to the American public," said Sen. Johnny Isakson (R-Ga.), a former real estate broker who was among those urging Republican leaders to stop blocking the legislation. "You can play that game when it doesn’t matter. But people’s lives, their fortunes, their largest single asset is at stake."
Though I suppose I shouldn’t be churlish with Isakson’s recent epiphany, since he is pushing the Republican caucus to actually negotiate with the Democrats.
That said, here’s how the proposed compromise would divvy up money, per the WaPo:
$300 billion guarantee: Allow the FHA to insure refinanced mortgages for homeowners who had become upside-down on their previous mortgages; lenders would have to forgive the previous loan and accept a loan that is no more than 85% of the value of the previous loan (BushCo wants to accomplish this through administrative means, but Republicans are coming around to this Dodd-Frank proposal)
$30 billion: Reimburse the Fed for any losses relating to its Bear Stearns bailout
$14.5 billion: Give people who buy a newly built home, home in foreclosure, or a home whose owner has defaulted on a mortgage in the next year a $5,000 tax credit for the next three years (this is Isakson’s proposal; and in case you’re wondering, yes, Isakson was a realtor before he became a full time politician)
$10 billion: Finance tax-exempt bonds that could be used to finance distressed subprime mortgages
$4 billion: Allow communities to buy and redevelop properties in foreclosure, thereby preventing entire neighborhoods from declining (The White House says this $4 billion–about the cost of paying for two weeks of the wars in Iraq and Afghanistan–is too expensive)
$200 million: Finance additional counselors to help those at risk for foreclosure
No cost: Require lenders to tell borrowers what the highest possible rate for ARMs would be
No cost: Permit bankruptcy judges to change interest rates on mortgages of those in bankruptcy proceedings (this measure is opposed by Republicans)
Oh wait. That $30 billion dollars (potentially) to reimburse the Fed for bailing out Bear Stearns? That’s already a done deal, with no input from Congress. I just stuck it into this list to give a sense of what Republicans believe is too expensive ($4 billion to save entire neighborhoods), and what is not ($14.5 billion to bail out the failing real estate industry; $30 billion for a finance company that is too big to fail).
Though, I should say, it was that $30 billion (and probably, seeing first-hand how strong Rick Noriega’s Senate campaign is) that convinced John Cornyn something needed to be done.
"We don’t want to sit on the sidelines," said Sen. John Cornyn (R-Tex.). The $30 billion rescue of investment bank Bear Stearns by the Federal Reserve Board in mid-March "got everybody’s attention," he said.
Anyway, if you’re so inclined and have a Republican Senator or two, please give them a ring and encourage them to support Dodd’s plan to support refinancing of upside-down mortgages (the $300 billion guarantee at the top of the list).
Update: Apparently, they’ve reached a deal. The Dodd proposal and the bankruptcy restructuing will both be amendments–they’re not in the base deal.
One investor blog I follow is raising holy hell over this issue. Congress has the power of the purse; yet, the Fed (arguably not a governmental agency) has usurped the power of the purse to bail out Bear Stearns. Via what precedent has the Federal Reserve Bank usurped this power? Considering taxpayer-funded bailouts of years past, how are we to trust $30-billion is the cap on the bailout?
Trust. Good god. Listen to me.
said Sen. John Cornyn
I’m wiping lemonade off my monitor now
Here’s another quote for you from Cornyn:
And where was Bear Stearns personal responsibility in all of this?
Another great ironic post, EW. But I have to say it made me very nauseous reading it because it touches on so much of the ravaging and plundering that these Repugnant crooks have done to our economy, laws and country. Makes one want to take a bath. I might take my monitor with me.
Bullseye, thank you.
The captive-audience-screen in the elevator was showing Bernanke’s remark about ‘the economy may shrink’ this quarter. My reaction was ‘May shrink??’
What planet does Bernanke live on?
Sorry to go OT but did you see the latest on Justice Dept. nonsense?
Yes,
The explanation locally for why Chiara was fired involves her possibly being gay, too. So it’s not a surprise–and something I addressed here.
I think when all is said and done, it will be shown that Chiara was alleged (not sure if this is true, though it is the rumor in the corners of the MI legal community I overlap with) to be partners with Hagen, was alleged to have given her a bonus because of that relationship (and not because Hagen was doing this work), and that it was a two-for-one deal, in that it also gutted NAIS’s pro-Indian approach.
Though the timing on this story makes no sense, since it doesn’t explain why Chiara was targeted for firing much much earlier.
