States Negotiate $25 Billion Deal for Homeowners

[JP Hochbaum]

I call this slightly good news. We keep getting cookie crumbs when we would be getting a large piece of pie.

"Still, the agreement is the broadest effort yet to help borrowers owing more than their houses are worth, with roughly one million expected to have their mortgage debt reduced by lenders. In addition, 300,000 homeowners are expected to be able to refinance their homes at lower rates, while another 750,000 people who lost their homes to foreclosure from September 2008 to the end of 2011 will receive checks for about $2,000. "

http://www.nytimes.com/2012/02/09/b...html?_r=1&pagewanted=all?src=tp&smid=fb-share

The states don't really have much power to do anything. But they could do something like North Dakota and start their own state banks.

North Dakota

"The financial institution, which opened in 1919 to help North Dakota farmers, has $5 billion in assets and contributed about $340 million in earnings to state coffers in the 12 years through mid-2009."

 

[1Perry]

The states would have all sorts of power. The federal government is trying to reign in their power here. Basically it's another slap on the wrist.

if something illegal was done. charges should be brought. Why are investors going to cheer? The banks are getting off easy.

Let's see, banks can get a credit for short sales. So that means they are being helped in getting bad loans off their books. A buyer gets to buy a house at market value and the bank gets to write off a portion on their settlement costs. The banks are going to take a loss on these houses in the end anyway. Why give them a credit?

Every one of these banks were running afoul of Sarbanes/Oxley. It says that there will still be instances where criminal actions can be pursued but you can bet that the government will step in if they ever go anywhere also.

Why is it that the government refuses to enforce it's own laws here?

 

[JP Hochbaum]

The states would have all sorts of power. The federal government is trying to reign in their power here. Basically it's another slap on the wrist.

if something illegal was done. charges should be brought. Why are investors going to cheer? The banks are getting off easy.

Let's see, banks can get a credit for short sales. So that means they are being helped in getting bad loans off their books. A buyer gets to buy a house at market value and the bank gets to write off a portion on their settlement costs. The banks are going to take a loss on these houses in the end anyway. Why give them a credit?

Every one of these banks were running afoul of Sarbanes/Oxley. It says that there will still be instances where criminal actions can be pursued but you can bet that the government will step in if they ever go anywhere also.

Why is it that the government refuses to enforce it's own laws here?

I am not well versed on the enforcement of the laws here, but I do believe that the SEC or the federal reserve is supposed to slap the banks when they are bad.

 

[1Perry]

I am not well versed on the enforcement of the laws here, but I do believe that the SEC or the federal reserve is supposed to slap the banks when they are bad.

Sarbanes/Oxley made is illegal, punishable by prison time, for a CEO to sign off on a fraudulent financial statement whether he knew it was fraudulent or not.

Banks were misrepresenting their net worths all over the place.

 

[MoSurveyor]

This whole deal with the Banks is very complex. In the big picture, these banks need to settle their past accounts and pay for whatever transgressions have occurred so they can move on. As long as these unknown liabilities are hanging over their heads their stock prices will remain low. On the other hand, if they give away too much too soon then their stocks will plummet anyway. On the State's side waiting to award people their settlement may have little affect on the people and will have no positive affect on the economy now when it's needed most. I really don't like the idea of the Banks getting off cheap on this issue but I can also see where an early settlement may be the best bet in the long run. This is one of the bigger clogs in the economic drain for all involved, Banks and consumers alike. Overall, I'm leaning toward them taking the settlement even though I don't like it. I would also like to see the States really shove it to the Banks over the issues not covered in this settlement even if that takes five more years to accomplish.


Personally, I think a state run/owned bank is a bad idea. I like the idea of a basic savings bank that's more community oriented but I'm not sure how much leeway, if any, states are allowed when it comes to financial institutions. A not-for-profit bank? I feel like I've broken the law just mentioning the idea but, offhand, I don't see why it couldn't work. Isn't a credit union similar to that?