Posted on 06/20/2008 5:14:47 PM PDT by SE Mom
Edited on 06/20/2008 6:04:28 PM PDT by Admin Moderator. [history]
National Review Online has obtained an internal Bank of America "discussion document" (pdf here) on the subject of the FHA Housing Stabilization and Homeownership Retention Act of 2008, a.k.a. the Dodd-Shelby mortgage-lender bailout bill.
Yesterday, Tim Carney reported that the prevailing sentiment on Capitol Hill is that the Dodd-Shelby bill "is exactly what Bank of America and Countrywide wanted." BofA is in the process of acquiring Countrywide. Countrywide is currently embroiled in a scandal over its V.I.P. program, under which several powerful politicians, including Sen. Chris Dodd, got preferential loan rates.
This discussion document (dated March 11, 2008) would appear to support the contention that BofA essentially wrote the bailout section of the bill. Almost all of BofA's preferences are mirrored in the Dodd-Shelby legislation. The BofA document even offers PR tips, such as "We believe that any intervention by the federal government will be acceptable only if it is not perceived as a bail-out of the bond market."
The president has threatened to veto Dodd-Shelby because it would "unfairly benefit lenders who made bad loans." The Senate will resume debating the bill on Monday.
The BofA doc is worth posting here for a couple of reasons: First, the similarities between BofA's ideal bill and the bill before the Senate are obvious even to the layperson — read the document, then read David C. John's analysis of the bailout and see for yourself.
Second, we'd invite our readers with some expertise in this area to look over the document for things we might have missed. Opponents of the bailout are lucky that a few tenacious Republicans (Kit Bond, DeMint et al) were able to hold up the bill and keep it from passing as quickly as expected. The fight resumes next week, so take a look at this document and keep digging.
~snip~ Second, we'd invite our readers with some expertise in this area to look over the document for things we might have missed ~snip~
PDF link referenced in the piece: http://www2.nationalreview.com/dest/2008/06/20/bofa.pdf
If the lenders take this “bailout” from the government, they should be required to use the government pay scale. No more huge CEO payouts when taking the government’s dime this shamelessly.
This could get ugly shortly..
<”This could get ugly shortly.”>
Good! Everyone knows that ugly goes all the way to the bones. In this case that means Congress.
So what did Shelby get from the mortgage brokers?
Orders and instructions?
Who knows with Shelby- but did you read the piece? Basically it looks as though BOA WROTE the damn bill....talk about brewing scandals.
I'm happy to see my Senator Kit Bond is one of the few tenacious Republicans.
This is corruption at its’ finest- plus the little tidbit they want to tuck into this bill that ALL credit card co’s report to the feds..
Brewing scandal, ping..
I haven’t read the bill itself yet. It doesn’t even appear that they are trying to hide the improprieties. ‘Above the law’ and all that...
I just can’t hold my head sidewise to read it.
Neither can I...I tried for a couple of mins- but I’m PDF handicapped- there must be a way to get it readable.
Dodd has been somewhat subdued on the Senate floor for the past few days although he worked himself up to yelling mode from time to time.
It’s pretty bad what is going on. I surely don’t know what to do about it. I was active in the term limits effort and we got some traction for a while. Then it faded.
They have become a criminal class that feels entitled to its criminality. They don’t believe for one minute that they derive their power from the people or are limited by the Constitution. THEY are the power and they will tell the American people how things will be.
We’re giving you “comprehensive immigration reform”, like it or not. Didn’t work, but they believed they were going to get away with it, Republicans and Democrats alike.
They want to set up a permanent funding for low income housing, one of the worst scams that ever was.
I really could go on and on with this, but I am getting to depressed.
Ask the folks here, there’s someone who will help.
Right click then click on ‘rotate’. Or if your on a laptop just hold it sideways. :)
Dodd==>Resign! If I were doing business at Country Wide, I’d be down there demanding my VIP treatment too.
Estimates from;
http://jphilipblog.wordpress.com/2008/06/19/chris-dodds-sweetheart-mortgages/
Dodd was not charged about $7500 for the Washington Townhouse, and perhaps paid $2-3000 less for his Connecticut home. That is roughly $10,000 which would have been rolled into the closing costs. He saved roughly $200 per month on his combined payments.
