Tuesday, April 13, 2010

A Steaming Roll of Nickels

The big four mortgage bankers appeared before Congress today and said they have no intention modifying any home loans and you can’t make us. They prefer to continue foreclosing on homes. The Census Bureau says there are 3.4 million homes currently standing empty. The best estimates are that there are upwards of four million mortgages already in the foreclosure pipeline on top of two million already processed.

There are probably another five million mortgage holders that could enter foreclosure in the next year or less. Once a community reaches a certain density of foreclosed homes it starts to feed on itself. Local tax revenue dries up as abandoned property brings in nothing but eats up increased services from the city for police, fire and so on. The increased burden shifted to remaining homeowners helps drive them under. Local businesses layoff help and eventually close. They default on their commercial loans and debts to other businesses spreading the disaster. Somebody has termed these mini-Katrinas, destroying neighborhood by neighborhood. Thousands of these little storms are brewing across the country. Mortgage holders that owe more than their house is worth are described as being under water. Millions of people who are current on their mortgages now will find they can‘t make their payments as the economy spirals down. Unable to sell or refinance, they will drown too.

The banks routinely get far less from foreclosure than the amount the current owner could pay under modification so why would why would bankers who measure margins in fractions of a percent want to foreclose? It’s simple, the bankers don’t give a steaming roll of nickels for the long term health of their own banks let alone America. Bush left behind tax and accounting rules that allow the bankers to lose money hand over fist and still look good on paper each quarter. The more foreclosures, the better the books look, after all there are billions in executive bonuses at stake.

If they run their banks into the ground in a couple of years, so what? That’s what trillion dollar bailouts are for. Even if the government seizes the big banks and liquidates them, it’s not like the bank executives have their own money invested in them. They aren’t stupid. When a hurricane comes you go to high ground. The bankers’ high ground is in gated communities behind armed guards. The rest of us are on our own. www.prairie2.com


RobertM said...

re: If they run their banks into the ground in a couple of years, so what?

All the more reason to take away their ability to create money (which is exactly what groups like monetary.org and SwarmUSA.com are proposing). When housing prices left the realm of 2x-3x annual income, the ending to the story had been written. Either wages have to go up (not likely) or house prices have to go down.

The bankers, in their quest to prop up their global Ponzi scheme, have hurt all citizens alike. Homeowners will see the value of their homes decline (fictitious as they were), many will be foreclosed on and people like me will never be able to afford a home because they are so overpriced.

I welcome turning homeowners into renters, hopefully bankrupting the banks and real estate industry, painful as it will be for the average citizen. Only then will we see real change as Naomi Klein's Shock Doctrine points out so well. I don't think the people will stand for another bailout from Congress (even though there's a huge back-door bailout going on at the FED).

There IS a solution to our problems but Congress will have to be forced into it by pressure from their constituents.

prairie2 said...

converting everybody into renters is exactly what this is all about. "corporate communism" is a good term for what they are about.

Fake_William_Shatner said...

They'd rather "reign in Hell" than serve in Heaven I suppose should be the title here.

What's the point of being rich, if everyone else is "prosperous enough?" Sure, the Kings of Europe, didn't have cable TV, and those castles were drafty -- but when they went to Scotland, they could bet a man's wife and have him beheaded if he protested -- and the groveling and kissing of rings was great sport.

Yes, the Banksters will load up the loot in offshore accounts -- or more likely, exchange it for Gold as they must know this will eventually make the Dollar useless ... but, I think for the people who PLANNED the collapse, it's more about those "traditional values" that got ruined by the Magna Carta.

I think it's not "corporate communism" -- that's just the CURRENT process, the final result will be; "We are all sharecroppers on the lands of our forefathers."