The US taxpayers on the hook again.
Well at least someone is making money from Everett mortgages. But it ain’t me and I want a shot at this. Because here is another Wall Street bailout. Another Timothy Geithner bailout special where the US taxpayer is on the hook for bad mortgages. Politicians caused the mortgage mess and now there cronies who finance their election campaigns are getting rich on you all over again. They did it with TARP and the other “Stimulus Bills” and now they are doing it through the back door.
Here’s how it works. An investor (who should assume the risks but according to the feds is “To Big to Fail”) owns say $100 million is MBS (mortgage backed securities). MBS are simply a whole bunch of mortgages bundled into one deal. Let’s say as a bank I have to Mark to Market. That is I have to write down the value to what those mortgages are really worth. So I value it at $40 Mil. Because of TARP this bank will qualify for a federal bailout and probably mitigate the loss so that is will not be a big deal. The US taxpayer bails out the big investor again. This adds to our monstrous deficit.
Another investor, Investor B, buys this for the $40 Mil. The new investor goes through each loan and finds the ones who can make payments with a bit of help. He will write out a new mortgage at a lower dollar amount and charge a lower interest rate. Because he paid $0.40 on the dollar he can do this.
Each mortgage holder is contacted by Investor B and negotiations ensue. Investor B has a lot of room to negotiate he can adjust the new mortgage downwards and still make money. As Investor B goes through he rewrites every mortgage he can. By lowering the standards he re-qualifies as many mortgages as he can. Now here is where the baloney ensues. Investor B now sells the loans as a package to a federal agency. Let’s say he sells it for $80 Mil. True he does have costs involved but the profit is enormous. And can you guess who is on the hook for all these loans? That’s right you are.
The reason this all depends on jobs is very simple. Without a job I don’t care how much lower you make the mortgage payment or the mortgage interest rate you can’t make a payment. As I have stated before, many times in fact, without jobs our economy is going nowhere but down.
So now can you see how the US taxpayer is screwed again? Vote every incumbent out. Especially those who are voting for more deficit increasing expenditures.
Jim Johnson and Comments are always welcome