And FWIW, David Margolis, the only marginally trustworthy one at DOJ involved in this, seems to have belieevd Chiara was fired for showing favoritism to her partner.
empty wheel, I am hoping you have a nice long discussion on the yoo torture memo, it is depraved, it pretends ignorance of precedence, it ignores clear passages in the constitution regarding conrgress’s obligation to control the persident’s power during war and it is clearly a ruling that sanctions torture
it is also a ruling for purpose prior to acts rather then after those facts, as christy discusses over at the lake
I am under the impression there is now an obligation to prosecute for the crimes of torture, I do not believe the issue can be ducked by the democrats any longer, I believe they will ahve a personal liability if with this memo they do not prefer charges against those that wrote the memo and those that asked for the finding granting powers of torture
I think Glenn has summed it up best. See his title of todays post. He just flat out calls John Yoo a war criminal.
but what I am saying is the house members are now criminals as well
they absolutely must prefer charges otherwise they have the same liability
we now must show the world who and what we are, we now absolutely have to bring to the bar of justce those criminals who have brought this nation to ruin, who have damaged our national security, our ability to broker treaties, our integrity and have done it for a time unknown
we will never ever regain what they have taken unless we demonstrate for all time that we are a nation of law and especially our own depraved will see justice delivered
There are pleny of War Criminals to go around, and if the Vanity Fair article is on point, there is beginning to be some talk about how procecutions may occur if any of a group of persons travel outside the US. I for one, would think it just fine if george or dick or donald or john were nabbed and put on trial anywhere in the world for war crimes.
I’d prefer that we get the political will to do it here, so the world can once again see that we are a nation of law and order to be respected and looked to as a beacon of justice. Without the fortitude to procecute our own, I don’t know how we can ever be looked at as the leaders of the free world again.
If you work backward through the threads, she’s already been hitting it hard today.
Churlish is good, churlish is OK. Because we should all beware the GOP wolf dressed in Little Red Homeowners threadbare clothes.
$300 billion guarantee:
Why use taxpayer money to insure a refinanced mortgage? It’s a carrot to persuade a wayward industry to accept refinancings that require them to book losses on their portfolios of mortgage loans. If they refinance at the lower amount – presumably requiring them to forgive and forego collecting any loss from the write down – they get insurance that says if that loan goes bad, the fed will cough up and pay for their entire loss. Worth considering. Puts a portion of the loss on the lenders, where it belongs.
Two things: The cap shouldn’t be 85% of the original loan amount. It should be 85% of the refinanced loan amount, which may be considerably lower. Less of a carrot, but worth demanding in exchange for a systemic bailout of whole portfolios of questionable loans.
The stick should be to revise the bankruptcy law, in part to cram a much less favorable arrangement down the throats of lenders who won’t play ball.
Without the stick, the donkey will keep looking for a bigger carrot.
The “refinanced amount” must be current market value, based on an agreed method of assessment. No point in allowing lenders to refinance the same home several times because they refuse to take the hit required in writing down the underlying property’s value.
Taxpayers should pay for – ie, we should ALL share in the cost of – a systemic readjustment, not baby steps that help managers and their banks avoid reality. Homeowners certainly can’t avoid it.
Nix items $14.5 and 10 billion. If Isakson wants to subsidize real estate brokers, he can and Congressional GOP’ers can buy more houses. The ten billion item seems redundant.
Tax credits don’t relieve instability quickly enough, certainly not phased in over three years. They also only help those with high incomes who’d rather not pay taxes – including not paying for a share of the cost of this package.
Items $4 billion and 200 million are good. In exchange for the subsidy, debt counselors need to abide by minimum professional standards and maximum cost. We can’t treat this as if they’re contractors selling us arms for the GWOT.
Lender disclosure requirements need a more thorough overhaul than proposed here. Among other things, mortgage brokers, like sellers of stock, should have a “know thy customer” rule, and be obligated to offer the lowest cost proposal within a range of credit products. Which means they must also be obligated to explain the trade-offs between nominal rates and the burden of the contract terms that come with them.
Last item in this neglected thread.
Bankruptcy laws need overhaul, not minor tweaking, starting with the repeal of the 2005 “reform”, colloquially known as the No Credit Card Company Left Behind Act. It put repaying CC lenders very high on a reforming debtors To Do list, forcing anyone not on Skid Row to make payments for several years. It did mandate credit counseling as one of the “twelve steps” in achieving entry and release from bankruptcy. A good idea that should be retained.
