Fix the financial crisis by spreading the responsibility
Too Big to Fail? If all the financial reforms being considered in Washington focus only on banks, Robert Pozen, 
chairman of the mutual fund firm MFS Investment Management, says we will not be targeting the true source of the financial crisis.
Pozen recently published Too Big to Save? How to Fix the U.S. Financial System.
His book looks forward and explains what caused the crisis. Former Treasury Secretary Hank Paulson’s new memoir On the Brink, which was published today, is more a look back. MFS manages more than $187.5 billion.
I spoke to Pozen last month. Some of his ideas:
-The key to preventing another mortgage mess like the one we’re in now begins with not allowing the mortgage broker or whoever originated the loan to sell the entire loan ”and have no incentive to look closely at the credit-worthiness of the borrower.”
The next step: Forcing some transparency into the mortgage-backed securities market where he says the structures of the investments are too complicated and opaque.
Third: Reform credit rating agencies so that investors can have confidence in what they say are the risks associated with financial products.
-The key to getting credit flowing again has to do with re-starting the market for pooling loans into securities.
In 2006, there were $1.2 trillion in securitized loans traded. That volume has fallen to $50 or $60 billion by last year. If lenders cannot find a market to sell off their loans, that limits their ability to make new ones.
Banks, he said, really aren’t responsible for most of the lending that takes place. Pozen points out that in 2006, before the financial crisis began, bank lending accounted for 22 percent of all credit extended. Most of the credit give out was by mortgage brokers, credit card companies, insurance companies and other non-bank lenders.
In addition, “We never required the banks that were recapitalized to lend more,” he said.
-How to dig out of the mortgage mess? “The $75 billion we’re spending on mortgage modification is not very well structured to help people,” he said.
The Obama administration Making Home Affordable program has struggled to deliver on its goal of helping 3 to 4 million troubled home borrowers get new loan terms.
Pozen zeroed in on the “underwater” loans – these borrowers who owe more than the home is worth. Nationwide, he estimated that about 30 percent of borrowers are underwater, and the proportion is probably higher in South Florida. The Administration program is not geared to dealing with underwater loans, although last week Treasury Assistant Secretary Herb Allison said the administration is looking at the issue.
Pozen’s idea: Structure a program that takes a little from everyone involved in the deal.
Banks take a reduction in the principal owed, government-backed agencies buy the mortgages at a discount from the banks and homeowners give up some part of the profit if the house is eventually sold for a gain.
“There has to be a way that the $75 billion is geared to helping people get to the position where they have some equity in their homes, “ he said. “If we don’t do that probably what we have now is really not going to be effective.”
Harriet Johnson Brackey, the personal finance columnist for the Sun Sentinel, is an award-winning business reporter. Her columns for 2008 were named "The Best in the Business," a national award chosen by her colleagues at the Society of American Business Editors and Writers.
Comments
What reform? Looks like everyone is up to same tricks...
Calling Out Obama: Bankster "Reforms"
http://tinyurl.com/y9spb34
So Much For The Volcker Plan: Shelby, Dodd And Kanjorsky All But Kill The Prop Ban Proposal
So there you have it: Wall Street, after getting bailed out by America, is now back to telling America what is in its own best interest; if the cost is a few corrupt politicians, so be it: we are certain that the trio above was easily purchased with less than one day of Goldman's record trading days during Q4. In the meantime, we continue cruising along, pretending that anything has changed, except that this time open wealth transfer from taxpayers to investment bankers is not only legal and allowed, it is in fact encouraged.
http://tinyurl.com/ykyqrgm
Posted by: kelly | February 1, 2010 8:38 PM
The Republicans Learned Nothing....
Nine months after he penned a memo laying out the arguments for health care legislation's destruction, Republican message guru Frank Luntz has put together a playbook to help derail financial regulatory reform.
In a 17-page memo titled, "The Language of Financial Reform," Luntz urged opponents of reform to frame the final product as filled with bank bailouts, lobbyist loopholes, and additional layers of complicated government bureaucracy.
"If there is one thing we can all agree on, it's that the bad decisions and harmful policies by Washington bureaucrats that in many ways led to the economic crash must never be repeated," Luntz wrote. "This is your critical advantage. Washington's incompetence is the common ground on which you can build support."
http://tinyurl.com/yary76t
Posted by: raymond | February 2, 2010 12:20 PM
Democrats Say "Bye" to Populist Option
Obama's Junk Economics
The Republicans are winning the populist war. On the weekend before his State of the Union address on Wednesday, Obama strong-armed Democratic senators to re-appoint Ben Bernanke as Federal Reserve Chairman. His Wednesday speech did not mention this act (happily applauded by Wall Street). The President sought to defuse voter opposition by acknowledging that nobody likes the banks. But he claimed that unemployment would be much higher if they hadn’t been bailed out. So the giveaway of public funds was all for the workers. The $13 trillion that has created a new power elite was just an incidental byproduct. Unpleasant, perhaps, as American democracy slips into oligarchy. But the least bad option. People might not like it, but Main Street simply cannot prosper without creating hundreds of Wall Street billionaires – without enabling them to increase their bonuses and capital gains as bank stock prices quadruple. It’s all to get credit flowing again (at 30 per cent for credit card users, to be sure.)