You’re post is too accurate. They’ve become a law unto themselves and seem to be suffering from a sense of such entitlement it’s beyond their scope to understand who gives them power.
I must still be pretty naive though- when I read this on The Corner I was bowled over- isn’t it just a tad unethical for the industry who will benefit from this bill to actually- behind closed doors- be one of the parties drafting it????
From;
http://www.nytimes.com/2008/06/18/washington/18dodd.html?_r=1&partner=rssnyt&emc=rss&oref=slogin
Senator Christopher J. Dodd of Connecticut said Tuesday that he was aware that Countrywide Financial Corporation had assigned him to a V.I.P. program in 2003....
.....Mr. Dodd said he had no intention of taking similar steps. “Well, I don’t know we did anything wrong here,” he said. “I negotiated a mortgage at a prevailing rate, a competitive rate. If anyone had said to me, ‘We’re giving you some special treatment here,’ I would have rejected it.
Resign.
Chris Dodd ought to be jailed for bribery.
It's become the norm. Did you hear Sen. Sessions on the immigration bill? He made it clear that not one of them actually reads the stuff they pass. They have no idea what is in this legislation. None. La Raza and immigration lawyers wrote that bill, not our elected representatives. People we elect don't even read them.
If he was a real man (AND IN OLD JAPAN), he would be putting on his kimono and getting the sake out readying himself for a grand ritual for one who has shamed himself.
I remember Sen Sessions saying that... I keep forgetting though- willful denial I guess:)
Didn’t he get the “CEO friend” rate on his big loan from Countrywide?
Frankly, I’m surprised that Dodd has skated by unscathed as long as he has. Wasn’t he the DNC Chief during the Toon’s campaign against Dole? I recall him in the booth during the republican convention. Wasn’t that the era of Chinagate, “no controlling legal authority,” Al and the Iced Tea, etc.? Yet Dodd was above it all despite his position where he had to be in it up to his neck.
Anyway, Shelby isn’t a congressperson now. Dodd is. Dodd took sweetheart loans, and then wrote a bill that has all the features that his lender wanted.
That is about as clear a case of corruption as you can find.
Hugest subprime scandal via Countrywide is in the west.
The way I see it; the federal payout for the pay-up will be the feds, via taxpayer dollars, that way both and the middle "playah's" are satisfied. So, this deal does not surprise me in the least.
Second, this deal would automatically go to payout the "indebtedness" in the West to whatever bank/mortgage lenders Wachovia is purchasing. In essence, Wachovia is paying reparations for ever having been a Bank in the South. Whereas Little Italy, BofA, arose in San Francisco, never really having a "slavery past". It's "clean" to do business with any "reparations conscious" City or Government Entity in the South and East.
In this way, the Dems get to do what they always do: Carpetbag.
Hmmm, I’ve only read to page 45 of the internal memo. So far, this seems like it might (and I stess might) not be a bad deal for all concerned as I’m not seeing a taxpayer bailout.
Will there be losses? Yes, because the existing delinquent loans in danger of being foreclosed will be bought out of current mortgage loan pools. Investors who purchased the Ginnie, Fannie and Freddie mortgage backed securities won’t realize the income they may have expected but they wouldn’t have anyway since the loans are in default.
Thinking out loud here so please bear with me.
(premise) Most delinquent borrowers are probably in loans already insured by the government via FHA so FHA would be out the ‘difference’ anyway. ‘Difference’ being what actually is owed to the existing lender and what the property will sell for after the loan has gone through the foreclosure process.
So, existing lender would have to accept a negotiated payoff which will be less than the loan balance currently owed BUT would be about what they could expect to get if the loan went throught the foreclosure process. One incentive to the existing lender is they wouldn’t have near the REO’s on the books counting against their reserves. Another is REO’s are expensive and in my experience the property deteriorates the longer it is held by the bank.
Borrower stays in house with new loan at a 90% LYV based on current appraised value and not on previous inflated value. Also will have a new payment of at least 30% less than current payment. Incentive to borrowers to stay in the house and have a second chance. Negative is not all loans in danger of foreclosure will qualify for new loans.
