“We the Parasites” Benefiting from HAMP

You’ve probably already read DDay’s and Atrios’s pieces on what some Treasury officials admitted about HAMP the other day. But partly because I want to link to this really comprehensive account of the entire meeting and partly because I want to elaborate on a point made in it, I thought I’d join in.

Basically, at some blogger chats last week, some folks at Treasury judged that, in spite of the catastrophic failure of HAMP to achieve its stated purpose–to help homeowners stay in homes either bought during a bubble or refinanced at a time when lending standards had been all but eliminated–it was still a good thing because it gave the banksters some time to recover from their catastrophic investment in the shitpile.

On HAMP, officials were surprisingly candid. The program has gotten a lot of bad press in terms of its Kafka-esque qualification process and its limited success in generating mortgage modifications under which families become able and willing to pay their debt. Officials pointed out that what may have been an agonizing process for individuals was a useful palliative for the system as a whole. Even if most HAMP applicants ultimately default, the program prevented an outbreak of foreclosures exactly when the system could have handled it least. There were murmurs among the bloggers of “extend and pretend”, but I don’t think that’s quite right. This was extend-and-don’t-even-bother-to-pretend. The program was successful in the sense that it kept the patient alive until it had begun to heal. And the patient of this metaphor was not a struggling homeowner, but the financial system, a.k.a. the banks. Policymakers openly judged HAMP to be a qualified success because it helped banks muddle through what might have been a fatal shock. I believe these policymakers conflate, in full sincerity, incumbent financial institutions with “the system”, “the economy”, and “ordinary Americans”. Treasury officials are not cruel people. I’m sure they would have preferred if the program had worked out better for homeowners as well. But they have larger concerns, and from their perspective, HAMP has helped to address those.

As these revelations about Treasury’s self-congratulation on HAMP have come out, I keep thinking of the word “parasite.” The folks we pay to keep our financial system running for the good of the citizens of the United States are unabashedly celebrating that they’ve made individual families’ lives more miserable because the banks–who while SCOTUS may treat them as people are not actually part of the “We the people” originally envisioned by the Constitution–will have time to recover from their own damn mistakes.

Our government is happy–not from the pain of the families, per se–but because a bunch of artificial entities that seem to have replaced “we the people” as those who will receive  “general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity” from our government will be better off.

The guys in charge of our economy actually seem incapable of understanding who they work for–not to mention the additional problems their “qualified success” will cause. (What happens in a decade when large numbers of middle class kids can’t go to college because the government decided it was okay to subject their families to more misery during a foreclosure?)

Or, they don’t give a shit that this program asks homeowners to pay over and over for their mistakes, all to make sure the banksters never have to pay for their own.

Which is the other problem with this attitude. The alternative to HAMP, of course, is cram-down, in which the banksters have to cut the principle owed to them to what was probably more realistic value in the first place. Every time cram-down gets dismissed, the person dismissing it as an option mobilizes the language of morality, the need to make homeowners pay for buying more home than they could afford (assuming, always, they haven’t been laid off because the banksters ruined the economy or run into medical debt). But there seems to be no language of morality to describe the price banksters should have to pay by failing to do any real due diligence on loans or for accepting transparently bogus assessments of value. Heck, even the banksters get the equivalent of cram-down without a big morality play.

Treasury’s attitude about HAMP is not just evidence they’ve lost all track of who they work for and where the benefits of the economy are supposed to be delivered, but it also suggests that these Treasury folks have lost the most basic notion of capitalism, that if businessmen never pay for bad decisions, they’ll continue to make bad decisions.

And meanwhile, a whole bunch of “we the people” will be worse off because of the really twisted sense of purpose held by the folks working for “we the people.”

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  1. Becca says:

    Of course they’re parasites. They’re faced with this choice: Renegotiate a long-term low-paying income stream to make it a little lower, with a bit of sugar from Uncle Sam to make it slightly less unpalatable.

    Or find ways to suddenly tack on tens of thousands in fees, penalties, and accrued, unpaid interest, force the homeowner into bankruptcy, stand at the front of the line so as to drain the poor bastards remaining financial assets completely dry, foreclose on the whole thing, write off the entire mortgage and all those massive accumulated penalties off against taxable profits, AND at the end of it own a property which can be flipped back onto the market, owned 100% by the foreclosing entity.

    To simplify: Less money, over a long period of time (30 years). Or a ton of pure profit right now. Which are they gonna choose?

    • jimhicks3 says:

      I know I’ve put this post up before – quote from David Obey (last paragraph) of July 16th interview “I think the more important thing was what was my biggest failure. I think our biggest failure collectively has been our failure to stop the ripoff of the middle class by the economic elite of this country, and this is not just something that happened because of the forces of the market.”
      One arm of the hydra of the e/e are the bankers (the body is the govnmt) and they are squeezing the last drops of blood from us.
      Not fun watching the fall.
      j3

  2. bobschacht says:

    Thanks for this, EW.
    Your critique provides yet more reasons we need Elizabeth Warren in charge of the CFPB, and why Timothy Geithner and Larry Summers ought to be fired.

