Loan Modification Plans
The US government and JP Morgan Chase race to massive loan modification plans.
Naked Capitalism reviews the JP Morgan plan with skepticism:
So despite the use of mortgage counsellors, borrowers are NOT being assessed on an individual basis. I hate to sound like a perennial skeptic, but I doubt that these programs will be terribly successful (although pushing foreclosures off even two or three quarters will probably make the bank’s financials look better, and they presumably extract some more cash from the hapless borrower in the interim even if the mod fails).
Why is this program likely to score little in the way of success? Consider what created this mess in the first place: reliance on highly automated, credit score driven credit approval processes with little to no data gathering about borrowers’ ability to pay.
and even a bit of conspiracy theory in her voice:
But perhaps I am not being cynical enough. The point may not be to make the mods work, but to claim that mass mods are the only option and then prove that they don’t work to forestall government intervention.
Meanwhile, the FDIC marches forward on the Sheila Bair massive loan modification plan:
U.S. regulators are working on a new federal program worth up to $600 billion that would provide government guarantees of home mortgages to help prevent foreclosures, a source familiar with the discussions told Reuters on Wednesday.
The Federal Deposit Insurance Corp and the U.S. Treasury Department were hammering out the foreclosure prevention program, which could provide guarantees for up to 3 million at-risk mortgages, the source said.
Economic Meltdown to Become Routine
Economist makes case for regular economic calamity:
The Orange County Register and its Web site (which hosts this blog) recently ran an opinion piece by Richardson in which he argues that with the current regulatory framework “we should expect financial cataclysms like the current crisis to occur, on average, every 15 years.”
US Commercial Paper Soars with Fed Program
Corporations drunk on cheap taxpayer money. Markets stimulated with big time liquidity from US government:
U.S. commercial paper outstanding rose by $100.5 billion, or 6.9 percent, to a seasonally adjusted $1.55 trillion for the week ended Oct. 29, the Fed said today in Washington. It was the first gain in seven weeks, reversing a 20 percent decline during the previous six weeks. Financial paper led this week’s gain, rising $69.4 billion, or 12.4 percent, to $628.8 billion.
“The introduction of the commercial paper program is an enormous jolt of not just liquidity but stimulus to the economy,” Tom Sowanick, chief investment officer at Clearbrook Financial LLC in Princeton, New Jersey, said in a Bloomberg Television interview. Clearbrook manages about $20 billion.
GMAC Fighting for Survival
GMAC seeks to become a bank holding company to tap into US government capital and commercial paper opportunities.
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