(premise) Soft second loan will cover the ‘difference’ so if appraised values go up during the term of the new loan and new loan is either paid off (via selling of home) or refinanced FHA will recuperate the ‘difference’. Hmmm, have to go back and read what happens to soft second if appraised values don’t go up. Even though as has been traditional with soft seconds, each year a certain percentage of the second loan is forgiven. Still need to go check this out though.
(premise) There’s incentive for some of the smaller lenders who currently don’t have approval to originate FHA insured loans to pursue these new loans since they’d become authorized to do so under the new FHA program. (Yes, I know it’s a run-on sentence...I’m thinking out loud though.)
Ok, this is where I need to go read the rest of the document and then re-read some of what I’ve already read. I’m going to have to read it later though so I’m not sure when I’ll be back.
Qualifications:
Closed a few mortgage loans. Underwrote a few mortgage loans. Managed a couple of closing/shipping/insuring departments for a couple of name brand mortgage banks. Also cleaned up messes made in the last bust under the jurisdiction of the FSLIC.
It’s pretty simple. Countrywide (NYSE: CFC), the largest mortgage originator in the country, was on the verge of declaring a bankruptcy which could create panic and as a result could pull most of the rest of the industry banks and stock market down big time. BoA (NYSE: BAC) stepped in that evening and bought CFC with the [backchannel, implicit] blessing of Fed, regulators and Capitol Hill banking committee, with the [implicit] understanding that BoA may get some favorable treatment in the future to compensate for bailing out (really bailing out) and taking on a huge debt and risk of uncertain loans value on balance sheet of Countrywide. Since then, balance sheet of CFC has actually deteriorated and there were rumors of BoA reneging on the deal. Good troopers at BoA are sticking by their word and contract and going forward with the deal.
This was before what was termed, but was not really, a “bailout” of Bear Sterns by JP Morgan (NYSE: JPM), engineered by the Fed, but it was done for essentially the same reason - prevent / stop the market and consumer panic and prevent tying up in uncertainty millions of mortgage loans and bundled derivatives.
In other words, this bill is done for benefit of BoA and other similar players, but not because of previous political contributions to certain politicians, it’s simply giving back for the role they played in bailout, to their and their shareholders’ detriment. BTW, you might notice that BAC and JPM stocks have not suffered as much as many other financial stocks, such as Citigroup (NYSE: C).
These banks need to recapitalize, and Fed has already done as much as it could with discount rates, discount windows and auctions. It can’t do anymore without taking dollar even further down and exacerbating inflation even more. Hill is working on different legislations, while unfortunately Dems are using the need for banks’ recap to suit their own goals, among others to bolster Fannie Mae (FNM)and Freedie Mac (FRE).
Thanks!
This, above, is arguable given the bigger picture. But within these defined parameters as a set, sure, your analysis is good. The Banker's heart is Cold, for sure. No problem. But to suggest "no politics" is involved is not accurate, IME.
The idea that a corporate lawyer (or a team of ‘em) drafted legislation doesn’t bother me. In my (long ago) youth I met an attorney for a big (really big) oil company who drafted the oil laws of a certain undeveloped country that wanted to attract oil exploration. He went to the country, wrote the law in English in his hotel room, passed it to the local government reps who translated it into their language and had it voted on in their parliament.
It was fair to all concerned and comparable to laws in other countries.
If you want legislation concerning a complex industry (oil, banking, etc.) you’re going to need someone who understands the business to do the drafting. Where else to find them but on the payroll of corporations in that field?
NRO better come up with something of substance rather than objecting to the ID of the drafter.
You've got that part right.
The rest of the story goes more like this. A whole bunch of financial "geniuses" either loaned billions to deadbeats and scammers (without even a pretense of due diligence) or, bought those loans (apparently after a major bong hit) under the impression that they were AAA-rated.
So now it's magically your (and my) problem because these a$$hats are "too big to fail" and the World Will Come To An End if Angelo Mozilo and all his cronies don't get a big ol' golden parachute.
I call crap. It's time for a big heaping platter of "no bailout" with a side order of "not too big to fail" and an ice-cold goblet of "let the marketplace sort it out" for dessert.
Perhaps we should require them all to pass a test before passing any legislation.
I always did prefer gridlock anyway.
ping for tomorrow.
But to suggest "no politics" is involved is not accurate, IME.