The original bankruptcy model allowed debtors to dig out of their hole while distributing a fair portion of their assets and future income to legitimate creditors. It imbibed a “start fresh” approach, and rejected indentured servitude and debtors’ prison, elements of which crept back into the law via the 2005 “reform”.
As I said earlier, the “stick” needed to rein in predatory lenders is to increase debtors’ rights in bankruptcy, thus forcing lenders to renegotiate debts outside bankruptcy. Those who don’t renegotiate in good faith should get less in bankruptcy.
Bankruptcy reform needs to fit hand in glove with reform of consumers’ rights. Items we desperately need to address are hidden fees, exorbitant interest rates, and mysterious cross default clauses. These allow lenders to rack up profits to loan shark levels, while not disturbing those sharks’ gentle sleep in their suburban McMansions.
Economic regulation is often a political battlefield, with consumers no more than cannon fodder as lenders, lobbyists and government fight over the spoils. Enough.
I’ve been saying that for a while (and asked the question at the progressive media summit in January). But how do we go about doing it? How do we go about putting together a package of reforms that 1) can unify the progressive left (this really ought to be hte issue that unifies labor, economic justice groups, and the blogosphere), 2) builds pressure on Congress for some real steps toward a comprehensive economic package, and 3) wins?
I actually talked to some fairly high level people at TBA about it, but I’m struggling a little to figure out where to start, since there’s so much to be done.
A way to quick start that discussion is to convene a forum with two essential voices, together or back-to-back guests: Harvard Law’s Elizabeth Warren, consumer bankruptcy expert; and Barbara Ehrenreich, PhD, scientist, blogger, social commentator, and intrepid waitress, check-out girl and 21st century journalism’s Tom Joad.
Thanks so much for your really terrific comments.
In case emptywheel doesn’t know them, and she’s interested, do you know either Warren or Ehrenreich well enough to make an introduction?
No, I wish I did. Warren and Ehrenreich both publish frequently and comment on these topics in print and via interviews. Ehrenreich has her own blog, “ehrenreich.blogs.com”. Bill Moyers, who is also very aware of consumer issues, has interviewed them both, I believe, certainly Ehrenreich. Given our current Surveillance State, privacy issues become almost as important as the day-to-day legal framework that reins in how lenders of all kinds deal with borrowers.
For my money, the three legs holding up middle America’s kitchen stool are consumer finance, health care, and privacy rights related to both. To carry through the analogy, if the consumer’s home life rests on that stool, the stool’s seat is their job, if they have one. Without it, those legs press on increasingly uncomfortable parts of one’s nether anatomy.
I would still like to see something giving bankruptcy judges more latitude in regard to the fees. Many of you have been aprised of my situation with Homecomings financial. http://findarticles.com/p/arti….._n24253395
The fees have been one of the most challenging aspects and my understanding is that the remedies for this are pretty up in the air. The problem is that no one is sure who should handle the remedies and it is not written in stone what the remedies could be. Judges have a lot of latitude but a high risk of appeal, lots of appeals and chance of losing to appeal.
http://homecomings-financial.p…..13659.html
The story above is about a guy whose mortgage was bought out by homecomings GMAC and suddenly he had fees that he can’t get rid of. This is what happened in my case. How can a company just proclaim you owe this amount?? At issue in regard to the fees is that if it’s within a certain federally regulated percentage, they can assess fees no matter how bogus. The regulation could still put you several thousand in arrears on top of any other amount you may behind. Also there is nothing about regulating these companies to make sure that they are applying to priniciple first. They are notorious for saying that they have, but then paying the fees and then tacking on more. (which creates a bottomless pit that cannot ever be paid off and keeps them within the regulations). Lawyers have to do so much work to review how they applied the payments, that they are hesitant to take on these cases.
The fees must be regulated much more so than they are right now. But there needs to be oversight. Review. Accountability. A little person has to go to so much work to find someone to advocate on these very technical aspects of the loan. Even the FDIC is slow because they are so backed up with these cases. By the time they get to you, you have lost your house.
It’s a start, but I don’t think they have hit the areas of “theft” where they are making a killing and causing people to forclose. The link above is just one example for this company. There are literally hundreds of posts just like that one.
Agree, this is an important point.
When you first posted about it, I didn’t understand. I always thought in a foreclosure, everyone lost.
That isn’t the case anymore as your links explain. Sharks, probably a lot of the same lawyers who used to run bankruptcy mills, found choke points in the system where they could MAKE money on foreclosures.
the scottish haggis is threatening to close the senate if the demo’s don’t agree to approve judges” I am seeing but not confirming? wonder what they have on poor old Arlen? He runs hot and cold doesn’t he?