    Bob in AZ

  3. rosalind says:

    insular doesn’t even begin to describe the titanium-strength bubble world the d.c. elite inhabit. i shudder at the level of despair We the People will be further subjected to while we await the crisis to personally reach our MOTUs, at which point they’ll concoct some further self-interested relief to soothe the unpleasantness while we’re expected to keep to our place on the outside looking in.

    We the People, and the Country, won’t be able to hold that position much longer.

  4. fatster says:

    Excellent article, EW. Just excellent.

    And here’s some sound advice which certainly won’t be heeded.

    Howard Dean: Obama aides need to spend ‘some time outside Washington’
    “The people around the president have really misjudged what goes on elsewhere in the country, other than Washington,” D.C.Dean told Candy Crowley on CNN’s “State of the Union.”

    LINK.

  5. thatvisionthing says:

    Or, they don’t give a shit that this program asks homeowners to pay over and over for their mistakes, all to make sure the banksters never have to pay for their own.

    Haven’t the banks already been made whole for their toxic mortgage assets? They got bailed out along with Fannie and Freddie, yes? And then they were given more free money from the Fed at little or no interest, yes? (I wasn’t.) So the corollary of homeowner and taxpayer pay over and over is that fraudster-banksters keep getting paid over and over, for the same “toxic” asset? And when I’m foreclosed on they’ll roll my house again…and then again… gathering fees all the way? What a fabulous way to win fantasy casino!

    • jimhicks3 says:

      Have to define ‘the banks’ – only the giants were bailed out – the small local banks are being left to twist in the wind or are being closed. Even in the banking industry (& the word industry is laughable) there are the elites and the little people that they crush.
      j3

      • thatvisionthing says:

        Thanks, you’re right of course. But I still want to know how many times these motus are getting paid for the same “toxic” asset, or in how many ways we are paying for the same toxic asset. I wonder if MERS could tell us.

  6. fatster says:

    O/T

    Detainee torture cases proceed overseas as U.S. stonewalls

    “Judges in Great Britain, Spain, Australia, Poland and Lithuania are preparing to hear allegations that their governments helped the CIA run secret prisons on their soil or cooperated in illegal U.S. treatment of terrorism suspects. Spanish prosecutors also have filed criminal charges against six senior Bush administration officials who approved the harsh interrogation methods that detainees say were employed at U.S. military prisons in Afghanistan, Iraq, Guantanamo Bay and other sites.”

    LINK.

  7. thatvisionthing says:

    The alternative to HAMP, of course, is cram-down

    I read the Rortybomb review of the meeting, and Mike Konczal does give another alternative — actually spend the HAMP funds on homeowners:

    There was talk about how fiscal policy can’t move through Congress. I asked them about only 0.5% of HAMP being spent and how that could be used without Congress’ permission. Before I suggest that the remainder of the $50bn be divided into two funds, the Digging Holes Across States (DHAS) fund and the Filling Holes Across States (FHAS) fund, two far more socially productive means of spending the HAMP money than what is currently being done with it…

    he’s basically told “trust us.”

    • thatvisionthing says:

      EW, have you seen Ellen Brown’s article up on Common Dreams now, Homeowners’ Rebellion: Could 62 Million Homes Be Foreclosure-Proof? California court finds that MERS — the Mortgage Electronic Registration System created to facilitate the slicing and dicing of mortgages for toxic securitization — was too slick by half — it extinguished the right to foreclose. Cynthia Kouril wrote about that here a year ago and caught Brown’s article here. Since it’s just a “nominee,” MERS doesn’t own the note, can’t transfer the note, and Citibank can’t collect payment. The decision builds on prior cases in other states, e.g., Kansas and Nebraska.

      So there’s another alternative to HAMP and cramdown. Screwed homeowners may be able to find their way to owning their houses free and clear because of the fraud.

      Keep reading though. Did I say fraud? Yep, as in criminal. There’s a class action racketeering and mail fraud suit in Florida, and a qui tam suit in California since the point of MERS was to keep titles out of the hands of city and county title recorders and thus not pay fees that should have been paid.

      The plaintiff sues for treble damages for all recording fees not paid during the past ten years, and for civil penalties of between $5,000 and $10,000 for each unpaid or underpaid recording fee and each false document recorded during that period, potentially a hefty sum.

      Similar suits filed in Nebraska and Tennessee. :-)

      But keep reading! Maybe this is why HAMP is playing out the way it is — Brown quotes SF Chronicle article from 2007:

      The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.

      . . . The loans at issue dwarf the capital available at the largest U.S. banks combined, and investor lawsuits would raise stunning liability sufficient to cause even the largest U.S. banks to fail . . . .

      That was 2007 — are those bailed-out mortgage securities still even more toxic?

