At least the FDIC gets it.
IndyMac didn't.
Slash the mortgage amounts owed, and cut the rate and let the homeowner stay in the house with a smaller payment, and keep these homes off the market.
It's better than selling these loans at 20 or 30 cents on the dollar.
This administration's "Hope Now" policy has now evolved into a receivership, where finally something gets done besides the promise of a waived late payment fee.
But it'll cost the Fed's $6 billion because IndyMac and their CEO operated in denial.
Yesterday, Washington Mutual said it was "well capitalized" and it has $40 billion of liquidity, and will give a new update on July 22.
Compare this to IndyMac who said it had $19 billion, and the FDIC had to take the bank over when $1.1 billion was pulled from the bank.
Does that mean a run can happen on WaMu if depositors yank $2.5 billion?
If there was a run on WaMu, it would eventually help the housing market. Using the FDIC's blueprint, they would aggressively mitigate the losses on these loans, and let the people stay in their houses by slashing the rates on the loans, and the value of the mortgages so homeowners would have an incentive to stay put.
And their neighbors bellyaching over "moral hazard" and "bailouts" will just have to get over it, as this would stop the real estate foreclosure sales being done at costs that no builder or homeowner wants to compete with. The neighbor bellyaching would soon see the value of his home rise.
And if you take these comps off the market, the market would eventually heal itself-and quicker!
That's the good thing about the market meltdown scenario that we are now seeing. This panic, will accelerate what needs to be happen now, so we can prevent more pigs being swallowed by the python, because the banks can't digest the pigs they already have on their books.
Receivership is now the "forbearance" option.
Right now we have $2.6 trillion in uninsured deposits at banks. At IndyMac we know those uninsured depositors get .50 cents on the dollar. (That's the money they are using to keep people in their homes. The uninsured depositors get the "rest" of their money after the bank has been sold and that money is divvied up.)
According to the latest Fed numbers, the banks have $273 billion of vault cash.
It wouldn't take much for the public to panic, and a run to start.
No comments:
Post a Comment