It would not be accurate to suggest that, but I didn't say "no politics" is involved - obviously, "politics" are involved. I did specifically say that the bill is designed to benefit BoA and industry "not because of previous political contributions to certain politicians", essentially that it is not a quid pro quo by individual politicians for financial or personal support, along the lines of recent disclosures about VIPs - Dodd, Conrad, Laura Richardson et al. Hope that distinction is acceptable.
Click the clockwise tool
I was only commenting on the specific issue of the bill, involving Countrywide bailout by BoA, and touched on similarities and differences with non-bailout of Bear by JPM and Fed, not larger overall picture or origins of bubble, easy money, “spreading the risk” by bundling and reselling CDOs/MBSs etc.
Bear’s and CFCs falls showed that they were not big enough to fail, along with dozens smaller financial institutions (Century21 and bunch of others) who thought they just might be “big enough” and are not even footnotes to industry’s history now.
Unfortunately, and not magically, it IS my (and your) problem because we are “in the market”, including many people who think they are not but whose 401(k)’s and pensions are tied in mutual funds or money markets. Psychology is one, if not primary, of several factors that determine the value of “the market”. So bailing out “the system”, not particular institutions or their investors is necessary for all us. Whether some people will suffer the consequences of their (or other people’s) bad decisions which may have seemed like great decisions at one time, is another issue and is not related to the task at hand of keeping the “system” functional and possibly improving and/or stabilizing it in the future.
Besides, in neither BS or CFC case there is a “bailout” of investors or management and neither will depend on taxpayers funds.
“sauce for the goose”.
I agree with some of your statements - but I DEFINITELY believe that the Democrats are extremely hypocritical about how legislation can be created.
Recall that in 2001 - 2002, Vice Pres. Dick Cheney had a group review energy policies, and there were high level company officials who came in and met with Cheney’s Energy Group. For years, the Dems have shrieked that the companies were writing legislation, and they claimed that the Cheney/Bush people were “in the tank” for the energy companies. But, as you stated, “If you want legislation concerning a complex industry (oil, banking, etc.) you’re going to need someone who understands the business to do the drafting. Where else to find them but on the payroll of corporations in that field?”
And as Cheney and Bush sought information on how to improve our energy policies, where else to get input, than from the industry. (The Democrats wanted the policy to be established by Greenpeace, Sierra Club, ZPG, etc. and all others were to be excluded.)
Now that the shoe is on the other foot, perhaps it is time to point out the hypocrisy of the Democrats, and at the same time, to show the potential for the Democrats to be “on the take”. Maybe the Democrats might be a willing to notch down the shrill voices that they are so quick to use!
Good points, especially about Wachovia and expansion in the West. There were rumors that she might be interested in certain Western bank which is now, interestingly, involved in Laura Richardson mortgage fiasco.
http://www.freerepublic.com/focus/f-news/2033208/posts - Group seeks probe of CA congresswoman (California Rep. Laura Richardson)
Nothing to see here with Chris Dodd. I’m sure its all just a coincidence. He is a Democrat, so he has the best of intentions. Richard Shelby should be investigated, though!
I’m not a banking & finance person but I do know from inside experience that California’s state & local child “s’port” program is contracted BofA to collect & distribute support payments @ the old Meclellan AFB in the “State Disbursement Unit.” Therefore, BofA has the 411 including but not limited to social security #’s, case details, etc., on all active child support cases. FYI. I left BofA after more than a decade primarily for this reason - they have too much info and they’re assisting the hefty bureaucrats make FAT BANK in the name of (all together now) “For the Chid’ren!” In the meantime, these bureaucrats regularly attend conferences at resort hotels and in swanky diggs in Washington, DC; create more and more regulations, engage with other agencies (DMV, TANF aka Welfare, etc.) and basically, we proletariats get to finance this without ever voting on it. It’s extremely shady; BofA is all in it and without a doubt, would love to get their hands into the till’s of the other states, tribes and territories. FYI.
Different angle you’ve got there.
With Wells Fargo, BofA, and Wamu well established on the west coast, I don’t see Wachovia moving in anytime soon to seriously compete.
Wachovia is going to be in survival mode right now, along with the rest of the major banks. That means maintain cash reserves and going with what is working right now. Retail banking and credit cards. Home loans is dead for at least another year or longer. The whole secondary market for home loans is dead as well.
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