Did Bank of America Write the Housing Bailout Bill?
"We call it the 'Bank of America bill on steroids.'"
-Anonymous House staffer
>
The staffer was referring to the Dodd-Shelby bill that would let mortgage lenders off the hook for bad loans, ultimately shifting the burden to taxpayers.
The Bank of America paper referenced is this document, a PDF marked Confidential and Proprietary, titled the "FHA Housing Stabilization."
This was first picked up by the NY Examiner, followed by the National Review Online, who noted that "the similarities between BofA's ideal bill and the bill before the Senate are obvious." Then lastly, an LA Times blog, LA Land, put all the separate pieces together with this post: Did Bank of America write the Dodd bailout bill?
The White House has now promised to veto the bill. That suggests that, barring any last minute changes, this Housing Bill looks to be DOA.
~~~
I don't understand why a realistic bill can't be hammered together. It should reflect the following realities:
Home prices remain elevated;
Artificially propping up home prices is counter-productive;
Those Homeowers who are in houses they cannot and never could afford are going to have to give up those homes and move;
The banks that made these bad loans to unqualified borrowers are going to have to take the writedowns;
It is not the taxpayers responsibility to bailout borrowers who are in over their heads, or lenders that made bad loans.
How hard can that be? (Do I really have to do everything myself?)
>
UPDATE: June 25, 2008 10:55am
I see the Washington Post has discovered this story . . .
Vital Part of Housing Bill Is Brainchild of Banks
Jeffrey H. Birnbaum
Washington Post, Wednesday, June 25, 2008; D01
http://www.washingtonpost.com/wp-dyn/content/article/2008/06/24/AR2008062401389.html
>
Sources:
FHA Housing Stabilization
Bank of America, March 11, 2008
Download: BoA FHA Housing_Stabilization.pdf
Did Bank of America write the Dodd bailout bill?
Peter Viles
L.A. Land, June 21, 2008
http://latimesblogs.latimes.com/laland/2008/06/did-bank-of-ame.html
NRO Doc Drop: BofA-Scripted Bank Bailout Looks Awfully Similar to Dodd-Drafted Housing Bill
National Review, June 20, 2008
http://corner.nationalreview.com/post/?q=ODJkN2Q3NTY0MjAwYjJlNTY0NTJmMWEzZTI1OGZjZTg=
Bank of America PAC money behind Dodd's Countrywide loan
Timothy P. Carney
The Examiner, Jun 19, 2008 1:37 PM
http://www.examiner.com/a-1449448~Bank_of_America_PAC_money_behind_Dodd_s_Countrywide_loan.html
Monday, June 23, 2008 | 09:30 AM | Permalink
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Comments
"The banks that made these bad loans to unqualified borrowers are going to have to take the writedowns"
Perhaps you have a better view out your window, are pigs flying ?
.
Posted by: VJ | Jun 22, 2008 8:43:14 PM
As though we haven't been bailing out everyone in sight already..
Would explain why B of A still wants to buy Countrywide, though.. expecting a bailout.
Posted by: ronin | Jun 22, 2008 8:47:02 PM
BTW, Jim Cramer on this mornings 'Chris Matthews Show':
"I've been viciously negative about housing, to the point where the National Association of Realtors did a letter-writing campaign to get me fired, because I said on the 'Today Show', I guaranteed that your house would lose value, about nine months ago. I am now guaranteeing this. Nine months from now, you will regret it if you haven't bought a house. Totally contrary view. Housing will bottom nine months from now."
Eh, what about the additional 3 million homes that will be foreclosed on over the next 18 months ?
.
Posted by: VJ | Jun 22, 2008 9:03:50 PM
Agree with Ronin that BOA's purchase of zombie Countrywide made no sense unless they knew that all those billions in bad loans would be bailed out.
Posted by: Mike in NOLA | Jun 22, 2008 9:20:49 PM
the part that gets me is the people who either refied several times (ie took most/all of the house profit out) and/or the serial flippers who bought and sold several/many times for a profit and now might get their latest acquisitions bailed out. i haven't been able to find any numbers on the refi folks, their numbers and the amount taken out (the mew reflects some of this, i guess). just about every foreclosure story i read, and there have been a lot, begins with the owner admitting to multiple refis and, by doing so, taking out the house appreciation. i don't have much sympathy for these guys. if i bought jnpr at 50 and sold it at 200 and then re bought it at 300 and got a margin call and had to sell it at 250, did i get a bailout? what about the profit i've already taken out of the house? i've seen no comments on this in all the drivel i've read about the homeowner bailout legislation. barry keep up your fine work. clipb
Posted by: clip bartow | Jun 22, 2008 9:23:48 PM
Cramer and Matthews, a perfect storm of hot air; wonder how many boats sunk.
Of course we can accept at face value Cramer's assertion that he was "viciously negative about housing" and that NAR tried to get him fired, etc.
Still it wouldn't surprise me if a few markets, the poorest and/or those that fell the fastest and hardest at least, are approaching bottom but so what: Buying in the next year would only provide paltry bragging rights, "I caught the bottom," while waiting another 2-3 years before the market turned around enough to make a decent profit; a serious opportunity cost with the possible exception of the few locals who really know how to play the distressed property game.