      Extend, extend, extend, and pretend, pretend, pretend… ?

      Brown suggests a possible resolution to all of this is nationalization of bankrupt banks, like Sweden did.

      I totally love this article.

        • cinnamonape says:

          I’m wondering if the whole HAMP process was to give the banks time to find the documentation, or trace it with information provided from the homeowner, or to simply find some issue with the paperwork provided by the homeowner to make them believe that they have to allow eviction.

          Does anything in the documentation that homeowners sign regarding the HAMP application make them acknowledge that the bank “owns the note” and “waive the right of challenging the bank to produce it”?

            • thatvisionthing says:

              More on the extend and pretend and wtf is going on with a govt program that fails and harms everything it’s supposed to help? I keep remembering this part of Elizabeth Warren’s panel at Netroots Nation. You can watch the video here, start at around 50:45:

              QUESTION FROM THE AUDIENCE: Hi, I looked at the 2005 bankruptcy act, and it had some changes to how derivatives were treated in bankruptcy, and I didn’t really understand that…

              ELIZABETH WARREN: Oh, you weren’t supposed to understand it. (laughter) I’m dead serious on this.

              So, what Matt’s pointing out is that the big headline in the 2005 bankruptcy changes was how it really hammered families in trouble, people who’d had problems with unemployment and medical debts and family breakups, and said, “We’re just going to make it a lot harder, a lot more expensive to go bankrupt.

              But in a little provision that had no sponsor, an amendment that made it in somewhere in the process — go back and look, I’m serious about this — there was also a little tear in the fabric that was about financial products like derivatives and credit default swaps and repos, and it said — remember all those rules of bankruptcy that if anything goes wrong, there’s something called an automatic stay. Tweet! Nobody gets to come in and collect from the business once it files bankruptcy — it’s like a time out — without coming in effect through the bankruptcy judge,so that the bankruptcy judge can keep track and see what happened, that the claims are all correct, and to give a little breathing room to the company so the company can kind of get itself stabilized. Instead, this little tear in the fabric said, “That’s all true, those are the bankruptcy rules, except for this list of financial products.”

              And they kept saying, “Don’t worry about it, it won’t really have any effect at all” — until Lehman got into trouble. And if you want to understand the Lehman bankruptcy, understand Lehman was in many ways not a bankruptcy. Because Lehman didn’t have the fundamental protection of the automatic stay. Everyone could come in with their credit default swaps and their derivatives and their repo agreements and so on and continue to take things out of Lehman.

              In other words, what we have in the case of these big companies and financial products, it’s like the old bank runs. You know, the first one to come in and seize is the one who’s going to get paid in full, and if you don’t get in there fast enough, you don’t. The bankruptcy system doesn’t work right now for financial products. Lehman showed us that, and yet the financial reform bill could not be brought so far as to stitch up this part of the hole on financial products.

              So all I can say — I will only finish on Matt’s point by saying, everyone else understands the tools. The insiders get it, and they get it big time. And they know not only how to play the system as it exists, they know how to change the system to work it to their advantage. And bankruptcy is just one of the many examples. And who ends up paying for that? All the rest of us.

              Regarding length of quote, there is no transcript to link to, I just transcribed that section of the video. I think it’s fair use.

              • bobschacht says:

                Thanks for the transcription. Elizabeth Warren understands stuff like this– and she’s on our side. Barack Obama: apparently not so much.

                Bob in AZ

              • bmaz says:

                Quote is fine, and thanks for providing it. Pretty much emblematic of where we are, why we are in this sucking sinkhole economically and operationally as a people, and why, despite all the happy talk, the odds are so stacked against Elizabeth Warren ever being confirmed as head of the CFPB or, in the remote chance she is, having any real authority, jurisdiction and/or funding to do the job intended.

                • thatvisionthing says:

                  I’m thinking it’s why Christopher Dodd keeps cutting her down. Isn’t he the one who would know where that sponsorless amendment that somehow got slipped in came from? I remember a similar story about him slipping a lousy amendment into a financial bill, and it turned out he did it because the White House asked him to.

                  And 2005 — preparation laid down years ahead of time before Lehman failed. Then TARP dumped on everyone at the last second, you have to pass this now or the world will end!

                  MERS — you go back to the beginning of MERS, Fannie and Freddie are in on it, I think they’re part owners, or the instigators — I can research it but I’m afraid comments are going to close. And all those FBI agents reassigned away from fraud after 9/11 to go after “terrorists.” Hardly any left. Marcy Kaptur wanted it restaffed; I really don’t know if that happened. You seen any fraud cases lately filed by the govt?

              • thatvisionthing says:

                More re 2005 bankruptcy bill compared to HAMP extend-and-pretend, or extend-and-don’t-even-bother-to-pretend:


                The Failure of Bankruptcy Reform

                Rortybomb 9/16/09

                In so much as the goal of the [2005 Bankruptcy Reform] bill was to deter risky borrowing ex ante (and thus reduce filings) or increase bankruptcy payouts ex post (by moving people to chapter 13), it was a failure. Since lobbying is costly, if you were the CEO of a credit card or financial company, would you have fired the team responsible for writing this for Congress?

