Vital Part of Housing Bill Is Brainchild of Banks Mortgage Aid Under 'Credit Suisse Plan' Would Benefit Lenders
By Jeffrey H. Birnbaum Washington Post Staff Writer Wednesday, June 25, 2008; D01
A key provision of the housing bill now awaiting action in the Senate -- and widely touted as offering a lifeline to distressed homeowners -- was initially suggested to Congress by lobbyists for major banks facing their own huge losses from the subprime mortgage crisis, according to congressional staff members and bank officials.
Credit Suisse, a large investment bank heavily invested in mortgage-backed securities, proposed allowing hundreds of thousands of homeowners to refinance their mortgages with lower-cost government-insured loans, relieving financial institutions of the troubled debt.
Hundreds of thousands of homeowners are, of course in reality, hundreds of thousands of non-performing loans presently (and inconveniently) on Credit Suisse's books.
For some still-unknown reason, fraudulent and criminally culpable investment banks think that, instead of prosecuting them and sending their CEOs to jail, it is in the 'public interest' to cover their losses and send them on their way with newly sanitized books.
After the bank proposed this to Congress in January, it became known as the "Credit Suisse plan" among congressional staffers and lobbyists. It later formed the basis of housing provisions in both the House and Senate.
What the second-largest Swiss bank, headquartered in Zurich, is doing proposing legislation in the U.S. Congress is anyone's guess. The front pages of the NYTimes and WaPo are outraged when the Chinese try to buy an Investment Bank or the Dubai Sheikhs bid on running an American port, but there's nary a murmur as we bail a good ol' Swiss or German or Brit bank to the tune of $trillions.
'Cause that's what we're talkin' about, friends--thousands of billions in worthless mortgage loans, fraudulently written, upon which CS and other complicit banks profited in record amounts--are, now that they are worthless and a drag on the balance sheet, to be given over to the American taxpayer.
If you haven't noticed, in the blur of other visual distractions the networks and newspapers serve up each day, the guy selected by Barney Frank and his cohorts to hold the bag, is you.
. . . In approaching congressional aides, the lobbyists suggested that banks take less than full payment for the distressed loans on their books. But the measures would allow financial institutions to get cash out of foreclosed properties that would otherwise sit on their books as dead weight.
Since the new loans would be guaranteed by the Federal Housing Administration (FHA), taxpayers would ultimately pay for defaults. The Congressional Budget Office projected that this could cost $1.7 billon over five years.
$1.7 billion is the smallest of the quarterly losses of the smallest banks in this conspiracy. If, in fact, the fall-out in bad debt and mortgage losses was anywhere near that figure, the banks involved would merely shrug and pay it off. Countrywide Financial, the mortgage bank just acquired by Bank of America (and whose founder is under possible indictment as among the creators of the sub-prime scandal) has a thus-far acknowledged liability of $50-60 billion all by itself.
. . . "The alternative to having the banks as participants was a massive federal bailout," (Rep. Barney) Frank said. "They [the banks] benefit, but they benefit by losing less."
And Barney would benefit by gaining more. In the past year, he stocked his campaign funding to the tune of $350,000--tanking up from the very investment banks, commercial banks and real estate firms he now plans to bail out. But, aside from Barney Frank's personal financial gain from the industries he would now bail out (with your money), why are we constantly presented with "massive federal bailout" as an only alternative? Whatever happened to bankruptcy and bank failure as an option? Whatever happened to federal indictment and prison terms for the perpetrators of financial fraud? Whatever happened to accountability?
. . . The pursuit of legislation to help strapped homeowners began last year. Several scholars, from both the political left and right, recommended plans based on the Depression-era Home Owners' Loan Corp., which put the federal government in the business of providing mortgages. But that was eventually seen by lawmakers, including Frank and Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.), as too expensive a program to win congressional approval.
So, they lie to us about a five-year $1.7 billion liability, which is small enough to be approved. If the number isn't palatable, change the number. Chris Dodd and Barney Frank--co-conspirators in lying while in office.
