Assuming that it can actually be enforced, this is a half measure that only postpones the day of reckoning for homeowners. Those homeowners with negative amortization loans are courting much worse financial disaster 5 or 7 years from now if these measures were to include them, having to make payments on a ballooning principal, the result of seven years of partially postponed payments.
For the first time since the Great Depression thousands of California’s families—and many more throughout the United States—are losing their homes, left standing on the courthouse steps while the fruit of their hard work is auctioned off. What should be the democratic right of every family to decent shelter is sacrificed to the profit needs of banks and financial institutions.
I am glad I am a renter right now.
Our dictator, however, is up to no good on this matter.
And if this ain't 1929, it's about the closest thing to it:
Stick with me now, because this is where it gets interesting. For it is at this point that the banks got the bright idea of buying up a bunch of mezzanine tranches from various pools. Then, using fancy computer models, they convinced themselves and the rating agencies that by repeating the same "tranching" process, they could use these mezzanine-rated assets to create a new set of securities -- some of them junk, some mezzanine, but the bulk of them with the AAA ratings more investors desired.
It was a marvelous piece of financial alchemy, one that made Wall Street banks and the ratings agencies billions of dollars in fees. And because so much borrowed money was used -- in buying the original mortgages, buying the tranches for the CDOs and then in buying the tranches of the CDOs -- the whole thing was so highly leveraged that the returns, at least on paper, were very attractive. No wonder they were snatched up by British hedge funds, German savings banks, oil-rich Norwegian villages and Florida pension funds.
And there's more in that column.
And there is still more.