                Actually no, you’d give that team a giant raise.

                Sweat Box

                This is the argument Ronald Mann builds on in his provocative paper Bankruptcy Reform and The “Sweat Box” of Credit Card Debt. His argument is that the bankruptcy reform bill wasn’t about ex ante filing reductions or ex post recovery increases; it was about delaying the actual time it took to begin a bankruptcy claim. Many of the features of the bill, including ‘credit counseling’, raising filing fees, debt-relief agencies, etc. are designed to raise the time barrier between financial distress and the act of filing a bankruptcy. And what happens during that time? The person in question is paying triggered high-interest rates on credit card loans.

                As for HAMP and the hell of delays and thwarts homeowners enter when they try for a loan modification, see the HuffPo article I linked to @10, Are Loan Modifications Causing Foreclosures? There’s too much to distill into a quote.

                ~~~last link repaired~~~

        • thatvisionthing says:

          Yes, that was my second “here” link. Happy to repeat it:

          Cynthia Kouril wrote about that here a year ago and caught Brown’s article here.

      • emptywheel says:

        Actually, I’m pretty sure Cynthia Kouril did the earliest work pulling together those suits from around the country to suggest what might happen.

      • ManwithaParachute says:

        So, would not the potential impact of this “fraud” be that even with mortgages in good standing the banks or companies administrating the mortgage have been collecting monies from us folks who have been paying on time that we could recover?

        • thatvisionthing says:

          I am SO not a lawyer — I wish I knew the answer to that. I can hardly follow the bouncing ball:

          As alleged in a Nevada class action called Lopez vs. Executive Trustee Services, et al.:

          Before MERS, it would not have been possible for mortgages with no market value . . . to be sold at a profit or collateralized and sold as mortgage-backed securities. Before MERS, it would not have been possible for the Defendant banks and AIG to conceal from government regulators the extent of risk of financial losses those entities faced from the predatory origination of residential loans and the fraudulent re-sale and securitization of those otherwise non-marketable loans. Before MERS, the actual beneficiary of every Deed of Trust on every parcel in the United States and the State of Nevada could be readily ascertained by merely reviewing the public records at the local recorder’s office where documents reflecting any ownership interest in real property are kept….

          After MERS, . . . the servicing rights were transferred after the origination of the loan to an entity so large that communication with the servicer became difficult if not impossible …. The servicer was interested in only one thing – making a profit from the foreclosure of the borrower’s residence – so that the entire predatory cycle of fraudulent origination, resale, and securitization of yet another predatory loan could occur again. This is the legacy of MERS, and the entire scheme was predicated upon the fraudulent designation of MERS as the ‘beneficiary’ under millions of deeds of trust in Nevada and other states.

          MERS is a disease — everything it touches turns to fraud. Kind of Midas-y, I guess that’s poetic.

          • ManwithaParachute says:

            Given the tenacity of Orly Tate, maybe i should hire her to start a possible class action against the entire industry….of course the SCOTUS has the ability to make a decision and and at the same time say it is not to be used in future cases as precedent. This in and of itself seems to shred the constitution.

        • thatvisionthing says:

          Then there’s this:

          California Court Rules: MERS Can’t Foreclose, Citibank Can’t Collect

          According to several attorneys, this opinion should serve as legal basis to challenge a foreclosure in California that has been based on a MERS assignment. It could also be used when seeking to void any MERS assignment of the Deed of Trust, or the note, to a third party for purposes of foreclosure; and should be sufficient for a borrower to obtain a TRO against a Trustee’s Sale, and a Preliminary Injunction preventing any sale, pending litigation filed by the borrower that challenges a foreclosure based on a MERS assignment.

          IWIWAL (I wish I was a lawyer :-)

  8. thatvisionthing says:

    As these revelations about Treasury’s self-congratulation on HAMP have come out, I keep thinking of the word “parasite.” The folks we pay to keep our financial system running for the good of the citizens of the United States are unabashedly celebrating that they’ve made individual families’ lives more miserable because the banks–who while SCOTUS may treat them as people are not actually part of the “We the people” originally envisioned by the Constitution–will have time to recover from their own damn mistakes.

    See, that’s why I don’t get this part of Rortybomb’s review:

    – They used the phrase “level-playing field” a lot. They also said “finreg” for the financial reform bill and process.

    I can’t imagine how “level-playing field” gets used in a Treasure Dept. sentence.

    • readerOfTeaLeaves says:

      Ah, yes: Maiden Lane.
      This is only one of the links to Yves Smith’s excellent posts on the topic; more at NakedCapitalism.