Posted by: RW | Jun 22, 2008 9:25:13 PM
Great post Barry. I think it is interesting that BofA wants to lay this all off on Ginnie Mae. This is truly transferring all the shitty CWide risk directly onto US Taxpayers. If I am not mistaken Ginnie is the only agency that commands a direct obligation of the US Govt. as opposed to Fannie and Freddie's implied obligation.
Posted by: dukes | Jun 22, 2008 9:29:45 PM
"The White House has now promised to veto the bill. That suggests that, barring any last minute changes, this Housing Bill looks to be DOA."
erm, i think this is going to pass with an override Barry.
Yup. Too many 'LITTLE" people are counting on this one this election year. Beside every senator in line for BOA's largesse, there's Aunt GINNIE, with uncle FREDDY and cousin FANNIE a little further down the road....
Pigs don't fly these days, they JET. {with Dems at the throttle sad to say...}
Corporate welfare at it's finest.
Posted by: brion | Jun 22, 2008 9:30:13 PM
What's in the bill that the White House doesn't actually like, which one of their favorite lobbies does it hurt, how and why? 'BoA wrote the bill!' is subterfuge.
Posted by: me | Jun 22, 2008 9:39:56 PM
Damnit Barry, stop saying things that make sense. In this day and age, that just fries the circuitry of my brain.
Posted by: Adam | Jun 22, 2008 9:44:55 PM
The whole thing (oil, the war, cronyism, bank bail-outs, immunity for telecoms) reeks of fascism.
It reeks.
Posted by: Marcus Aurelius | Jun 22, 2008 9:49:48 PM
Barry & others...when are we going to see B of A go the way of Citigroup and see all its respectability gone? They are soooo overdue for a sharper drop. After that, Goldman Sachs
Posted by: investorinpa | Jun 22, 2008 10:08:35 PM
anything to keep the zombified banks alive I guess. Perhaps Jimmy boy can talk those up too....then again, perhaps he better not. It's the times we live in.
http://www.youtube.com/watch?v=_nkZ3eHeXlc
Posted by: stuart | Jun 22, 2008 10:28:18 PM
I agree with everything you say
in you post, but based on what
you think needs to be done, what exactly has to be legislated in
this matter?
Isn't everything in place for that
to happen?
Posted by: Mark Hessel | Jun 22, 2008 10:36:25 PM
Well, Dodd the Democrat goy cheap money from Country Fried. Now it's pay back time for that and his big political contribution from BoA
Posted by: EB | Jun 22, 2008 11:05:23 PM
How about starting with a bill to ensure banks clean up their paper trails...
http://money.cnn.com/video/#/video/news/2008/06/20/news.hunter.produce.note.cnnmoney
Posted by: stuart | Jun 22, 2008 11:10:20 PM
"How hard can that be? (Do I really have to do everything myself?)"
Like Superman, yes you do. But I appreciate what you do!
Posted by: Trainwreck | Jun 22, 2008 11:28:55 PM
"Those Homeowers who are in houses they cannot and never could afford are going to have to give up those homes and move"
... and it will be better for everyone if they do. Since they will spend the money they save (the difference between what they're paying in interest only on the house/lottery_ticket they can't afford, and what they can rent suitable housing for even if it's not as nice) on consumables... which will make a much bigger difference to the economy than those tax rebate checks ever did.
Posted by: Bob A | Jun 22, 2008 11:35:00 PM
"It is not the taxpayers responsibility to bailout borrowers who are in over their heads, or lenders that made bad loans."
Unfortunately, much of the losses have already been taken by buy and hold investors who believed those (you know who, including the tv clown mentioned above) who told them last spring and summer everything was ok/"contained" and sat and watched as their equity in bank stocks vaporized.
Posted by: Bob A | Jun 22, 2008 11:40:02 PM
(Do I really have to do everything myself?)
I hope not, but it wouldn't hurt to try and get this post into the hands of some people in the mainstream press, where financial illiteracy and discomfort with numbers run rampant.
Posted by: John F. | Jun 22, 2008 11:56:59 PM
"A lowered interest rate could be regarded as an odd form of socialism. It makes the rich man's money worth less and helps the poor borrower out."
Tell that to the barista mom eying a $5 gallon of milk or gasoline...
Posted by: brion | Jun 23, 2008 12:57:38 AM
I believe the 'Friends of Angelo' bunch did a pretty good job in covering all the bases. Apparently, this Bill is Veto-proof.
http://market-ticker.denninger.net/archives/496-Did-Bank-Of-America-CFC-Write-The-Housing-Bill.html
http://www.tickerforum.org/cgi-ticker/akcs-www?post=49282
Posted by: Shantanu B. | Jun 23, 2008 1:53:48 AM
Are banks responsible for their own irrational exuberance? More importantly, can they be held accountable?
Nice graphic from St Louis Fed. Net Reserves for Banks Free vs. Borrowed.
Note in the previous recession they were net free nearly $15B. Compare that to now: http://research.stlouisfed.org/fred2/series/NFORBRES?rid=19.
Posted by: exuberancia irracional | Jun 23, 2008 3:16:31 AM
BAC with the help of the 'friends of Angelo' wrote the bill.
Posted by: soNotInTheKnow | Jun 23, 2008 3:34:11 AM
Ya! Joshua Shipiro agrees with me. He's obviously read John Kenneth Galbraith's books too.
I note he is an author recommended here on TBP.
Luckily our local library has him too.
Posted by: Simon | Jun 23, 2008 6:34:19 AM
