Is it really that simple? I've been reading and watching for days now and I don't understand why Congress is so confused as to why they do not have the public support. They have yet to explain the catastrophic affects this will have (not getting the $$).
To see it from the public ( aka Main Street) point of view, the banks are in the weeds because they have mortgages for houses that have no or less value than the paper on them. People are simply walking away making the paper worth even less. Sending money to the banks without negotiating current mortgages will only further lead to more forclosures and more empty money. It isn't solving the problem but merely putting a bandaid on a symptom. We've been discussing it, Hon and I, for some time now being in the real estate industry and how it's affecting business.
If banks are given the money they are okay for a while however without renegotiating mortgages and eliminating detrimental ARMs, eventually we'll be right back HERE again with more foreclosed properties and less money being paid back to banks. A house heading for foreclosure let's say has a mtg of $1200. If they hit the ARM in November it goes to $1400. If the bank renegotiates now to maintain the $1200 they may actually continue to have the loan paid off - if not, the folks walk away and the bank then has to sell this property, which will then likely be in less than spectacular condition for pennies on the dollar further decreasing the value on the street of these homes and maybe acheiving what would calculate to $600 -$700/mo mtg when it's all said and done.
Does that make sense? Obviously no and now you have banks still in the weeds and MORE people without homes, more people stuck in homes they can't sell, more people unable to buy for lack of lenders, etc.
After reading this article on CNN by Dobbs it validated what we've been saying all along. If you don't have time to read the entire article, I've highlighted the point here:
Chetry: What do you think if you were up there making decisions? What do you think we need to do?
Dobbs: Well, the first thing we need to do is return to a traditional role of regulation. ... The problem here is not simply the housing market. But $700 billion and nothing in that bill deals with the foreclosure crisis, if you can imagine that. That's arrogance. That's stupidity. That is your leadership in Washington, D.C. Democratic leadership in Congress and Republican leadership in the White House.
So that's an absurdity. The first thing that has to be dealt with is mitigating the foreclosure crisis, period. Secondly, in terms of instilling confidence in the banking system and in our credit markets, the first thing to do is to deal with those institutions that are wildly out of balance, whose balance sheets, frankly, are a joke. And the regulators who should have been tending to them over the years are also a joke.
It's time to end the joke. That means aggressive regulation. It means aggressive intervention on an institution-by-institution basis.