Then in December, Credit Suisse officials proposed a different approach to the White House's economic advisers, according to people familiar with the plan who spoke on condition of anonymity because their employers did not allow them to speak publicly. The bank recommended to the White House -- and soon after to congressional staffers -- the broad outlines of the provision now headed for passage in Congress.
The banks would have to accept a reduction in the value of the troubled loans while qualified borrowers could then get federally insured loans to replace their private ones. The homeowners would avoid foreclosure and pay less each month. The banks would get a payment rather than a potentially nonperforming asset. Mortgage holders typically lose about 40 percent of the value of their loans on foreclosed homes.
Qualified borrowers. What exactly is a 'qualified borrower?' If these borrowers had been qualified, we wouldn't be in the mess we're in. And what about the homes that have been walked away from, the properties that have been looted of their bathtubs and appliances, stripped of their wiring, gutters and windows? Sometimes 400 homes in a single neighborhood. What of those, Barney? Who picks up the wreckage of the wreckage, Chris?
. . . Congressional aides said they did not simply accept the banks' proposals. Rather, they said, they worked with others, especially financial regulators, to refine the package. The Federal Deposit Insurance Corp., for instance, urged that financial institutions accept a larger cut in the borrowers' principal than first proposed, and the House measure reflects this recommendation.
Sheila Bair, Chairman of the FDIC and very nearly the only island of competence in these fraululent and self-serving floodlands, has long lobbied for increased contributions by the banks into the FDIC coffers. The gap between liability and funding is enormous and she apparently would not sign off without concessions.
Congressional staffers said they also consulted with other banks, such as Citigroup, and industry groups such as the Securities Industry and Financial Markets Association. It also hashed out concepts with La Raza, the NAACP and low-income housing groups.
That's an interesting list of consultants. Citigroup is teetering on the brink of collapse and passionately needs a bailout to survive. The Securities Industry and Financial Markets Association is an industry trade group representing securities firms, banks, and asset management companies in the U.S., Europe, and Asia--the very people who sprung this ponzi-scheme by misrepresenting assets to investors.
Wow. Next time we legislate fast-foods, let's get McDonalds and Burger King to write the legislation.
But Credit Suisse and Bank of America were instrumental throughout the process. "They helped us understand the notion of how many loans were going to default based on the coming waves of foreclosure," a House aide said. "They helped us dimension up the scope of the program."
The friendly financial geniuses who had no idea how deep the losses of their fraud would extend, have now helped us understand notions and dimension up the scope up programs. Those must be the coming waves of foreclosure pegged at $1.7 billion (for congressional acceptance purposes) instead of the $trillions actually at risk.
If they have their way, that falsified (dare we say fraudulent?) risk will stop being theirs and become yours. Thus will wasted and potentially lost capital be freed and made available for use in the commodities bubble that has doubled the cost of gas and brought a large portion of the world's poor to the brink of starvation.
The Barney and Chris Plan.
Credit Suisse said it made its suggestions to improve the mortgage market. "We've participated in a series of conversations with government entities and offered a discreet regulatory solution to improve existing affordable mortgage programs," said Duncan King, spokesman for Credit Suisse. "We hope to improve existing affordable mortgage programs."
Discreet (Adjective) Marked by prudence or modesty and wise self-restraint
We are meant to swallow, while standing in line for $5 gas, that these foolish and greedy lenders have suddenly become prudent. Angelo Mozilo, crooked CEO of Countrywide, who gave Chris Dodd a favorable mortgage, is trading his $200 million lifestyle for the sackcloth and ashes of modesty. Mozilo is depending upon the wise self-restraint of all the buddies n the Democratic Party that he has paid off over the years, to stay out of jail.
Bank of America said its participation came at the request of congressional aides. "They were reaching out to all sorts of people who have been thoughtful about this crisis," said Peter McKillop, a spokesman for Bank of America. "They were talking to us and talking to every bank that had a sophisticated mortgage business. We wanted to come up with a bipartisan solution that stabilizes the housing market."
Sure you did.