The banks and other players in the securitization industry now seem to be looking to Congress to snap its fingers to make the whole problem go away, preferably with a law that relieves them of liability for their bad behavior. But any such legislative fiat would bulldoze regions of state laws on real estate and trusts, not to mention the Uniform Commercial Code. A challenge on constitutional grounds would be inevitable.
And just think, the same Supreme Court that gave us citizens United would decide on mass contract law abrogation just to please the fat cats. There's a scary thought.
Asking for Congress’s help would also require the banks to tacitly admit that they routinely broke their own contracts and made misrepresentations to investors in their Securities and Exchange Commission filings. Would Congress dare shield them from well-deserved litigation when the banks themselves use every minor customer deviation from incomprehensible contracts as an excuse to charge a fee?
The banks certainly seem to think Congress will. In fact, they're counting on it. If banks and their investors cut off the anonymous donation fountain ahead of 2012 as a threat to make Congress comply, or worse, just donate buy elections of people who will do their bidding, our democracy is in real trouble either way.
There are alternatives. One measure that both homeowners and investors in mortgage-backed securities would probably support is a process for major principal modifications for viable borrowers; that is, to forgive a portion of their debt and lower their monthly payments. This could come about through either coordinated state action or a state-federal effort.
Cramdown! Of course, it dies twice in the House before, so of course it won't pass now.
The large banks, no doubt, would resist; they would be forced to write down the mortgage exposures they carry on their books, which some banking experts contend would force them back into the Troubled Asset Relief Program. However, allowing significant principal modifications would stem the flood of foreclosures and reduce uncertainty about the housing market and mortgage securities, giving the authorities time to devise approaches to the messy problems of clouded titles and faulty loan conveyance.
The people who so carefully designed the mortgage securitization process unwittingly devised a costly trap for people who ran roughshod over their handiwork. The trap has closed — and unless the mortgage finance industry agrees to a sensible way out of it, the entire economy will be the victim.
The banks won't take the hit. They'll force a TARP 2 scenario. And the "fiscally responsible" Republicans will lead the charge on that, guaranteed.
There's no difference between corrupt GOP sellouts and corrupt Democrat sellouts like Obama.
ReplyDelete"While President Obama and other Democrats have excoriated Republican “front groups” for using secret money to pay for attack ads, the party’s political committees have begun doing something similar: collecting cash from outside nonprofit groups that don’t disclose their contributors and using the money to pay for negative campaign commercials, campaign records show.
One group, Patriot Majority PAC — a Democratic political committee that has run a hard-hitting $1.7 million attack ad campaign against Sharron Angle, the Republican candidate for Harry Reid’s Senate seat in Nevada — has gotten one of its largest donations, $250,000, from a left-leaning nonprofit that doesn’t release the names of any of its contributors, the records show.
Another newly formed political committee, America’s Families First Action Fund, which is running negative commercials against Republicans in House races across the country, recently got $1 million from a closely related nonprofit affiliate, the records show. Both organizations were set up over the summer by Democratic strategists, who emphasized in a memo to donors that contributions to the nonprofit could be kept anonymous."
We're fucked either way. Why vote?
I see the voter suppression trolls are hard at work.
ReplyDeleteIrony alert: my word verification captcha for this comment was "stompu." Is Rand Paul sponsoring this blog now?