      The MSM is really missing the boat by failing to explain this disaster, although this link has a nice summary, including:

      As part of a bailout that swelled to $182.3 billion, AIG and the Fed created Maiden Lane III, a taxpayer-funded facility designed to remove mortgage-linked swaps from the insurer’s books. Shannon told the New York Fed on Nov. 24, 2008, that AIG executives wanted to publicly disclose details about Maiden Lane the next day.

      “Do you think it might be feasible to hold off on the Maiden Lane III 8K and press release until next week?” Brett Phillips, a New York Fed lawyer wrote in an e-mail that day. “The thinking is that the Maiden Lane III closing will be a less transparent event, and it might be better to narrow the gap between AIG’s announcement and the New York Fed’s publication of term sheet summaries.”

      “Given the significance of the transaction, AIG would be best served by filing tomorrow,” Shannon wrote. “We will of course be guided by your counsel.” The document outlining the Maiden Lane agreement was posted on Dec. 2, 2008.

      Talk about your ‘parasites’…

  9. Phoenix Woman says:

    “Parasites” is of course what Ayn Rand fans like Allan Greenspan (and no doubt his wife Andrea Mitchell) and the “intellectual” conservatives like Paul Ryan and Mark Sanford think we all are. We failed at Social Darwinism, so no Dagny Taggarts for us to treat like inflatable sex toys! And no affordable housing, either!

    • thatvisionthing says:

      The “parasites” thing — I keep thinking back to Star Trek: The Motion Picture, and Vger, the monster machine probe going through the galaxies wiping out “carbon infestations.” It was going to cleanse the Enterprise too, a fine machine but damn all those carbon infestations, er crew. Did not realize that it had been created by carbon infestations; it had its programming to fulfill.

      Turns out that it was one of those “and then a miracle occurs” Citizens United things — it had been damaged and then repaired by another machine with its own programming, and Vger’s original programming got tweaked — it became like the brain of this vast support machinery built around it with magnificent power — it kind of became conscious. Kind of a person. Or a person wannabe.

      Well, there’s your corporate personhood. We created it! We rule– what, we don’t?

      We took capitalistic greed and made it our king person.

  10. klynn says:

    Between this post and the previous post, I am at a loss as to what we should call our country.

    It’s not a democracy anymore.

    • oldgold says:

      It’s not a democracy anymore.

      It never has been and it was never intended to be.

      It is what it always has been and was intended to be. A republic that favors the well-off and the well connected.

      • klynn says:

        oldgold,

        I question whether we have ever been a Republic.

        Is our nation built on seeing it function as a “public affair”? With the lack of transparency, I would conclude we are not a Republic.

          • klynn says:

            No, I am in agreement with you to an extent in terms of who is favored in our society. I just question if we are really even a Republic.

            My comment was not meant as an attack but as further dialogue to your insight.

            • oldgold says:

              I just finished reading Miracle in Philadelphia. It is a good history of the Constitutional Convention. It is a good historical read.

              Here is a synopsis:

              Among other things, it examines in brief the factors that allowed for the constitutional establishment of a single executive as well as the establishment of a bicameral legislative system. It also looks at what the founding fathers meant by federalism and why they chose a republican form of government over a more purely democratic one.

              http://www.academon.com/Essay-Miracle-at-Philadelphia/85782

              Our Founding Fathers were, generally speaking, anti-democratic.

          • klynn says:

            Although, the lack of transparency sure could be a flanking maneuver. The lack of transparency does allow for citizens to be attacked from many directions.

  11. jawbone says:

    Love the double standard: Little people who walk away from their underwater houses are chastises as lacking moral character. They’re just supposed to suck it up and keep on paying the banksters*.

    But, just this morning, there was a report on NPR about the next big financial tsunami for the banksters (and honest banks) is that commercial property notes will be coming due at a time the value of those properties has tanked and many buildings are empty and the owners are receiving no rents. The segment closed with the reporter noting that analysts said banks (including the banksters) would be better off than during the housing crash because they had time to plan. Many banks are already renegotiating the notes with the building owners to reflect the lower values of the properties (cramdowns, but done by the banks to protect themselves a bit?). This was considered to be a good thing.

    Nice double standard there, eh?

    And…I went to find the segment and there’s nothing there. I’m pretty sure I heard it…but did anyone else? Was I dreaming?

    Aha! It was a locally WNYC produced segment, mostly about the Northern NJ commercial real estate market, but did mention same things are happening in many other markets.

  12. DrDick says:

    This is not simply letting them recover from their “mistakes”, it is allowing them to avoid paying for their greed and outright malfeasance. far too many of these bad loans were deliberately misrepresented to the people who took them and the applications often falsified by the originators in order to maximize their profits.

  13. fatster says:

    Here’s a nice little article on two true parasites and how they’re shaking in their boots.

    In S.E.C. Fraud Suit, Texas [Wyly] Brothers Stand Firm

    LINK.

