Credit Suisse Pushes for a Bailout
February 13th, 2008 by Chris KinnanThe Wall Street Journal’s Damian Paletta is reporting on a lobbying effort by global investment bank Credit Suisse to pass a scheme that would stick taxpayers with hundreds of thousands of failing subprime mortgage loans:
The Credit Suisse plan would open the way for nearly 600,000 subprime borrowers, many of whom are delinquent on their mortgages, to refinance into loans backed by the FHA. Some 1.3 million borrowers were either seriously delinquent or in foreclosure at the end of the third quarter, the most recent numbers available from the Mortgage Bankers Association. The number is expected to rise.
In a 20-page summary handed out to lawmakers, policy makers and regulators, Credit Suisse said the plan would make $89 billion in subprime loans eligible for refinancing. Credit Suisse spokeswoman Victoria Harmon said bank officials have “shared our ideas and technical advice on FHA” and received “constructive” responses from the government.
It would be a staggering bailout (and grossly unfair to prudent lenders, renters, and the vast majority homeowners) if Wall Street convinces Congress to stick U.S. taxpayers with this stinking mass of bad bets (that likely include fraud and reckless speculation.) That’s not how capitalism is supposed to work.
February 14th, 2008 at 12:01 pm
Right on. More like this, please.
February 15th, 2008 at 8:42 pm
The funny thing here is that a recall that CNBC program: Kudlow and company I guess is the name. In a particular show, Kudlow the quintaessential free marketer had a panel of really heavy weight Wall Street figures discussing the subprime mess, and one of the guys, without shame or remorse, suggested that the only solution was a goverment bail-out. Suddenly all of those free market advocates fell right behind in line with guy and everyone was discussing the wonder of such thing. I laughed at how Kudlow was trying to save face and how uncomfortable he was with the suggestion, he seemed really taken a back by the panel of so called free market experts. That was surreal, in particular at the end when Kudlow says goodby with a punch line that goes like: Because the free markte knows better or something like that.
That is just to show you there is long way before real capitalism is realized in the US.
February 17th, 2008 at 11:13 am
Who is going to bail out the banks? Tough call. Meanwhile, this problem goes beyond several million homeowners who are subprime. It goes to millions of people who bought since 2004 or 2005 and have negative equity. Who will bail them out? And who will bail out their neighbors whose houses are not impossible to sell because of all the bank owned sales and the mortgage short sales that are happening next door to them?
–Richard
February 18th, 2008 at 5:57 pm
Question: One of the guys on your board of directors is James H. Burnley, a partner at Venable. He was also, apparently, an airline industry lobbyist after 9/11 until around 2003. Indeed, his Venable bio notes the following:
That’s a curious thing, don’t you think? I mean, yes, this was after 9/11 and all, but look how the NYT reported things later:
You should read the whole article, in which experts call the bailout “an interruption of the free-market system.”
So I’m wondering what you Kinnan thinks about one of his directors having actively lobbied and succeeded in bailing out the airline industry?
February 18th, 2008 at 6:39 pm
He thinks it’s just fine Sickle…or else…
April 23rd, 2008 at 11:12 pm
Of those defaulting loans, I wonder just how many of the defaults have been fraudulently manufactured by Credit Suisse-owned Select Portfolio Servicing, formerly known as Fairbanks Capital Corp.?
Not a bad racket if you can get into it…Purchase the loans, Securitize them…have your “in-house” servicer manufacture defaults and pocket the fraudulently generated late fees, pocket the modification fees (if allowed by the PSA governing the trust) once the borrower is bled dry, roll the loan off the books and onto FHA’s thereby effectively laundering the victimized loan/borrower off of your books and avoiding the financial hit altogether.
Hollywood couldn’t write it any better….Of course the excuse will eventually be “But everybody else is doing it…”