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For the last few weeks there has been a strange rumor circling around. Probably some of you have already heard about it.
It's about a new government "rescue" plan or "mortgage replacement loans", which IMHO is a disguise for a plan to make serfdom legal and supported by government enforcement in the US.
When I heard initially about it I dismissed it quickly as just another autocratic enormity and a closeted wet dream of some sick financial Golums.
Well I may have been wrong ... Tonight on Charlie Rose the great "rescue" idea was put forward by Martin Feldstein , who is not only an AIG board member (where he did a great job
), but also a member of G30 (aka the "Gang of Thirty pieces of silver" or the "geniuses" who started to promote the derivatives lunacy in the late 90's)
Let me first peel the onion for you and tomorrow we may get a link to the Charlie Rose interview and judge for yourselves.
Problem:
About 10 million homeowners have negative equity in their homes (the mortgage they payed is way higher than the current market value of their houses). About half of those have more than 20% .
That freezes the banks that conned them into signing those mortgages and were responsible for for the whole housing bubble (OK not only banks, ...add more from your own list)
Blah blah blah ... financial crisis .... blah blah blah ...hurting financial institutions ....blah blah blah... house prices are in a downward spiral... many homeowners have actually incentives to foreclose their mortgages (Duh!!!) .. that furthers lowers the rice of houses ... bank credit... blah blah blah .... those people who foreclose their mortgages put more pressure on people which still have a positive equity.
And the root cause of this problem is that mortgages are a no recourse loan.( ie if you stop payments the bank can't do anything else than take the house back, only the house and nothing else)
Reaction:
We must do something to "save" the homeowner! In addition to the Wall Street bailout, so we can a "alleviate" the burden of negative equity.
Of course that doesn't mean the homeowners should be forgiven a proportion of the mortgage ... nah .. because that would produce a sharp decline in home prices and the Wall Street would loose more money.
We have to do something to stop people from choosing foreclosure instead of continuing to pay exorbitant mortgages.
The government has to build a firewall to stop the downward spiral of house prices.
Solution:
We have to bailout J6P from being ripped off completely by offering him an "incentive" to continue the obscene payments on a home worth nothing. A part of his mortgage would be replaced by a low interest government loan (loan provided by J6P from his tax money) that will lower the mortgage payments.
But we have to be "responsible" with J6P's tax money when we use them to bailout ... well...Mr J6P . The government "partial replacement loan" would not be a non recourse loan like a normal mortgage, like his existing mortgage.
Those "mortgage replacement loans" will be full recourse loans, which will not go to the individual but to the mortgage holders...
And of course, since this is actually a "swap and not a loan";) probably the "rescue" of the homeowners would be roughly somewhere around (an additional) $700 bil (from J6P's tax money, of course)
If home prices will continue to go down and J6P cannot pay his mortgage he will loose his home, he will loose all the money he did pay for that home, but he will still have to pay to the government about 20% of his initial obscene mortgage, i.e. the full-recourse "mortgage replacement loan"
So J6P would loose everything and will become a debt slave and pushed by the government into debt bondage because the government cannot waste taxpayer's (J6P's) money.
I was yelling at my TV : "You moron, if you want to stop house prices form failing let them reach to the bottom of the bubble faster . It is idiotic to artificially prop prices after a bubble burst, and it's immoral to do that with taxpayer's money!!!!"
WTF is this ??? :eek: the financial/banking system of the USA ...United Somali Alliance ???
It's about a new government "rescue" plan or "mortgage replacement loans", which IMHO is a disguise for a plan to make serfdom legal and supported by government enforcement in the US.
When I heard initially about it I dismissed it quickly as just another autocratic enormity and a closeted wet dream of some sick financial Golums.
Well I may have been wrong ... Tonight on Charlie Rose the great "rescue" idea was put forward by Martin Feldstein , who is not only an AIG board member (where he did a great job
), but also a member of G30 (aka the "Gang of Thirty pieces of silver" or the "geniuses" who started to promote the derivatives lunacy in the late 90's)Let me first peel the onion for you and tomorrow we may get a link to the Charlie Rose interview and judge for yourselves.
Problem:
About 10 million homeowners have negative equity in their homes (the mortgage they payed is way higher than the current market value of their houses). About half of those have more than 20% .
That freezes the banks that conned them into signing those mortgages and were responsible for for the whole housing bubble (OK not only banks, ...add more from your own list)
Blah blah blah ... financial crisis .... blah blah blah ...hurting financial institutions ....blah blah blah... house prices are in a downward spiral... many homeowners have actually incentives to foreclose their mortgages (Duh!!!) .. that furthers lowers the rice of houses ... bank credit... blah blah blah .... those people who foreclose their mortgages put more pressure on people which still have a positive equity.
And the root cause of this problem is that mortgages are a no recourse loan.( ie if you stop payments the bank can't do anything else than take the house back, only the house and nothing else)
Reaction:
We must do something to "save" the homeowner! In addition to the Wall Street bailout, so we can a "alleviate" the burden of negative equity.
Of course that doesn't mean the homeowners should be forgiven a proportion of the mortgage ... nah .. because that would produce a sharp decline in home prices and the Wall Street would loose more money.
We have to do something to stop people from choosing foreclosure instead of continuing to pay exorbitant mortgages.
The government has to build a firewall to stop the downward spiral of house prices.
Solution:
We have to bailout J6P from being ripped off completely by offering him an "incentive" to continue the obscene payments on a home worth nothing. A part of his mortgage would be replaced by a low interest government loan (loan provided by J6P from his tax money) that will lower the mortgage payments.
But we have to be "responsible" with J6P's tax money when we use them to bailout ... well...Mr J6P . The government "partial replacement loan" would not be a non recourse loan like a normal mortgage, like his existing mortgage.
Those "mortgage replacement loans" will be full recourse loans, which will not go to the individual but to the mortgage holders...
And of course, since this is actually a "swap and not a loan";) probably the "rescue" of the homeowners would be roughly somewhere around (an additional) $700 bil (from J6P's tax money, of course)
If home prices will continue to go down and J6P cannot pay his mortgage he will loose his home, he will loose all the money he did pay for that home, but he will still have to pay to the government about 20% of his initial obscene mortgage, i.e. the full-recourse "mortgage replacement loan"
So J6P would loose everything and will become a debt slave and pushed by the government into debt bondage because the government cannot waste taxpayer's (J6P's) money.
I was yelling at my TV : "You moron, if you want to stop house prices form failing let them reach to the bottom of the bubble faster . It is idiotic to artificially prop prices after a bubble burst, and it's immoral to do that with taxpayer's money!!!!"
WTF is this ??? :eek: the financial/banking system of the USA ...United Somali Alliance ???
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