"F. George McDuffee" wrote:

On Mon, 16 Feb 2009 10:27:44 -0800, "Paul Hovnanian P.E."
wrote:

snip
There was an economist on a local radio talk show saying that what we are
experiencing is a strike by the banking industry. Either we make them whole
again after their screw-up with the mortgage business or no money moves.
Although I don't thing we should go as far as he was recommending
(nationalizing the banking industry), I do agree with his position that its
time to stop offering the banking business a carrot and break out the
stick.

The next time a bank goes under, the feds should just pick it up and run it
themselves. Better yet, don't wait for a bank to fail, start opening local
branches right now, in competition with the private banks. Essentially
government backed credit unions. Take deposits, pay interest, make loans,
issue credit cards, etc. If JP Morgan and their ilk don't like the
competition, they can compete to keep the business.
------------------
While I think you are on the right track, there does not appear
to be any need to open new banks, simply make additional capital
available for the strong local and regional banks, credit unions,
etc. that are already there, simply by making sizable CD
purchases with 3 to 5 year terms.

That's actually a pretty good idea. A deposit is a liability which a
bank has to offset with an asset (a loan) on its books. Handing them
piles of capital gives them no incentive to do anything.


==In many cases, the stronger local and regional banks don't
need more capital,== as this is not the reason for not making a
loan, but rather their reluctance to make loans is the result of
the prospective borrower's inability to satisfactorily answer the
three traditional credit questions [that the major banks in
trouble apparently did not ask].
(1) Can this borrower repay the loan?
(2) Will this borrower repay the loan?
(3) What can I do if this borrower doesn't repay the loan.

Not everyone that wants money, individual or company, is
justified in getting it.

On the other hand, there is a great deal to be said for the
ruthless administrative seizure and liquidation of known
insolvent banks, or more importantly banks whose solvency cannot
be determined because of their management's "stonewalling," about
the types, amounts and current value/location of assets and
liabilities, whether from obstinacy, ignorance, or an effort to
avoid criminal prosecution. It may well be that the reason that
the major national banks are not making any loans is because they
are insolvent, but no one knows.
http://www.iht.com/articles/2009/02/...3insolvent.php

One can make an assumption that, if they are not making loans, something
is amiss. Open the books and show us what or we'll assume its
insolvency and take them over.

Trouble is (like you stated) some people don't deserve loans. Nobody in
their right minds is going to underwrite residential construction in
regions where there's a surplus due to past speculative building.

We missed the boat with the last handout in not getting a seat on the
BoD (even a non-voting one) in every bank we (the gov't) invested in. In
some cases, we (the taxpayers) are the largest single owners of these
banks. And we can't even peek in the books.

--
Paul Hovnanian
------------------------------------------------------------------
Stupidity kills. But not nearly often enough.

On Sun, 15 Feb 2009 14:46:39 -0600, F. George McDuffee
wrote:

On Sun, 15 Feb 2009 10:09:04 -0800, Gunner Asch
wrote:
snip
We have a second wave of subprimes coming do in the next several months
from what I understand, and a credit card implosion on the horizon as
people who have been funding their shotfalls on their cards all hit the
absolute limits and go into default
snip
------------------
While there may indeed be a second wave of sub-prime/alt-A
defaults, the big tsunami on the horizon appears to be the wave
of commercial real estate defaults, especially shopping plazas.

Not only has there been a substantial downturn in retail
activity, but almost all commercial real estate mortgages are
short term ( 3-5-7 year periods common) with a balloon at the end
that are now coming due. The problem is that even the viable
projects are having extreme difficulty "rolling their notes
over," with much higher interest required when these can be
refinanced at all, which in turn makes the currently viable
projects into cash sinks and zombies with negative cash flow.
===========
If you can't show me the money, at least show me the note....

An additional problem with existing residential montages of all
grades, both stand alone and bundled into CDOs, has just surfaced
in a big way.

Basically the mortgage holder or loan servicing company cannot
produce a valid mortgage contract and/or TILA [truth in lending
act] documentation when they attempt to foreclose, with the
result the cases are thrown out of court.

It is becoming increasing apparent that there is literally
*NOTHING* behind large numbers of residential, and quite likely
commercial mortgages and mortgage backed securities, and very
likely much of the vehicle, credit card and student loan debt,
thus this debt/CDOs are grossly overvalued, even at 15 cents on
the dollar.

=============
Homeowners' rallying cry: Produce the note

By MITCH STACY, Associated Press Writer Mitch Stacy, Associated
Press Writer – Tue Feb 17, 3:54 pm ET

ZEPHYRHILLS, Fla. – Kathy Lovelace lost her job and was about to
lose her house, too. But then she made a seemingly simple request
of the bank: Show me the original mortgage paperwork.

And just like that, the foreclosure proceedings came to a
standstill.

Lovelace and other homeowners around the country are managing to
stave off foreclosure by employing a strategy that goes to the
heart of the whole nationwide mess.

During the real estate frenzy of the past decade, mortgages were
sold and resold, bundled into securities and peddled to
investors. In many cases, the original note signed by the
homeowner was lost, stored away in a distant warehouse or
destroyed.

Persuading a judge to compel production of hard-to-find or
nonexistent documents can, at the very least, delay foreclosure,
buying the homeowner some time and turning up the pressure on the
lender to renegotiate the mortgage.

snip
-----------
http://news.yahoo.com/s/ap/20090217/...SD0DBR.QlvzwcF

And these were the financial "masters of the universe."


Unka' George [George McDuffee]
-------------------------------------------
He that will not apply new remedies,
must expect new evils:
for Time is the greatest innovator: and
if Time, of course, alter things to the worse,
and wisdom and counsel shall not alter them to the better,
what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman.
Essays, "Of Innovations" (1597-1625).