  14. klynn says:

    oldgold @ 28

    I’ll have to read it. One of my favorites is, Decision in Philadelphia: The Constitutional Convention of 1787.

  15. Ann in AZ says:

    Heck, even the banksters get the equivalent of cram-down without a big morality play.

    Sooo true. Many of the foreclosures are not due to the owners buying too much house or a house they couldn’t afford. Some are due to the drubbing home values took at the hands of the banks. Some folks were credit worthy and expected to refi before their rates went through the roof, but couldn’t because the house they bought for $250K was now worth $175K. That’s on the banks; not really their fault. One expects real estate to at least hold its value even if it doesn’t appreciate.

    The other thing is, cram down should be allowed for the simple reason that the banks could not sell the asset to another buyer for the current amount they originally lent; again, the banks caused the market to devalue the assets in their rush to make a fast buck.

  16. gesneri says:

    What happens in a decade when large numbers of middle class kids can’t go to college because the government decided it was okay to subject their families to more misery during a foreclosure?

    Maybe protest will become a reality in this country if young people are energized by something like this. I think young people can be the backbone of a real protest movement–they have the optimism needed to believe that they can actually effect change.

    • readerOfTeaLeaves says:

      My state has caucuses for Presidential primaries, and in 2008 there was a **huge** turnout in my precinct, and in my state. The thoughtful comments of all the people that I heard just blew my mind; the number of dots they connected blew my mind.

      Among the <30 year olds, every single attendee was for Obama (as were at least half the rest of the attendees). And of that group, paying for college was just about #1 on the list of that entire group of voters.

      So I don't think it'll be ten years for this to blow up; it's happening already.

  17. Hugh says:

    There is no surprise here. Some of us have been pointing this out literally for years now that both Bush and Obama Administration programs to “help” homeowners have been about perception not substance. Their purpose has been to instill confidence in markets and prop up housing prices by giving the illusion that something was being done. However their impact was marginal. The real help for housing prices came from the Fed and GSE securities buying programs. The Administrations’ programs on the other hand have been small in comparison to the problem, with all kinds of strings attached, and mostly got the few who qualified in deeper. The numbers who actually benefited from these programs were tiny. If anyone had been seriously interested in helping homeowners, cramdowns and an indefinite moratorium on foreclosures would have been on the table. They never were. The most you can say is that the moratoria on foreclosures we have seen were strategic from the bankers’ point of view and aimed at not flooding already glutted markets with even more homes and driving prices lower.

  18. Hoofin says:

    What I don’t understand is that the government already lets people deduct part of their mortgage interest from their taxes. They also let banks deduct a mortgage principal writeoff as a bad debt.

    So the government is already subsidizing, or taking a hit, on two sides of the transaction.

    Instead of Cramdown, why can’t the government just give the banks the incentive to write off 75% of the difference in an underwater mortgage? Additionally, let the homeowner have a refundable tax credit for mortgage interest, in place of the deduction, that would make the interest the same as if it were a 4% mortgage. (So if they’re paying subprime 8% interest, they get half of that as a refundable tax credit.)

    The homeowner would still be free to default, but could not be eligible for federally-insured loans if he/she does.

    How much extra could that cost?

  19. brendanx says:

    Parasites? Where’s the gratitude for the innovative credit instruments this class has provided?

    A propos of parasitic classes, I just started reading Timothy Garton Ash’s history of Solidarity. There’s a faint parallel to us, in that that movement was triggered by an economic crisis engineered by the profligate borrowing of their parasitic class. Unfortunately, in this country there’s a dearth of solidarity or patriotic feeling. Indeed there’s an outright malice towards the poor and working classes, particularly non-whites, who bear the stigma of parasite in our morally inverted politics.

  20. wavpeac says:

    You all here have heard me say this over and over again. Obama has a HUGE public relations night mare on his hands…made possible by Geithner and friends. When they bailed out these banks…I think it was to keep a lid on the fact that millions of Americans had their homes literally stolen by criminal behavior. I have said that I could have easily righted my ship and kept making my payments had they not refused communication with me for the 6 months in the lead up to my foreclosure. They gave my case to “lawyer mill” in St. Louis Ms. My loan originated in TX and I live in NE. The lawyer was impossible to find on my own. (a bankruptcy lawyer was able to find it on his system). They would not give me my pay off. This is a violation of RESPA law and makes it impossible for you to line up money to pay off the loan if you don’t know that it’s going to double or triple due to fees. They didn’t want me to know that they were charging me property inspection fees, and fees to cash my checks electronically. (those fees were only added in retrospect after they quit taking my current payments).

    There are so many things they did that violate the law. Most people who got sub prime loans had no idea that they couldn’t do this stuff. They went along and lost their homes. The fees probably seemed right in line with the way the credit cards were working.

    At any rate…if people found out that we bailed out banks who were using a criminal system, fraud to make money…as we lost our homes, Obama would look like he colluded. And that’s exactly what he did.

