Finally, a presidential candidate came out and honestly addressed the biggest problem in our economy, the enormous debt overhang in our mortgage market. A few days ago, Mitt Romney was at a forum in Florida talking about foreclosures, and his comments were actually refreshingly honest about our housing and banking situation and the need for a debt write-down.
We're just so overleveraged, so much debt in our society, and some of the institutions that hold it aren't willing to write it off and say they made a mistake, they loaned too much, we're overextended, write those down and start over. They keep on trying to harangue and pretend what they have on their books is still what it's worth.
Mitt Romney was pointing out that the banks are carrying debt on their books at inflated values. When was the last serious politician to make that point, openly? There's more.
In some cases, if the debt is not in something you can service, it's like you have to move on and start over away from those debts. It's helpful if you get an institution that's willing to work with you, but if you don't you have no other option.
Romney is now saying that if you can't pay your debts and your lending institution won't work with you, walk away. Perhaps this isn't so surprising, though, as Romney is an expert in debt restructuring. This is actually just common business sense.
And finally, he offered a real solution to the mortgage debt crisis.
The banks are scared to death, of course, because they think they're going to go out of business... They're afraid that if they write all these loans off, they're going to go broke. And so they're feeling the same thing you're feeling. They just want to pretend all of this is going to get paid someday so they don't have to write it off and potentially go out of business themselves."
This is cascading throughout our system and in some respects government is trying to just hold things in place, hoping things get better... My own view is you recognize the distress, you take the loss and let people reset. Let people start over again, let the banks start over again. Those that are prudent will be able to restart, those that aren't will go out of business. This effort to try and exact the burden of their mistakes on homeowners and commercial property owners, I think, is a mistake.
This is the right approach to the problem. If you force the banks to recognize losses on the mortgage debt they are holding, then all of a sudden they will have an incentive to write down debt. Otherwise, a bank will do anything it can to maintain the fiction that the debt is worth 100 cents on the dollar, including lie, harass, and robo-sign.
There are ample reasons for cynicism, the cup overfloweth with them, perhaps. Still, what's shocking about these comments is how casual they are, as if it's common knowledge that the banking system is still insolvent and that our debt loan cannot be paid back. Among financial elites, it in fact is common knowledge. Tim Geithner noted this when he talked about Lehman Brothers and the "air in marks" on the debt it was holding on its books. And Martin Feldstein on the Republican side and Alan Blinder on the Democratic side are both arguing for debt write-downs. Everyone knows this has to happen, that the accounting manipulation needs to stop. But Mitt Romney actually said it.
We're pretty sure that Romney will walk these comments back if necessary, since he holds positions only insofar as they are convenient. Since at that same forum he called out for praise one of the most bank-friendly state officials in the country, Florida Attorney General Pam Bondi, we can probably measure his adherence to this common-sense approach in micro-seconds.
But what this episode shows is that the solutions to our crisis are understood. In the book Greedy Bastards, the question of restructuring debt is considered in detail. We need a debt deal, as Romney inadvertently noted. More fundamentally, getting rid of the accounting gamesmanship will lead to a healthier economy because it will align financial assets with real economic assets. As another example, credit default swaps are linking American banks excessively to an unstable Eurozone. Credit default swaps are in fact yet another accounting game designed to further balance sheet fictions. Dick Grasso offered his solution to this obvious problem. We can, according to Grasso, simply declare these contracts online gaming, and void them.
What Americans should be taking from this episode is that finance, while complex, is not conceptually hard. If it's a lie on the balance sheet, it's going to be destructive to ordinary people. If you stop the balance sheet lying, the economy will do better. But while Mitt Romney might have said this out loud, they all know it behind closed doors. Our question is, who will be the first to make this a policy reality?
 |
 |
|
| Obama | Romney | |
|---|---|---|
| Electoral Votes (270 to win) |
332 | 206 |
| Obama | Romney | |
|---|---|---|
| Total | 65,899,660 | 60,932,152 |
| Percent | 51.1% | 47.2% |
| Democrats* | Republicans | |
|---|---|---|
| Current Senate | 53 | 47 |
| Seats gained or lost | +2 | -2 |
| New Total | 55 | 45 |
| Democrats | Republicans | |
|---|---|---|
| Seats won | 201 | 234 |
Yeah, he really nailed it.
The Federal Government did something like this in the 1930's. Then the created a special bank to re-work mortgages. Work out well from what I read.
Values have not been marked to market - news? Tanked real estate is customarily never marked to market. Because when it is written off unhelpful losses occur and if it recovers then profit must be booked and taxed.
Reset is code for letting rational free markets self correct. Advice from an offshore money parker to avoid a taxable event until he flips a switch - Swiss accounts for diversification - bull. Reset from a serial vulture investor who may salivate about packaging foreclosures into a vulture fund bought for pennies on the dollar - like the Repub RTC give away in the mid 80s. I was on the inside; even testified for TRA 86 at Geo Mitchell's request.
We need far more than a debt deal. Mark value to market, pro rata adjustments, assign affordable rent competitive with apartments, require maintenance, don't evict millions of people taken advantage of, or critically irresponsible. Unpaid taxes can be adjusted, possibly forgiven, or accrued pending specified future events.
Grasso's idea is justified. Swaps are less than virtual reality, speculators have been trading in nothing. Teach speculators a lesson.
to learn more: www.howwegotswindled.com
We've sent sons and daughters to kill and die in far off lands for a LOT less cause.
If "we" the people - I agree, and Mark to Market should do that fairly across the board. If you mean "we" the bankers and investors, well, nope, their solvency is in jeopardy. But, that's why they call it an "investment" instead of a "deposit".
Both parties should have let the banks fail in 2008, we would been out if this mess by now.
And NO - we wouldn't be out of this by now. We'd be in another Great Depression. Unless you mean that the banks should have been put into receivorship and continued to do business under bankruptcy courts, all the management fired, and TARP actually used to do what it was supposed to do - buy toxic assets. Just another right wing lie - TARP was going to buy the toxic assets but that's not how it ended up - pure unrestricted loans to the banks.
Mitt Romney in October, said his plan for the housing crisis would be to "let it run its course and hit the bottom":
"Don’t try and stop the foreclosure process. Let it run its course and hit the bottom, allow investors to buy up homes, put renters in them, fix the homes up, and let it turn around and come back up."
http://mortgage-modification-attorney.com/romney-foreclosures-bring/
Words don't get to change meanings because you wish that you could make true statements.