Instead of helping debtors, Obama has moved to heal the creditors, at public expense. If debtors cannot pay, the Treasury and Fed will take their IOUs and bad casino gambles onto the public sector’s balance sheet. The financial winners must come first – and it seems second and third, too. The rationale is that unless the government gives the large financial institutions what they want and saves them from taking a loss, their “incentive” to protect the economy from devastation will be gone.
http://www.counterpunch.org/hudson02012010.html
Posted by: shelly | February 2, 2010 12:51 PM
QUOTE:
"Pozen zeroed in on the “underwater” loans – these borrowers who owe more than the home is worth. Nationwide, he estimated that about 30 percent of borrowers are underwater, and the proportion is probably higher in South Florida. The Administration program is not geared to dealing with underwater loans, although last week Treasury Assistant Secretary Herb Allison said the administration is looking at the issue."
Come on , let's not be lazy about reporting the facts. Simply do a google search and you can read the report published in your own newspaper back on August 11, 2009, stating that almost half of single-family mortgage holders owe more than houses are worth. With the tumble in values since then, it's probably over half. And many of these folks are not just underwater - they are absolutely drowning in negative equity. We're talking about mortgage holders who owe over twice as much as the property is worth.
I see a long road ahead for this region.
Posted by: Marie | February 2, 2010 2:12 PM
Wish someone from state would help out.
Anyone having problems with AURORA LOAN SERVICES?
You are not alone...
Here is a lady who has started a class action suit please get in touch with her. We are having all the same problems. http://www.auroraloanvictims.com/
Read the comments.scroll down.....they string you along as they take your payments:
http://www.afscanhelp.com/companies/mortgage-companies/aurora-loan-services.cfm
Posted by: dolly | February 2, 2010 10:51 PM
Barack Obama: Listen To What The People Want
Expose, if you dare or care, the underbelly of this government that rules us. The corporate conspirators that conspire and aspire to control it all. Open up the Federal Reserve to audit and disclosure so that we know who the owners are and what they are doing with the money they create and make from us in the form of interest which much of our tax dollars go to. Give the power of our money back to us and into the hands of a Treasury Department run not by "one of those".
Free this country from the slavery we - on Main Street - are all victim to. Abolish the "ruling" class and re establish the middle class. In a country as great and mighty as ours, there should be no poor (homeless and hungry).
There will always be an upper class - the rich - but let them become rich through the fruits of their labor, imagination and creativity not by robbing the rest of us. I don't advocate robbing from the rich to give to the poor, but curtail and punish those in the "elite" class so they can no longer rape, pillage and plunder the population at large and at will.
Bring back the usury laws so that the "too big to fail" banksters can no longer charge annual rates of interest of over 30%. Eighteen percent worked so very well for so many years and even then most rates were not in the double digit category. The banks were solvent and profitable then. Wall Street was working well and profiting as well.
http://tinyurl.com/y8zh52u
Posted by: bob | February 3, 2010 7:44 AM
Obama and crew are not listening!
The people have to work with each other!
We have to float like a butterfly and sting like a bee...
Wednesday, February 3, 2010
SwarmUSA.com Open House – Now through Sunday!
http://tinyurl.com/ydsteza
Posted by: alec | February 3, 2010 4:56 PM
Derivative Fraud? Where Are OUR Cops?
Where does it end in this country folks? There's more than enough evidence that "a river (of corruption) runs through it" - "it", of course, being our economic and banking system. Look at the update this morning out of "Biggovernment" related to the story I discussed yesterday with the AIG "takeunder" by The NY Fed:
The FRBNY wanted more than just a standard debt deal; it wanted absolute control and ownership of AIG. But, it was illegal for the FRBNY to hold equity and the Treasury Dept. did not yet have the legislative authority, later granted under EESA, to do so. But this didn’t stop then-President Geithner or his general counsel Thomas Baxter. They crafted the AIG Trust to accomplish the same goal. But the Trust was transparently invalid and illegal for two fundamental reasons: One, the FED maintained absolute control over the Trust’s existence, its terms, and the Trustees through Section 1.03 of the Trust Agreement. This, as we explain in our Response papers attached, invalidates the trust; yet the government continues to speak about this as an “independent” Trust.
That's a raw allegation of unlawful conduct, coming from a bar-admitted attorney.
WHERE ARE THE DAMN COPS AND WHY AM I HEARING HANDCUFFS CLANK SHUT IN THE UK AND EUROPE GENERALLY, WHILE HERE ALL THE COPS ARE IN THE DONUT SHOP SWILLING THEIR COFFEE?
http://market-ticker.denninger.net/archives/1933-Derivative-Fraud-Where-Are-OUR-Cops.html
Posted by: stan | February 4, 2010 1:25 PM
Listen to John Perkins
Starts @ 14 minutes....sounds like we were hoodwinked!
http://tinyurl.com/ydhamkm
Posted by: ally | February 4, 2010 5:45 PM
Obama he promised to straighten Bush's mess out Two Wrongs don't make a right, By the way I found a website that give you prizes for your opinions and 4 play games here is a topic about this:
http://opinion.ezwingame.com/topics/who-do-you-blame-for-the-economic-crisis1
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