Imagine, allowing another of Bush’s criminals to be appointed to judge when the rest of us would like to see many impeached as unfit?
Let him. It would probably be the first time he actually followed through on something he promised. I for one would like Specter to be held up to a spotlight where all of his duplicitous bombast could be exposed. So if he wants to make a big statement about how he is a champion of Bush’s yahoo judicial appointments, I say let him.
Amen. He has more flip flops then Venice Beach.
If the Dodd portion is made an amendment making it easier to kill, is there really much left in this bill to make it worthwhile?
He is like a puppet, trot him out to walk on the end of dicks’
If you had to live in Georgia and deal with the likes of Johnny Isakson and Saxby Chambliss, you’d be dancing a jig to find out that either one of them took the time out from their busy schedules to think about anything at all. Actually, I think Isakson is simply a misguided follower. Our other Senator, Saxby Chambliss, is a hard core lunatic…
Breathtaking your ability to distill the objective into a few sentences. As always, thanks.
IMHO, eofh nailed the issue about which Wall Street and the Hedge funds are most concerned:
Wall Street wants the taxpayers to insulate them from the consequences of their own greed. The GOP and the Vichy Dems want this, because it means more contributions from Wall Street.
As a very short term communications goal, spotlighting Wall Street socialism for the richest one percent, may be the best place to unify progressives along with the rest of the country. It’s where Wall Street is so exposed, financially and wrt “the discipline of the markets.”
I didn’t understand the rhetorical impact at first, but rescuing Bear Stearns from Chapter 11, allowed lunatics like Kyl to keep talking about bankruptcy.
It would be terrific if we could find some accountants, finance jocks, people with mortgage experience, who could really look at these mortgages and the securities. How much are the taxpayers paying and what groups are benefitting.
All of this sounds so familiar. Where else can we find oligarchs who don’t want to take responsibility in any meaningful way? Why, how about the White House? Our Preznit believes that taking responsibility means a pat on the back and a promotion. His idea of the balance of powers is where the rich get all the benefits, and the poor get all the consequences. The idea of risk-free capitalism appeals to his inner sense of greed. The “discipline of the markets” is anathema to him.
Bob in HI
Agreed. “Market discipline” has become the rationale for not sharing taxpayers’ largesse with the hoi poloi, even though Bush promised that’s exactly what his tax cuts would do. It all goes to those behemoths in suits and cigars that H.L. Mencken and Will Rogers mocked so effectively in the 1920’s and ’30’s.
We really are fighting the same battles, with the added twist of almost real time computer surveillance [this comment will be available via google in about ten minutes] and – unlike the Europeans and those living in most other developed states – no ability to get at, verify, correct or limit the use of that data. Because to do so would limit the Fat Cats’ (cable, search engines, financiers) ability to profit from our data. Can’t have that. Nope, can’t have that.
35, I believe that the “insurance” in the passage EW quoted is about the feds insuring lenders, ensuring that their loans to consumer borrowers would be repaid if the consumer defaults. If that’s true, there wouldn’t technically be “insurance” – which, as To Catch a Thief makes clear, is gambling: a bet with a “bookie” that in the unlikely event that XX (death, auto accident) happens, I’ll pay you YY.
What I think this legislation proposes is a kind of taxpayers’ guarantee. That is, some mechanism by which a lender reports to a federal agency, with proof that WW mortgages have gone into default and the lender took all the usual and customary steps to prevent or respond to it. The lender gives the documents evidencing the consumers’ debt to the feds and receives cash or its equivalent.
That simplifies a process riven with details that should exist to protect the feds and taxpayers’ money. Like an agreed set of documents and an agreed formula for reducing a mortgage’s multi-year stream of payments into a lump of ready cash. That’s logical, since it’s just another form of government contracting and would involve tens of billions of taxpayer dollars. We all know how well the GSA and DoD handle that.
The fed now has a lot less cash and piles of loan documents on its desk, IOU’s that haven’t been paid. What happens? Collection, with Blackwater mercenary wannabes sitting out front in a dark, tinted-window SUV? That would defeat a major purpose of the bailout. Or a Pythonesque, “Never mind, sorry about your job/family/marriage/health”? That’s one of those pesky details we better have an answer to before Congress gives us one.
