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.
The Daily Reckoning Australia