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News Link • Obama Administration

The Crime of the Century Continues

• Crime & Federalism

Now, listen to the deal they got from the FDIC....

Basically, they purchased all current residential mortgages at 70% of par value (70% of the outstanding loan amounts). They purchased all current HELOCS at 58% of Par Value!!!

Next, in order to "sweeten the pot", the FDIC stepped in and guaranteed the following: For any residential mortgages where OneWest experiences a loss, the FDIC will step in and cover anywhere from 80%-95% of the loss. The loss is calculated using the ORIGINAL LOAN BALANCE, not the amount that OneWest paid for the loan. 

There are three bad policy implications to this plan.  

Privatize gains; socialize losses.  George Soros and other private investors have made speculative housing bets.  If those bets pay off, Soros and his investors will make billions.  They will keep their billions.  If those investments fail, the FDIC (that's us, the taxpayers) will cover their losses.  Thus, the well-connected like Soros are able to - once again - private gains while socializing loses.  Change we can believe in, indeed.

Keeps air in the housing bubble.  The FDIC's action prevents housing from returning to fair market value.  Without a government guarantee, banks would allow short-sales or give a principal reduction in a mortgage modification.  Some money is better than no money, right?   Reprice the mortgages in light of declining property values would allow the free market to determine how much homes are worth.  This would ensure housing would hit a bottom.  Instead, the FDIC is continuing with a bubble-lite policy.

Hurt people facing foreclosure.  People who are about to lose their homes are unable to obtain mortgage modifications or do short-sales.  There is no incentive (indeed, there's a disincentive) to write down the value of a loan when the government is going to guarantee the private investors more money than they'd get from a short-sale or mortgage modification.  Thus, foreclose on people.  If the value of the property tanks, so what: The United States taxpayers will pick up the tab.  

Sure, families will lose their homes.  Animal shelters are overrun, as the family pets aren't allowed into apartment complexes.  Sure, that is all very sad...Don't you realize, though, how much money Goldman Sacks and George Soros put into getting Obama elected?  You think billionaires invested in a presidential election because they cared about the common man?

Oh, wait: You really took Barack Obama's promise to help struggling Americans seriously?  Sorry for you.  It's time to put childish fantasies aside; and to start following the money.

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