Sunday, March 28, 2010

18 Months Later, whoda thunk it?

Back in September of 2008, I wondered aloud why the hell banks (and Congress) would prefer widespread foreclosure over moral hazard.

Now, 18 months later, we have both principal reductions ( ) and well publicized Too Big To Fail systemic fracturing which has only been compounded as previously huge institutions got huger by picking up failures for pence upon the dollar with Uncle Sam's backing.

My statements from back then:  ( )
immediately outlaw exotic loans and legislate the requirement of banks to adjust all mortgages to a 15 or 30 year fixed (buyer's choice) at principal + (current prime + 1) on the price of the house that was purchased, if the house was purchased at least 2 months before the bill was first voted - 
this means that anyone currently in a mortgage could perceivably have their house payment cut to 3% and recalculated retroactively - it's like...INSTA-EQUITY! 
forclosures stagnation would conceivably be mitigated by allowing the buyers of a forclosure to buy the note with the 1 time fixed rate cut - which i think would cause a land grab by people with good credit and flush with money from the reacalculated payments and increased equity against which to back up their borrowing - 
basically - let the people buy the paper if The People are going to buy the paper - let's be practical about it, though - why markdown when you can put a rate on it easily? 
voila - no money spent out of pocket and the banks that created the mess end up making money through the avoidance of loss of money -