Attention Congress, Mr. President, American Homeowners Need Your Help!

Mr. Gross goes on to explain what I have been trying to follow and interpret myself everyday. Daily I’m confused by all of the sophisticated mumbo jumbo of financial structure that were created by what he quoted as

I am not a financial guru or MBA grad and my writing and business skills tend to be on the unsophisticated side. My blog isn’t intended to confuse or manipulate people by throwing out financial terms that not even I can understand. I do my best to convey what’s happening by throwing my spin on the market that is easy reading for the people that need to understand what the hell is going on out there. I enjoyed this Washington Post article because Mr. Gross also feels the same way.

He goes on to explain:

“My explanation of how the subprime crisis crossed the borders of mortgage finance to swiftly infect global capital markets is perhaps unsophisticated. What Federal Reserve Chairman Ben Bernanke, Treasury Secretary Hank Paulson

“The past few weeks have exposed a giant crack in modern financial architecture, created by the youthful wizards and endorsed as a diversifying positive by central bankers present and past. While the newborn derivatives may hedge individual, institutional and sector risk, they cannot hedge liquidity risk. In fact, the inherent leverage that accompanies derivative creation may foster systemic risk when information is unavailable or delayed. Only the central banks can solve this, with their own liquidity infusions and perhaps a series of rate cuts.”

Huh? OK, for all of you non-Wall Street readers, what the heck is he saying? Let me explain. What he is saying is that our mortgage crisis is affecting the world’s markets and that these mortgage backed securities are everywhere and no one truly knows what’s inside of them. Bad loans, good loans? Junk or money making opportunities?

Wall Street made a mistake and now they are paying for it. The rules and guidelines set up by these “youthful wizards” are the same rules that are hurting homeowners, our economy and quite possibly the international markets. I predict that they will all be affected greatly as we have seen the instability over the last few weeks and quite honestly, I don’t think they have seen anything yet.

The market is not going to stabilize and Wall Street needs to get that through their thick skulls. This will be the biggest market failure in our countries history. With trillions of dollars on the line, no end to foreclosures, mortgage job losses and soon to be mass layoffs on Wall Street, they have got to be living in some kind of bubble to not think the we are headed into our generation’s first “Great Depression”. I’m not about doom and gloom. I’m a man of positivity and optimism. But I also am a realist and this is very real people!

“The ultimate solution must not emanate from the Fed but from the White House. Fiscal, not monetary, policy should be the preferred remedy. In the early 1990s the government absorbed the bad debts of the failing savings and loan industry. Why is it possible to rescue corrupt S&L buccaneers yet 2 million homeowners must be thrown to the wolves today? If we can bail out Chrysler

Critics warn of a “moral hazard.” If we bail out homeowners this time, they claim, it will just encourage another round of speculation in the future. But there’s never been a problem in terms of national housing price bubbles until recently. Home prices have been the most consistent, least bubbly asset aside from Treasury bills for the past 50 years. Only in the past few years, when regulation has broken down, when the Fed has failed to exercise appropriate supervision, have we seen “no-doc” and “liar” loans and “100 percent plus” loans. If you enforce regulation, you’ll have no problem with moral hazard.”

“This rescue, which admittedly might bail out speculators who deserve much worse, would support millions of hardworking Americans. Those who would still have them eat Wall Street cake (as a Wall Street Journal editorial suggested, saying they should get used to renting once again) should look at it this way: your stocks and risk-oriented leveraged investments will spring to life anew. Republican officeholders would win a new constituency of voters for generations.

Get with it, Mr. President. This is your moment to one-up Barney Frank and the Democrats. Create a Reconstruction Mortgage Corporation. Or, at the least, modify the existing FHA program, long discarded as ineffective. Bail ‘em out — and prevent a destructive housing deflation that Ben Bernanke cannot avert. After all, you’re the Decider, aren’t you?”

A rescue by congress is the only way to stabilize our housing and financial markets. This is the only way to stop foreclosure. I am not talking about a major bail out either. We need a massive campaign to help homeowners who need help and can’t refinance out of these toxic soup adjustable rate mortgages. That is the major problem and I am sure most everyone that is working in foreclosure prevention services will attest to. Just implementing massive loan modifications to “qualified homeowners” will help curtail losses for lenders, Wall Street, investors, our economy and the American people.

Moe Bedard
Founder and Common Sense Guy
LoanSafe.org
LoanWorkout.org

Tagged as: Loan Modification, Loan Workouts