Paulson's "Interest Rate Freeze" - The Real Story is Fraud

[swag]

Sean Olender, Sunday, December 9, 2007

(via Mark Thoma)

New proposals to ease our great mortgage meltdown keep rolling in. First the Treasury Department urged the creation of a new fund that would buy risky mortgage bonds as a tactic to hide what those bonds were really worth. (Not much.) Then the idea was to use Fannie Mae and Freddie Mac to buy the risky loans, even if it was clear that U.S. taxpayers would eventually be stuck with the bill. But that plan went south after Fannie suffered a new accounting scandal, and Freddie's existing loan losses shot up more than expected.

Now, just unveiled Thursday, comes the "freeze," the brainchild of Treasury Secretary Henry Paulson. It sounds good: For five years, mortgage lenders will freeze interest rates on a limited number of "teaser" subprime loans. Other homeowners facing foreclosure will be offered assistance from the Federal Housing Administration.

But unfortunately, the "freeze" is just another fraud - and like the other bailout proposals, it has nothing to do with U.S. house prices, with "working families," keeping people in their homes or any of that nonsense.

The sole goal of the freeze is to prevent owners of mortgage-backed securities, many of them foreigners, from suing U.S. banks and forcing them to buy back worthless mortgage securities at face value - right now almost 10 times their market worth.

The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.

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[terisan]

1. I was looking at prosper.com as an alternative for lenders/borrowers. Anyone have experience? nt

Prosper.com vets the borrowers then sells the loans to public. Apparently you can buy a very small share of a loan or bigger. I think you can try it out as a lender for very small amount. People borrow to consolidate debt, finance businesses, whatever. There is a section in which you can help people on sort of social needs loans-such as family needing to build wheelchair ramp.

It seems to be an attempt to get off the grid, so to speak, in banking and investing.

[speedoo]

2. K&R, and bookmarked. nt

[pansypoo53219]

3. leave no

GOP donator behind.

[Demeter]

4. If You Read Only One Article This Century, Read THIS One! K&R

We have been cursed indeed: "May you live in interesting times".