Naked Capitalism | Obama to Use Pension Funds of Ordinary Americans to Pay for Bank Mortgage “Settlement”

Obama to Use Pension Funds of Ordinary Americans to Pay for Bank Mortgage “Settlement”

The story did not outline terms, but previous leaks have indicated that the bulk of the supposed settlement would come not in actual monies paid by the banks (the cash portion has been rumored at under $5 billion) but in credits given for mortgage modifications for principal modifications. There are numerous reasons why that stinks. The biggest is that servicers will be able to count modifying first mortgages that were securitized toward the total. Since one of the cardinal rules of finance is to use other people’s money rather than your own, this provision virtually guarantees that investor-owned mortgages will be the ones to be restructured. Why is this a bad idea? The banks are NOT required to write down the second mortgages that they have on their books. This reverses the contractual hierarchy that junior lienholders take losses before senior lenders. So this deal amounts to a transfer from pension funds and other fixed income investors to the banks, at the Administration’s instigation.

Check out the article in full here…

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Comments
One Response to “Naked Capitalism | Obama to Use Pension Funds of Ordinary Americans to Pay for Bank Mortgage “Settlement””
  1. Shelley says:

    The fruad is overwhelming! What can ya say we have said it all! Vote out all of the politicians and start a new! Then throw the unlawful judges and lawyers and banksters and politicians in jail and support the good judges lawyers and politicians and joe public. The tax payers and victims, the real investors that make this country tick.

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