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The Guarantor State Steps In

By Al Schumann on Friday April 20, 2007 02:32 PM

WASHINGTON - Mortgage finance giant Freddie Mac has committed to buy as much as $20 billion in mortgages to help borrowers with high-priced loans stay in their homes, the company‘s chief executive said Wednesday.


In recent days, attention has focused on how the federal government can help the most vulnerable subprime borrowers, particularly those who have taken out adjustable-rate mortgages that are due to reset to significantly higher interest rates in the months ahead. One proposal, floated by consumer-advocacy groups, has been to place a temporary moratorium on foreclosures. Another line of thought being championed by Sen. Charles Schumer of New York, chairman of the Joint Economic Committee, and Democratic Sen. Jack Reed of Rhode Island, is to channel funds to groups that help borrowers struggling to make payments escape foreclosure.

Democrats and Republicans have been careful to say they won't legislate a "bailout," which ostensibly would pay off the balance of delinquent loans to protect people's credit. While other legislative approaches are debated, Congress is pushing regulators and the industry into action.

Sen. Christopher Dodd, D., Conn., chairman of the Senate Banking Committee, lambasted regulatory inaction earlier this year. Banking overseers responded by proposing to improve underwriting standards on subprime loans.


Oh, the humanity! There will be no bail out, except of course there will be a bail out, and there already is a bail out in place. The naughty lenders will be given a vigorous scolding. Bad! Bad lenders! Then they'll be told to play nicely.

Banks and other mortgage lenders repossessed more homes last month as many borrowers — mostly subprime — couldn‘t keep up with payments, according to a survey conducted by RealtyTrac Inc. that was released Wednesday. Foreclosures in March spiked to 149,150 -- a 47 percent leap from March 2006, according to the survey. Lenders repossessed one out of every 775 homes in March.

To avoid moral hazard, Senators Reed and Schumer think the bail out should be "channeled" to groups in the business of providing relief to the distressed homeowners. They need a chance to wet their beaks too. But, I wonder, why not cut out the multiple middle men and simply pay off the loansharks? Preserving the fiction that the subprime lenders exist independently of a safety net does no one any good. It infantilizes the poor things. They need to learn to take some personal responsibility (for once in their lives) and people need to be able to help them get past their dependency on hand outs. Dodd's scolding and remonstrations won't last past the time it takes to deliver them. Schumer and Reed's concern for their exquisite sensibilites isn't going to help them get past their moral squalor. The soft bigotry of low expectations isn't going to work, I'm sorry to say.

Comments (6)


song bird to the furies

nice post j'alva


Thanks, Owen. You know, this would be a good time for the Greens to step up their heat a bit more. They could take advantage of the "plague on both your houses" sentiments that the loansharks are creating.


I can't help thinking that the official horror of foreclosures owes very little to concern with the so-called "owner", and a great deal to concern with the mortgagor. The Guarantor State (JAS' felicitous phrase) would far rather the average Joe be stuck paying off a property for which he borrowed too much, than that any financial institution should ever find itself in the same predicament.


Reading Hofstadter's bio picture of FDR was a real eye opener for me. There he was doing everything he could to bail out the rentier capitalists, and half of them were nearly insane with concern over the marginal benefits accruing to the people they'd exploited and bilked. FDR was exasperated by their stupidity, which was so excessive and so self-indulgent that it strained class ties.

Joe Homeowner's undoing is a statistic, and possibly of some real concern to the wiser heads. But the grief of mortgagor one might know personally . . . now that's a tragedy. I think Owen would agree with me that that's the same psychology at work that considers supply side a form of noblesse oblige.


j'alva..u mean ...it isn't ?????

they loved my nut so much
now they gave me two of em
one from the bank and the other from uncle

now i can fuck myself twice as often

And to think that these things are securitized and traded too...I can well imagine the big swinging dicks at the trading desks shorting like crazy and when word bubbles through the office grapevine that the subprime branch of the financial octopus is gonna get a nice bandage for its boo-boo (and this ahead of the financial and general press, naturally), closing out those positions and going long like nothing you've ever seen.

It's almost...:sniff:...beautiful...:breaks down in tears:...

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