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Friday, June 5, 2009

Economy The Struggle

Posted by Charles Mudede on Fri, Jun 5, 2009 at 10:24 AM

Banks! They are in the business of no shame.

But Mr. Obama did not mention that the measure he was signing, the Helping Families Save Their Homes Act, was missing its centerpiece: a change in bankruptcy law he once championed thatwould have given judges the power to lower the amount owed on a home loan.

It had been stripped out three weeks earlier in a showdown between Senate Democrats and the nation’s banks, including many that are getting big government bailouts.

As Congressional Democrats and the White House crow about multiple victories over the financial industry, including new rules for credit card issuers, banks are quietly savoring an even bigger victory of their own.

The defeat of the bankruptcy proposal is a testament to the enduring influence of banks, even as the industry struggles financially and suffers from its role in the economic crisis.

This is the 21st century; this is class warfare.

Comments (7) RSS

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It's class warfare because now you have to declare bankruptcy to get out of debts you agreed to pay?

Posted by texttwist on June 5, 2009 at 10:46 AM

See "Why the Present Depression will be Deeper than the Great Crash of 1929":

http://www.oftwominds.com/blogjune09/dep…

Posted by MichaelPgh

on June 5, 2009 at 10:48 AM

A class war in which only the upper classes are organized.

Posted by Trevor on June 5, 2009 at 11:01 AM

The lower class still hasn't gotten the memo that real estate and the stock market aren't going to turn them all into millionaires in time for retirement. Lots of them have figured it out, but lots of them are also still in denial. Once everyone is on the same page there will be a jolt of socialism that will last exactly long enough to repair the damage done over the last 40 years. Once things have stabilized the rich will be back, hissing the siren song of the ownership society in the ear of the Joe the Plumbers, and before you know it things will snap back to 1990s style deregulation and a pure speculation economy.

Only next time, we'll have to do it all with considerably less in the way of clean air, clean water, arable land, trees, energy, and mineral resources.

I'd be curious to see how it's all going to turn out, except the answer is so patently obvious: "BADLY."

Posted by Judah

on June 5, 2009 at 11:10 AM

I don't know about a class war, but the loss of cram down in bankruptcy was unfortunate. These reductions in principal would have only been available had (1) the debtor tried to renegotiate with the holder of their mortgage (2) it would cost the holder more to foreclose than to reduce the principal. It would also only been for a limited time. Yes, people should pay back what they agreed to when they took out the loan. But practically speaking, what motivation does a homeowner have if their house is worth $100,000 or more than their mortgage (in my practice I've seen a lot worse in the far out suburbs)? The result is that "innocent" neighboring properties decline in value because of a foreclosure and the tax base of a city/county is further undermined. And remember a person with a second home can get it reduced in bankruptcy. It just doesn't apply to your first home. Finally, banks are partially responsible for this run up of property "values," which has caused the underwater problem. As they would lend to anyone with or without a pulse, they lobbied for the mortgage interest rate deduction and they marketed endless refinances and home equity loans.

Posted by royskeen on June 5, 2009 at 11:16 AM

Yes, the banks are amoral, but this isn't just as simple as greedy institutions putting the screws to hapless borrowers. If the courts force mortgage value reductions, that cuts into the "asset" side of the banks balance sheet. Which in turn would likely lead to even more tax payer money having to be dumped into them to keep them solvent. The irony is that the banks can be hit even harder by repossession--they lose any revenue and increase their costs, and worst of all, if they sell, the true market value of the asset will be revealed, further crushing their balance sheet. This is why the banks want to avoid "mark to market" valuations at all costs.

Posted by Westside forever on June 5, 2009 at 12:25 PM