Bush unveils subprime mortgage scheme to bail out banks

by wsws (reposted)

Fri, Dec 7, 2007 8:02AM

Friday, December 7, 2007 :The plan announced by President Bush Thursday to freeze interest rates on some subprime mortgage loans will do nothing to stave off foreclosure for the vast majority of families facing the loss of their homes in the coming months. Bush, flanked by Treasury Secretary Henry Paulson, Housing and Urban Development Secretary Alphonso Jackson, a Federal Reserve Board governor and other federal regulators, announced the plan at a White House press conference only hours after the Mortgage Bankers Association reported that the number of US homes in foreclosure rose to a record level in the third quarter, engulfing 1.7 percent of homes.

The number of delinquent mortgages rose to 5.6 percent.

Worked out between Treasury Secretary Henry Paulson and major Wall Street banks, mortgage lenders and servicers, and investment funds holding securities backed by subprime loans, the overarching aim of the Bush administration plan is to limit the losses suffered by financial giants from the meltdown of the US housing market and resulting credit crisis.

It is estimated that 1.5 million adjustable-rate subprime mortgages, totaling some $400 billion, will reset to higher interest rates over the next 18 months, resulting in the foreclosure of hundreds of thousands of homes and further destabilizing some of the biggest US banks, mutual funds, insurance companies and hedge funds, which hold hundreds of billions in so-called “collateralized debt obligations” (CDOs) backed by bundles of subprime loans.

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For more information: http://www.wsws.org/articles/2007/dec2007/...

§Fear and greed: The financial crisis driving Bush's subprime mortgage plan

by wsws (reposted)

Fri, Dec 7, 2007 8:02AM

Friday, December 7, 2007 :The near-panic in financial circles that lies behind the Bush administration’s scheme to freeze some subprime mortgage interest rates is summed up in an article by Washington Post business columnist Steven Pearlstein published on Wednesday under the headline “It’s Not 1929, but It’s the Biggest Mess Since.” Pearlstein writes: “We are only at the beginning of the financial world coming to its senses after the bursting of the biggest credit bubble the world has seen.

Everyone seems to acknowledge now that there will be lots of mortgage foreclosures and that house prices will fall nationally for the first time since the Great Depression. Some lenders and hedge funds have failed, while some banks have taken painful write-offs and fired executives. There’s even a growing recognition that a recession in on the horizon.

“But let me assure you, you ain’t seen nothing yet.”

He then notes that the same financial giants which originated, packaged and resold hundreds of billions of dollars in shaky subprime loans also “originated, packaged, rated and insured home-equity loans, commercial real estate loans, credit card loans and loans to finance corporate buyouts.”

Having described the process by which high-interest loans to borrowers with weak credit were leveraged into a massive edifice of cheap credit—and fantastic profits for the banks, mortgage lenders and investment firms—Pearlstein outlines the way in which the collapse of the credit bubble is undermining the stability of the financial system.

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§A Kinder & Gentler mortgage relief for distressed homeowners? NOT!

by DLi (dlimay7 [at] flex.com)

Sat, Dec 8, 2007 2:08AM

The only reason Boy/Emperor George and his Wall Street cronies cobbled together this bailout scheme is to try save themselves and the crooked Capitalist system from a chain-reaction type of total collapse and self-inflicted Implosion. But it ain't going to work, as the greedy robber bankers have over-leveraged those risky sub-prime loans into TRILLIONS of derivative Ponzi scheme swindles all across the World. the real question is, when will the Great Implosion--which will dwarf the Great Depression as a mere 'correction'--begin to wipe out their financial house of cards?

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