Skip to comments.IMF’s Lagarde Calls for DeMarco to Perform Principal Reductions – “Escargot Endrun”
Posted on 04/13/2012 8:09:15 AM PDT by whitedog57
At a speech at the Brookings Institute in Washington D.C., IMFs head Christine Lagarde called for the U.S. to perform principal reductions for residential mortgages.
... the IMF said U.S. steps to tackle the problem have had limited effect. The agency recommended wider efforts to reduce the value of mortgages rather than rescheduling or refinancing them.
Fannie and Freddie have to be part of the equation, Lagarde said, wading into a vigorous U.S. policy debate. U.S. households have to be able to unload a bit.
As I mentioned at the Brookings Institute on earlier this week, there is no evidence that principal reductions will stem the tide of foreclosures or prevent default other than anecdotal evidence. Studies so far have no been over a 4 year period to see if principal reductions have a lasting effect on defaults. And the moral hazard aspect: tell borrowers that if they go 90 days late and get their principal reduced to (say) house value, it will look like WalMart at the beginning of Holiday buying season.
And why is the IMF attempting to pressure FHFAs Director Ed DeMarco into doing something that makes little sense, has tremendous moral hazard, and is just another version of Super Lotto! since only a sliver of the 11 million householders that are underwater (CoreLogic) will qualify.
Instead of the Cornhusker Careveout (Senator Ben Nelsons attempted sellout to Obamacare in exchange for a better deal for Nebraska), I call the principal reduction pleas by The Administration and Lagarde the Battleground Boondoggle since several battleground states (Florida, Ohio and even Nevada) will be the target for free money.
I wonder if the Administration is trying the Escargot Endrun through Ms. Lagarde?
And will IMF get the additional funding it is seeking from the U.S.?
(Excerpt) Read more at confoundedinterest.wordpress.com ...
From her Wiki:
Lagarde joined Baker & McKenzie, a large CHICAGO-BASED international law firm, in 1981. She handled major antitrust and labor cases, was made partner after six years and was named head of the firm in Western Europe. She joined the executive committee in 1995 and was elected the company’s first ever female Chairman in October 1999. In 2004, Lagarde became president of the global strategic committee.
Get it yet??
1. Sell the homes at whatever current market rate they will fetch.
2. Let first time homebuyers have the first shot at the homes, then other individual buyers or small time investors buying them individually (no bulk sales). At the right price, they will sell.
3. Stop trying to reinflate the mortgage bubble.
Who are all these people out there saying principal reduction. Are they writing the check? I need to know the answer because they are most assuredly asking ME to write part of it.
Its like erasing a number to them. Its not real. Oh they’ll say “It’s very real to the people underwater!” to which i’ll reply it’s real to me too. It’s all to real to me.
Madame! Get back on your side of the pond and STFU.
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