Charles Schumer Calls For State to Protect Debtors From Foreclosure

Reddit

The junior Senator from New York, Charles Schumer, called on Federal agencies in the States to step in and do more to protect borrowers who face default and foreclosure on their loans. The great socialisation of risk continues in Western Welfare states, with nanny/bully States stepping into assume the liabilities (personal and financial) and take over responsibilities (personal and financial and physical) for private citizens.

“It is essential,” Schumer or one of his tax-payer funded lackeys wrote, “that the Federal agencies overseeing the financial markets use their influence over the major market players to encourage them to engage in a major effort to modify or refinance the loans that have a high probability of defaulting so that the upcoming wave of foreclosures that is anticipated can be abated and market confidence can be restored.”

Schumer knows a popular cause when he sees one. The call for a moratorium on foreclosures will go out just as surely as night follows day. It’s really just a question of who will make it first and when. The “who” can probably be whittled down to a short-list of long-shot presidential candidates who are more beholding to unions and organised labour than to Wall Street firms. It won’t be Hillary Clinton or John Edwards. But it’ll be someone. And it will happen soon.
 
Schumer shows that as bad as it’s been, it’s going to go get worse. “UBS estimates that the interest rates on US$339 billion in subprime loans underlying mortgage backed securities will reset between the third quarter of 2007 and the end of 2008.  The total volume of subprimes that will reset is even larger.  It is widely acknowledged that the loans which are about to reset are already performing poorly, with higher than expected default and foreclosure rates. Therefore the reset process is very likely to contribute to higher foreclosure rates, rates which are already alarming. Just yesterday, we learned that national foreclosure filings are 93 percent higher than they were this time last year.”

Our advice? Get your entertainment from America, but not your investments.

Dan Denning
The Daily Reckoning Australia

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.
Reddit

Comments

  1. Hello. I found you in Google newsreader on my site so you must be famous. Speaking as an American, I will trade you 1 Schumer for 1 kangaroo, or 2 wombats.

    Reply
  2. Stop the Subprime Bailout

    Can you spare a few thousand dollars to pay somebody else’s mortgage?

    Congress thinks you can, especially senators Christopher Dodd and Hillary Clinton. What’s more, a lot of the people you’re being asked to bail out lied on their loan applications or signed up for loans without reading the terms.
    Here’s what’s going on, as explained by Caroline Baum of Bloomberg.com:

    During the housing boom of the last five years, people with bad credit histories, many of whom lied about their income and nature of employment, got mortgage loans they weren’t qualified for to buy houses they couldn’t afford. Now that house prices have stopped rising, and the house can’t be refinanced or sold at a profit, Congress wants the taxpayer to subsidize the mortgages so these folks can remain in their unaffordable houses.
    The proposal to bail out subprime borrowers may seem humane, but it’s wrong. The argument is that borrowers who signed up for subprime loans had no idea what they were doing. They didn’t understand the loan documents, or didn’t read them. Some borrowers may have been victims of predatory lenders (whose stocks have already surged on talk of a bailout). But many more borrowers simply gambled on risky loans in hopes of flipping property for big profits, or knowingly lied about their income just to get a bigger house. Don’t reward these irresponsible people with property, paid for by you and me!
    Politicians will exploit your emotions by saying they want to help people “keep their homes”. But remember that the people in financial trouble already had houses. They got into this mess by trying to buy bigger and fancier houses than they could afford. If we do help them, it should involve them moving back into houses they can afford. No one will be out on the street. Anyone who could pay a mortgage can pay rent, which is much less.

    More: http://patrick.net/housing/contrib/nobailout.html

    Aggravated
    August 24, 2007
    Reply
  3. Most of the people I know like American’s (as much as we can stomach their jingoistic naivety), but detest much of what the country now stands for- which resembles nothing of what their “founders’ established. Will we be disappointed when the Harvey Norman (no interest no deposit, 12 months) bailiffs come to the door of US companies and housholds and start asking for their pound of flesh? I don’t think so. Never mind mortgage bailouts- there’s nothing new in the U$ govt robbing its own citizens to bail out its cronies, the real threat is the fed’s inflating its debt away and thus eroding the wealth the rest of the world has benevolently lent back to the U$ govt to prop it up over the past 10 years. Did this credit crunch appear when the sub primes starting rolling, or when the Chinese govt signalled an end to buying US treasuries a couple of months back. I don’t know if I will enjoy seeing what is surely coming to the American’s or not. After all, being in financial markets I’m going to be directly affected by it even more than I already am. I wonder what the Iraqi’s will think when the American people start they have it?

    dubious pete in melbourne
    August 24, 2007
    Reply
  4. There is a certain (albeit depraved) symmetry to this situation. Sub prime mortgage borrowers have in effect out-conned the con-artists on wall street, who in turn conned the hedge funds, who conned the super funds (,etc, etc). Now the USD (the ultimate con) will be vaporised, leaving the world with real reserve levels, as opposed to fictional USD. And the pollys want to con the voters into thinking they can escape their mortgages AND keep their houses ? Whatever they’re on, I want some !

    Reply
  5. I am flabbergasted that Bill Gross from PIMCO could even suggest the US tax payer bails out these people. what? i thought pimco were safe, they have underperformed so miserably over the past few years because they were underweight USA, overweight AAA’s, underweight credit and US, and short on duration and DWE. they should be benefitting from the fallout, now he wants to save these peoples bacon? WHO does he represent? 10% of my OWN superannuation (401k) is in PIMCO, I don’t want him working changes that benefits someone elses portfolio.

    Forgive me but i thought capitalism rewards AND punishes? i thought he lived in a free market economy? land of the free home of the brave must truly be land of the home, free of the brave as I have heard it suggested. A bit of legislated theft anyone?

    No, i don’t get this, it is totally out of character for what he has written over the past 4 years. All the emails between himself and Steve roach I’ve read. i have good acquaintances who have worked on the floor with him in newport beach. apparently he is a very nice person and a good boss, very diligent. BUT, people who earn $50m a year and have their own jet, all of the sudden getting altruistic, sorry, I don’t buy? When you get altruistic you think “4000 children died in the last hour because they don;’t have water and sugar”, not, “we need to protect the overdrawn US homeowner from their own credit card repayments”

    I don’t get the latest newsletter he put out (go to http://www.pimco.com i am sure its there). Dumping on his philanthropic friends like that won’t make him popular either.

    Either PIMCO are going to hurt as well and its well hidden, or something is up. I heard friday that the chinese are holding a LOT of the really bad CDO’s.

    IF it goes under then perhaps there is the potential that they wont just stop buying US treasuries, but they’ll well and truly fubar us and that would virtually destroy the entire system as we know it.

    IF that’s the case I’d stockpile food & cash and hope for the best.I’ve met cranky chinese…….they can get pretty nasty, never mind Russian mining gangsters!

    dubious pete in melbourne
    August 27, 2007
    Reply

Leave a Reply

Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@dailyreckoning.com.au