Much appreciated.
fyi–Here’s a site for several torture pfd memos at Slate including the Haynes memo.
http://www.slate.com/features/…..Memos.html
Opps…This should have been on previous thread..
eofh, only if you have time or the interest, I am interested in the insurance side of this. My fear is that most of the the insurance claims are worthless, which means borrowers were defrauded on the premiums they paid. Pardon my ignorance, but it sounds more fair to me if the taxpayers do not start paying until we’re 100% sure the insurance is tapped out.
OT, (only if your time and energy allow) given your detailed knowledge of this industry, have you thought about hiring yourself out to FDL to post on this? I have no idea if Jane is looking, but you understand this community and this subject. Or, Jane and emptywheel might appreciate an editor for posts on this subject. Again, I’m getting way way ahead of myself, because I have no crystal ball into what Jane and ew want or need.
Well lookee here. The big bipartisan “victory” of a housing bill is – gasp- not quite what it was cracked up to be. Here, from the WaPo, is what Hanoi Harry and the Bush Bots really came up with:
1) “billions of dollars in tax rebates to the slumping home-building industry while offering little to homeowners threatened with foreclosure.”
2) “rejects the most ambitious plans for aiding distressed homeowners, including a Democratic proposal to permit bankruptcy judges to modify the mortgage on a person’s primary residence.”
3) “tax breaks worth up to $7,000 for home buyers who purchase foreclosed properties” (mostly rich speculators at this point).
4) “streamline the Federal Housing Administration, one of the top priorities of the Bush administration.” (Can you say deregulation!).
5) “$100 million to expand foreclosure counseling services” (Must be owned by Gooper businessmen!).
6) “Home builders and other businesses suffering losses in the flagging economy, meanwhile, would get the lion’s share of federal spending in the bill: $6 billion in tax rebates.” (More Gooper welfare!).
7) “Senate Majority Leader Harry M. Reid (D-Nev.) lauded the agreement as “a robust package” that is “good news for the American people.” (Hanoi Harry needs to be put out to pasture on his precious piece of dirt in Southern Nevada. He is pathetic).
Thanks for the link to the WaPo’s “Housing Accord Puts Builders First Strapped Homeowners Offered Little Aid.”
Post reader comments from the Wapo article:
For the most part they agree with comments here.
What Helicopter Ben, Wall Street and our bought and paid for Congressmen don’t discuss in any way:
1. Bear Stearns paid its executives $2.5 billion in bonuses in 2006. Is anyone asking on what basis these bonuses were issued considering that their financial statements and particularly the balance sheet was all bogus? Is anyone asking for those bonuses to be paid back since it was essentially fraudulent?
2. On what basis did the Fed provide a “put option” to JP Morgan? Note that although they claim it was a non-recourse loan it was not a loan since what gets paid back is the net difference on liquidation of the Bear Stearns toxic assets that the Fed has taken on. It is more accurately a put option.
3. Since when is the Fed in the business of providing handouts of taxpayer funds to shareholders and bondholders of specific private corporations? On what basis do they select private investors for such taxpayer largesse?
4. What was the Fed doing when housing prices were inflating and securitizations of all the mortagages were taking place at break-neck pace with no regard for classic prudent lending standards? Ah! Chairman Greenspan was extolling the virtues of financial innovation in managing and dispersing risk.
5. In what way would the financial system have imploded if Bear Stearns filed Chapter 11? Sure, Bear shareholders would have got zero and bond holders and other creditors would have received the liquidation value of Bear assets through a bankruptcy court – which is the proper way to handle such matters legally.
6. What is the rationale for providing financial support to speculators and flippers in the housing market?
7. Should the current policy be extended to all speculators in the US? Can middle class Americans that speculate also avail themselves of taxpayer funds when their speculations have adverse results?
8. Why were Enron style accounting allowed for Wall Street firms to enable them to book profits on derivatives on establishing a position? Yes, we know – it was all about those bonuses. Let’s not forget that in 2006 Wall Street paid out several hundred billion in bonuses to bankers and hedge fund managers.
9. What is buried in the opaque financial statements of banks, insurance companies and hedge funds?
10. Why are firms like Bear Stearns, Morgan Stanley, JP Morgan allowed leverage of 30:1 if their failure would lead to a systemic collapse? With that kind of leverage all that is required is a 3% fall in the value of assets for all equity capital in the business to be wiped out.
Will any of our honorable senators and representatives ask these questions? No way! They are all in the same payola racket of fleecing middle class Americans. At the end the blame rests with the fleeced citizenry since they don’t hold anyone of these charlatans accountable.