Occupy the mortgage lenders

Simon Johnson
0 Comment(s)Print E-mail China Daily, October 25, 2011
Adjust font size:

Participants in the Occupy Wall Street movement are right to argue that the big banks have never properly been investigated for the mortgage origination, aggregation, and securitization behavior that was central to the financial crisis – and to the loss of more than eight million jobs. But, thanks to the efforts of New York's attorney general, Eric Schneiderman, and others, serious discussion has started in the United States about an out-of court mortgage settlement between state attorney generals and prominent financial-sector firms.

Talks among state officials, the Obama administration, and the banks are currently focused on reported abuses in servicing mortgages, foreclosing on homes, and evicting their residents. But leading banks are also accused of illegal behavior – inducing people to borrow, for example, by deceiving them about the interest rate that would actually be paid, while misrepresenting the resulting mortgage-backed securities to investors.

If these charges are true, the bank executives involved may fear that civil lawsuits would uncover evidence that could be used in criminal prosecutions. In that case, their interest would naturally lie in seeking – as they now are – to keep that evidence from ever seeing the inside of a courtroom.

The scale and structure of any out-of-court mortgage settlement should address the damage inflicted by the alleged pattern of behavior. Many Americans now have too much debt. About 10 million mortgages are estimated to be "underwater" (the house is worth less than the loan). And, in key markets around the US, four years into the housing slump, home prices continue to fall.

If these were commercial loans, creditors would consider restructuring them – extending the payment schedule and typically writing down principal. But, in America's home mortgage market, this is much less common. Banks want neither millions of negotiations nor, most importantly, the need to face the losses implied on their loan portfolio.

As a result, households want to spend less and pay down their debts. To some extent, this is the natural aftermath of any credit boom. And household deleveraging in the US will take a long time.

Policymakers can respond in three ways. First, they could do nothing – apparently the preference of the Republican congressional leadership, which recently wrote to Fed Chairman Ben Bernanke to demand that he not try to stimulate the economy further.

Second, they could continue to rely on conventional monetary and fiscal policy to pull the economy out of the doldrums. This is the approach still preferred by the Obama administration, despite its poor performance.

Third, we could adopt an alternative approach that directly reduces the value of underwater mortgages. At this point, any improvement in consumer balance sheets would directly stimulate the economy and create jobs.

Start with the proposal made by Martin Feldstein, who recommends a trade: the government should reduce the value of mortgages when they are sufficiently underwater, with the government and the banks splitting the losses; in exchange, the borrower must agree that the new loan becomes "full recourse." That means that lenders could pursue borrowers' other assets – not just the house – in case of default.

1   2   Next  


Print E-mail Bookmark and Share

Go to Forum >>0 Comment(s)

No comments.

Add your comments...

  • User Name Required
  • Your Comment
  • Racist, abusive and off-topic comments may be removed by the moderator.
Send your storiesGet more from China.org.cnMobileRSSNewsletter
主站蜘蛛池模板: 久久亚洲精品无码gv| 人妻尝试又大又粗久久| 精品视频在线观看你懂的一区| 在线国产你懂的| 一区二区三区无码高清视频| 把极品白丝班长啪到腿软| 久久婷五月综合| 欧洲亚洲国产精华液| 亚洲成年人免费网站| 火车上荫蒂添的好舒服视频| 出差被绝伦上司侵犯中文字幕| 能在线观看的一区二区三区| 国产免费色视频| 黑人粗大猛烈进出高潮视频 | 日本高清免费不卡视频| 亚洲av永久中文无码精品综合| 欧美日韩亚洲一区| 亚洲熟妇少妇任你躁在线观看| 狼群资源网在线视频免费观看| 免费的三级毛片| 精品国产三级a在线观看| 国产99在线a视频| 色欲欲WWW成人网站| 国产乱码精品一区二区三区中文 | 国产成人久久久精品二区三区| 巨胸喷奶水视频www免费视频| 国产自偷在线拍精品热| 97久久精品无码一区二区| 在线观看一级毛片| 99国产欧美另类久久久精品| 天天做天天爱天天综合网| jjzz在线观看| 天天摸日日添狠狠添婷婷| ssswww日本免费网站片| 好吊妞视频988在线播放| 一区二区中文字幕在线观看| 性xxxx18免费观看视频| 一本大道加勒比久久综合| 少妇高潮惨叫喷水在线观看| 一本一道中文字幕无码东京热| 少妇BBB好爽|