Banks aiming to fiddle the bailout
The "arm's-length transaction" is an ancient legal hallmark of integrity and fairness. Are the transacting parties sufficiently independent to achieve an honest deal? Or do they have conflicts of interest, a motive on either side to overprice or underprice the business? Are there undisclosed codicils, commissions, contingencies? Now the Wall Street Journal reports:
Some banks are prodding the government to let them use public money to help buy troubled assets from the banks themselves.Banking trade groups are lobbying the Federal Deposit Insurance Corp. for permission to bid on the same assets that the banks would put up for sale as part of the government's Public Private Investment Program.
PPIP was hatched by the Obama administration as a way for banks to sell hard-to-value loans and securities to private investors, who would get financial aid as an enticement to help them unclog bank balance sheets.
Having a bank buy toxic assets from itself using mainly taxpayer money is the antithesis of a fair and honest transaction. The FDIC should say "no." But that doesn't mean there won't be plenty of other shenanigans. See Hancock column here:
The ways to steal from a $3 trillion government program are as numerous as digits in the U.S. national debt, according to the report.Companies hired to manage toxic assets could manipulate the price of securities in which they own independent stakes. Somebody running a bailout fund could overpay for junk mortgages owned by a pal.
Banks could overprice securities they use for collateral to get government loans. Or they could overprice assets they sell to the Public Private Investment Partnership, a consortium of government and investors. Money launderers must be drooling.
Having spent years fraudulently inflating their incomes to get big mortgages, unscrupulous homeowners now have an incentive to understate what they make so they'll qualify for a government-sponsored modification that lowers principal or interest. Mortgage companies could charge loan-modification fees to homeowners even though the government isn't charging anything.
Comments
Does anyone else think it is ridiculous that the banks are using Federal bailout money to buy other banks, only making them "way too large to fail?" Isn't the fact that companies can be "too large to fail" partially responsible for this mess? There should be size limits on corporations.
Posted by: Interpreter | June 3, 2009 2:15 PM
If anyone has had any luck with any of these companies, could you please post it for the ones that cannot find one to work with you. We've almost lost once and just got a second chance that want last long so I need to get something done now, so if anyone knows the right number to call, i am sure a lot of people that hasn't found them would appreciate it but check out http://obamamortgage2009.blogspot.com or obamamortgage2009.blogspot.com
Posted by: veronicabenn | June 15, 2009 1:42 AM
Mr. President why are the banking,and loan company not making loans as you promised they would do for the american people we are all hurting and not getting any help. Time for them to answer to you for not helping us the little people that keep them in business, maybe we should boycott their business. Check http://obamamortgage2009.blogspot.com/2009/03/obamas-mortgage-modification-do-you.html#comments
Posted by: veronicabenn | June 15, 2009 1:53 AM
Check out http://obamamortgage2009.blogspot.com or obamamortgage2009.blogspot.com There needs to be a program for the elderly but not quite to retirement age for mortgage modification when the have lost their job during this particular recession. I made a decent wage because I put my time into a company and now have no job. I am looking at $10 - to $12 hr jobs after working all my life. You can't make a mortgage payment on that kind of money. I will eventually lose my home.
Posted by: jacquelynbrowne | June 18, 2009 1:11 AM