Dylan Ratigan: On the Mortgage Settlement: There Is No Political Solution to a Math Problem

Dylan Ratigan has written another excellent article discussing the recent bank bailout commonly referred to as a settlement. It is clear to anyone that understand economics and the housing industry that this is another ridiculous attempt to placate the public while buying votes. How do they get away with the absurd policies and intellectual fraud that it takes to do things this stupid. It is made of politicians who lie to get elected and then lie to get re-elected as the learn to worship the campaign donated dollar. Obama has no idea what will work to solve the housing crisis and is just worried about getting more votes this fall. Most congressman and women have no idea what is happening in the economy nor what would be the only way to keep the USA from continuing its Japan like ten to twenty year recovery. Instead we have been willing to forgive the banks of any malfeasance and let crimes go unpunished. It is typical that the banking system and its players get away with crimes that would easily result in 20 or 30 year sentences to anyone other than a politician or banker. It is a clear sign that our country is not run by the people and has not been for some time. Capitalism has been replaced by the Pseudo Capitalism that is only capitalism for everyone other than banks. The banks abuse the system to the brink of failure and the tax payer is used to bail them out. The banks commit unlimited amounts of fraud and other criminal activity and the government pushes for a settlement to keep the banks from living with the results of their crimes. We are no longer able to trust the government to protect our financial interest and we certainly can't trust the banks to follow any rules that may have been created to protect the public interest. Fraud is fine if you are part of the governmental-bank complex that is running the country and dictating policy to the tune of half of all mortgages being underwater. (According to Zillow, roughly half of homeowners with a mortgage are effectively underwater)

Here is part of Dylan Ratigan's article on the settlement.

The housing market's vicious deflationary cycle demands serious policy action to match the scale of the challenge. Dropping housing values lead to foreclosures, which damage housing values, and so on and so forth. According to Zillow, roughly half of homeowners with a mortgage are effectively underwater, which means they owe more on their mortgage than their house is worth. So far, the alphabet soup laden set of programs (HAMP, HARP, Hope for Homeowners) put forward by the Bush and then Obama administration have been failures. And this is because, as the Congressional Oversight Panel noted as far back as March of 2009, the single best predictor of default risk is how much equity homeowners have in a home. Many Americans, though considered homeowners, are essentially "renters with debt" (as housing analyst Josh Rosner put it). And Amherst Securities Laurie Goodman noted that with our current housing trajectory, we can expect up to 10 million more defaulted mortgages over the next decade. These foreclosures impacts housing values, reduce consumer purchases, and costs municipalities money.

The proposals on the table to solve this problem aren't inspiring. The meager mortgage settlement deal cut via furious and dramatic negotiations is unlikely to be meaningful. This settlement is essentially a continuation of previous alphabet soup housing programs, because it would not force banks to fundamentally restructure the trillion dollar underwater mortgage problem. It will generate headlines, but it will fail to address the extent of the problem. State attorneys generals have accepted the settlement for a variety of reasons, one of the most frustrating being that they are substantially under-resourced and this deal moves cash their war. This is not how to make good policy. And the housing market will continue to suffer if our political leaders cannot acknowledge the depth of the problem.

Instead, we need some serious discussion from both the Republican candidates and the Obama administration about how to write down mortgage debt. Some proposals would reduce principal, while giving the banks an equity appreciation stake in the home. Others would deal with the problematic accounting standards which allow banks to overvalue second mortgages, and imply that one or more large banks needs to be restructured by the government. These are worth considering. We think it's important, regardless of how policy-makers reduce the debt, to force the banking system to appropriately value mortgage debt.

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Dylan Ratigan: On the Mortgage Settlement: There Is No Political Solution to a Math Problem