    • bobschacht says:

      At any rate…if people found out that we bailed out banks who were using a criminal system, fraud to make money…as we lost our homes, Obama would look like he colluded.

      If the DOJ was really doing its job impartially (you know, blind justice and all that), there would be dozens of big fraud cases before the courts right now. It would be nice if someone who knew how to keep track would write a diary about that.

      But what seems to happen is either
      * fraud goes unprosecuted, or
      * fraud, when prosecuted, results in mere wrist-slaps, without jail terms, and small fines amounting to a small fraction of the amount of the fraud itself.

      This is not change I can believe in.

      Bob in AZ

        • thatvisionthing says:

          Experts also disagree about the long-term consequences. Some, like Professor Fisch, expect regulators to seek more punitive settlements. Others said that agencies instead would favor lenient penalties that do not require judicial review.

          M. Todd Henderson, a law professor at the University of Chicago, said the impact would be determined by the public’s reaction.

          “I think it’s a public relations stunt more than anything else,” Professor Henderson said. “The court is trying to make it public that the government may be cutting cozy deals, because it is the public that ultimately controls the executive branch,” which includes the Justice Department and the S.E.C.

          I guess we’re supposed to scream louder?

          But in the deep vacuum of MSM space

    • thatvisionthing says:

      Is this for real? Commenter on HuffPo linked to this youtube. “So the next time you ask yourself why is it so hard to get a loan modification?,” the answer is:

      Indymac Boys Get Sweetheart Deal

      …Next, according to the sweetheart deal, the FDIC writes a check to OneWest Bank for 80% of the net loss. So in this case, OneWest Bank gets a check from the taxpayer courtesy of FDIC for $195,360. Ok. So now add the $195,360 from the government to the $241,000 cash offer, and OneWest Bank just made $436,360 on a loan they bought for only $334,600. And all they had to do was sell it for whatever they wanted to. Guys, they can’t lose money on this deal. Think about it. So OneWest Bank just profited from this short sale to the tune of $101,760. All thanks to the insane arrangement that they have with the FDIC. Hey, whoever said it’s good to have friends in high places wasn’t kidding around.

      So the next time you ask yourself why is it so hard to get a loan modification? The answer is, because there’s too much money to be made with short sales and foreclosures.

      Now… are you ready for an encore? Even though OneWest Bank profited by over $100,000, the house was still sold for less than the full loan amount. In this actual scenario, the borrower was forced to sign a promissory note for $75,000 to OneWest Bank.

      So who really pays in the end? Well, we’ll just let you decide.

      • thatvisionthing says:

        Oh, and by the way, the FDIC just announced that it needs to start borrowing money from the Treasury. The Treasury being the place all those Goldman Sachs guys called home before they called OneWest Bank home.

    • thatvisionthing says:

      And while they were stringing you on and stuffing in fees…

      EXCLUSIVE: Fannie and Freddie’s Foreclosure Barons
      Mother Jones 8/4/10

      How the federal housing agencies—and some of the biggest bailed-out banks—are helping shady lawyers make millions by pushing families out of their homes.

      …This all might seem like a legal technicality, but it’s not. The faster a foreclosure moves, the more difficult it is for a homeowner to fight it—even if the case was filed in error.

      …Last year, the foreclosure dockets of Lee County in southwest Florida became so clogged that the court initiated rapid-fire hearings lasting less than 20 seconds per case—”the rocket docket,” attorneys called it. In Broward County, the epicenter of America’s housing bust, the courthouse recently began holding foreclosure hearings in a hallway, a scene that local attorneys call the “new Broward Zoo.” “The judges are so swamped with this stuff that they just don’t pay attention,” says Margery Golant, a veteran Florida foreclosure defense lawyer. “They just rubber-stamp them.”

      …While the mortgage fiasco has so far cost American homeowners an estimated $7 trillion in lost equity, it has made [Florida foreclosure mill firm owner Daniel] Stern (no relation to NBA commissioner David J. Stern) fabulously rich.

      …FORECLOSURE MILLS OWE their existence to Fannie Mae and Freddie Mac…

      …Stern’s company is one of dozens of mills that now churn through more than a million cases a year for Fannie and Freddie, big banks, and private lenders.

      …The business model is simple: to tear through cases as quickly as possible. (Stern’s company handled 70,382 foreclosures in 2009 alone.) This breakneck pace stems from how the mills get paid. …The more they foreclose, the more they make. As a result, consumer attorneys and legal experts say, even families who have been foreclosed upon illegally—and who can afford to make good on their mortgages—end up getting steamrolled. “It’s ‘How fast can I turn this file?'” says Ira Rheingold, executive director of the National Association of Consumer Advocates in Washington, DC. “For these guys, the law is irrelevant, the process is irrelevant, the substance is irrelevant.”

      • wavpeac says:

        There could be no foreclosure mills if they the mortgage companies had been following RESPA and TILA laws!

