The joke's on us. Also, the tab.
Posted
Jun 26 2008, 01:51 PM
by
Minyanville
Rating:
You know that plan awaiting action in the Senate to help ease the foreclosure crisis and how it's not really a bailout of banks? It turns out it's really a bailout of banks, which makes sense considering it was actually proposed by banks.
The Washington Post today takes a look at the mechanics of the proposal, first suggested by Credit Suisse, which will essentially allow hundreds of thousands of homeowners to refinance their mortgages with lower-cost government-backed loans, very conveniently relieving the banks of the impaired debt. Bank of America soon got in on the act with a more elaborate proposal of its own.
According to the Post article, lobbyists for the banks suggested banks take less than full payment for the distressed loans but, importantly, be allowed to take cash out of foreclosed properties that would otherwise sit on their books. "Since the new loans would be guaranteed by the Federal Housing Administration (FHA), taxpayers would ultimately pay for defaults," the Post notes. The price tag, according to the Congressional Budget Office? $1.7 billion over five years.
"The alternative to having the banks as participants was a massive federal bailout," House Financial Services Committee Chairman Rep. Barney Frank told the newspaper. "They [the banks] benefit, but they benefit by losing less."
Top Stocks blogging partner Todd Harrison is founder & CEO of Minyanville.com. This post was written by Minyanville Executive Editor Kevin Depew. Excerpted from Five Things You Need to Know. Click here for the other four things.
