Taxpayer "cramdown"

Boom! Boom! Boom! Boom!

If you are wondering what the noise is its my forehead slamming against my desk.

Ughhhhh.....Welcome to the mortgage "cramdown"!

Bend over taxpayers. Its time for you to bail out the housing bubble!

Citigroup announced today that it has agreed to a senate proposal that will allow BK judges to modify mortgage loans. Here are the details:

"Citigroup became the first major bank to support a controversial plan to let bankruptcy judges alter mortgages in a effort to prevent more housing foreclosures.

Until now, banks have been ardently opposed to the proposal, which key Democratic lawmakers hope to attach to President-elect Obama's economic stimulus legislation.

The so-called "cramdown" proposal has been backed by Democrats over the past year as a potential solution to the foreclosure crisis.

Under the change, bankruptcy courts could alter the terms of mortgages, subject to certain conditions:

1) Only mortgages entered into prior to the date of enactment of the bill would be eligible for the treatment. All loans, and not just subprime, are eligible.

2) Borrowers have to show they made a “good faith” attempt to work with the lender before considering this bankruptcy provision. Bankruptcy cannot be the first option, and borrowers have to prove it wasn’t.

3) Bankruptcy judges can strip away a lender’s credit or rights if they violated the Truth in Lending Act or other state and federal laws.

The agreement with Citigroup to support the legislation was announced in Washington by Senators Richard Durbin of Illinois, Charles Schumer of New York and Christopher Dodd of Connecticut.

Durbin tried last year to win passage of his proposal, but it failed in the face of opposition from lending and housing groups that warned giving bankruptcy judges power to erase mortgage debt would increase costs for future homeowners."

My Take:

Sickening isn't it? The banks vehemently opposed this when it was brought up last year. why wouldn't they? If a BK judge does a "cramdown", guess who gets crammed? The banks of course. The fact that both Citi and the NAR agreed to this tells you how bad the situation is in housing.

This whole thing smells like a big pile of dog doo. Why on earth would any bank accept these terms? This is what happens when you allow Uncle Sam to put a collar around your throat. When you take $120 billion from the taxpayer via the government I guess you need to listen when they threaten you with your life!

Remember folks, the government bailed out all of these large institutions. Without Uncle Sam they do not exist. Why do you think the TARP was crammed down our throat in a matter of weeks? The banks were all toast and Paulson knew it.

I expect the rest of the big boys that accepted TARP money to follow Citi's lead. Instead of "lead" maybe I should term this Citi's "death march". The way I see it, this is the final nail in the coffin for the banks. What will end up happening here is this: Millions of homeowners will go to court and get their loans modified. The losses will then be taken by the banks via "cramdowns". The losses will then be crammed down the taxpayer's mouth as the government uses our money to infuse the banks with capitol so that they can offord to take the losses.

So isn't this just special. We the taxpayers: Who were prudent and lived within our means, must now go ahead and bailout everyone that took outrageous risk and bought homes that they knew they couldn't afford. By doing this, we also bailout the banks who were stupid enough to give them the money in the first place!

Boom! Boom! Boom!

Man I am going to have a headache if I keep doing this. I can't help it! Its the only way to release the anger after reading about this cramdown. I either do this or I grab a housing speculator by the throat and throw him out a window! The head smacking thing sounds like the wiser choice.

I have a question here: I wanna know when we "the taxpayers" get a chance to do our own version of a "cramdown". Perhaps the same judges that do these mortgage modifications can force the CEO's of these banks to line up on their knees(side by side) and allow each taxpayer to cram a sock down each of their throats. That's the cramdown I want to see!

Bottom Line:

What can I say folks? I get more angry and sickened by the day as I watch the government make such stupid mistakes.

Again I get back to "moral hazard". Who won't want a cramdown if they go ahead and do this? Anyone that bought a house within the last 6 years is going to want this deal. Why would anyone pay their bloated mortgage payment for 30 years if they have this option available?

If I was stupid enough to buy one of these McMansions, I would be the first guy on the phone to Citibank. "Sorry guys, can't afford it. Made a mistake. Lets go to court and work this out."

My oh my this is going to end ugly. I would avoid any investment in the financials until the smoke clears on this debacle. If the government goes through with this, the banks will essentially be nationalized. Their balance sheets will be hit with billions of losses. Their will have no earnings for years.

God forbid anyone in this country is forced to take a financial hit. The entitlement in this country has gotten completly out of hand.

Each day I get more and more angry with myself that I didn't act like a buffoon and go out and spend like a drunken sailor over the past few years. If I knew the country was going to bail me out, I would have bought a boat and a McMansion and partied until it was bailout day.

No trades today. I was too busy banging my head against my desk.