By Moe Bedard
Major banks except Citi have formally cut off all negotiations with the Senate in an effort to limit even further the scope of the cramdown bill. Senators from both sides of the isle have given up hope on further developments as well. Bloomberg’s report on the cramdown bill today seems like the last nail in the coffin for legislation that could have helped Main Street take back power from the lending industry that has taken advantage of consumers for years.
From the perspective of banks, there is no need to pass the legislation. Banks that service their own loans have the protection from litigation they need already thanks to provisions in President Obama’s foreclosure rescue plan. By offering their client’s loan modifications that conform to government guidelines, banks that service their own loans are now shielded from lawsuits that would punish them for predatory lending.
Here’s the benefit that the banks received in a nutshell:
Direct government financial bailouts in the trillions of dollars
The ability to purchase underperforming banks on the cheap with the cooperation of the FDIC and direct government aid
Government subsidies on loan modifications they offer their clients
Guaranteed protection against lawsuits for predatory lending
A positive media spin for “conforming” to government loan modification guidelines
Here’s what Main Street has received:
No direct government aid
Increased tax liabilities for generations to come
An unprecedented national debt load
Unemployment reaching historic levels
Representatives that are clearly working for business
In mathematical terms this is an unbalanced equation. How much longer Main Street will continue to accept the terms of our representatives is an interesting question. I don’t think American’s need to “wake up” for I feel that most of us are painfully aware we’re no longer the privileged recipients of governmental favors, business is. I think we American’s need to translate this awareness in to action and vote the representatives out of office that continue to side with big business to the detriment of Main Street.
From Bloomberg:
Democrats had negotiated with JPMorgan Chase & Co., Wells Fargo & Co. and Bank of America Corp. on a compromise. Durbin said the lenders objected after months of talks, and “will not even participate in a negotiation,” although the banks are “surviving today because of taxpayers’ dollars.” The three banks Durbin identified received $95 billion in U.S. aid.
“It’s clear that part of the mortgage industry was never interested in meeting us halfway, as negotiations went forward, they moved the goal post back and back,” said Senator Charles Schumer, a New York Democrat.
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Loan Modification:
Citibank called and offer us a loan modification on our home which is underwater in equity by over $300,000.00. We are not late on our payments. They offered to lower our interest for two years to 4%, then after two years, raise it again to 5.85% and extend it 40 years.
If we agree to this, it will give us relief for two years, but in the long run we will be paying over $1,000,000.00 more for a house that has lost it’s value.
I guess the buyers are the ones who lose in this housing slump, because the banks don’t seem willing to absorb any of the responsibility. While they get bail out money for their irresponsibly mistakes, the consumers are made to feel as if we are the villians in this meltdown.
How about a real compromise? How about taking the risk of sharing the loss and building back up together?
Just a thought.