    • thatvisionthing says:

      Heard yesterday on NPR:

      Mr. KRAMER: And then we also have the banks paralleling foreclosures on top of modifications. And people they’re in the middle of getting a modification and then they get foreclosed on two, three months later anyway. It’s just brutal.

      SIEGEL: I want you to explain. When you say the bank is doing a modification on a mortgage and then foreclosing just the same, when you say modification, what does that mean?

      Mr. KRAMER: Well, that’s when somebody comes (unintelligible) the federal program and some of the banks have embraced it and said, well, we’ll modify your loan to make your principal less or your interest less so you can afford the payment now. And while you’re going through that process, the banks usually take anywhere from six months to 16 months to do it. The banks parallel, in other words, they’re doing all the formal statutory things they have to do to foreclose on you. And they kind of set you up to fail. And if you can’t make the payment or you get late with a payment, they foreclose on you right away.

      SIEGEL: So you’ve had foreclosures of people who, as far as they knew, were negotiating their way to keep themselves in the house.

      Mr. KRAMER: I’ve had people foreclosed on who had finished negotiating and had signed all the paperwork and were foreclosed three months later, even though they made all their payments.

  21. alinaustex says:

    [email protected]

    Should there not be some common ground we can find with fiscal conservative to help fight this fraud ? Many fiscal conservatives I know want to do away with the Freddie and Fannie – okay maybe we do that with them but make certain that the foreclosure mills have been shut down . The parasitic banksters are also feeding on the GOP base as well – this would be an opportunity for progressives if Tim Geithner and Rahm Emmaunel were either fired or made to work for We the People who voted them in …

  22. alinaustex says:

    If President Obama was governing the way he was speechifying in his campaign we would be so much better off . Wonder if we can get Sen Feingold to run in the Primary in 2012 ? This is not what I voted for in 2008.

  23. wavpeac says:

    Here’s the line from one of my clients who happens to be a millionaire. She said she was talking with a banker who went to foreclose on a loan. The story goes like this….”The borrower bought the house knowing they couldn’t afford it and then refused to leave because they said Obama would bail them out and take care of them.” She truly believed this story, that Americans are being bailed out of these loans per Obama. This person is seriously bright and works in the computer software industry.

    Furthermore, if we don’t start making the fraud part of the story…which I have been shouting from the roof tops since my night mare began, we are doing a disservice to the story. It’s not just that people should not have gotten these loans. Some of these folks budgeted wisely and could have kept the loan…but if they went through one financial crises, it would trigger these HUGE fees…most of which were fraudulent. I went through a divorce when I had a conventional loan back in 1991. During that time…my ex and I due to communication issues forgot to pay the mortgage. (well I thought he did and vice versa). We were three months behind and they called us and worked it out. Piece of cake. If you have a conventional loan, you don’t know this is happening. And if you have a subprime loan, you already feel like you were “less than” and maybe you deserve it. Furthermore the statements are literally unreadable.

    When GMAC tried to say I hadn’t make 6 months worth of payments and I proved it in court, the Judge stated that the statements were worthless. They are and many people won’t admit that they don’t know how to read them. I took them to many lawyers in town, all who stated that the statements made it impossible to know or understand what had happened to my payments and what the fees were for.

    It’s a nightmare if you are in it and know what’s going on. I sometimes wish I hadn’t know because I might feel less stressed and less victimized. Medical bills, late child support, a lost job, were not about a mortgage holder not budgeting. In my case, a custody battle with the ex, completely wiped out my savings…after I bought the house. To the tune of 10,000.00$. Medical bills could do the same.

    It’s not accurate and when I hear the same old tirade, “homeowners who over borrowed” I just wanted to scream. I fought off 3 hospital acquired infections MRSA, then had surgery to remove the infection and caught two more infections. Three more surgeries later, the medical bills are over 100,000.00$. With our insurance, we will owe 20%. My old insurance back in 2000, when I had the first surgery that caused the infection covered everything at 100% after a certain amount. My job got rid of that insurance as soon as they started hiking the rates.

    It’s a perfect storm, and it’s not just about who borrowed and how stupid they were, or how un prepared they were. Who is really prepared for a theft or a rape. No one. But we all look at the victim and think…”well, it wouldn’t happen to me…”

    end of rant…sorry folks but just when you think it can’t get worse, sometimes it does…

    • thatvisionthing says:

      I really thank you for your vent. It reminds me of a diary I read on Daily Kos last year by a guy who had some real estate savvy who was fighting his foreclosure — the loan had been transferred and the new servicer misapplied his payments for months. Quite a story, he thought he had them nailed on the fact that they had misrepresented their ownership of his original note, a violation of federal law, and filed two fraudulent lawsuits against him. He was going to post an update, but never did:
      How I am beating the crap out of Countrywide/MERS

  24. Nell says:

    Excellent post. One spelling nitpick, which in this context isn’t really a nitpick:

    in which the banksters have to cut the principle owed to them

    should be principal