Interesting... apparently Hillary proposed a HOLC model today versus a RTC model

[Kurt_and_Hunter]

That is, something modeled on the depression era Home Owners' Loan Corporation versus the S&L bailout era Resolution Trust Corporation.

What's interesting about that is that the HOLC dealt directly with distressed homeowners in addition to working with banks.

(Watching Bill Clinton on CNBC)

Barney Frank is all over a Resolution Trust model, as is everyone on Wall Street and the Bush admin. Where is Dodd on this? Where do we expect Obama to be on this?

(I have no fixed opinions. I just find this interesting, and find the HOLC model intriguingly Democratic.)

______________

The Home Owners' Loan Corporation (HOLC) or Home Owner's Refinancing Act, was a New Deal agency established in 1933 under President Franklin D. Roosevelt. Its purpose was to refinance homes to prevent foreclosure. It was used to extend loans from shorter loans to fully amortized, longer term loans (typically 20-25 years). Through its work it granted long term mortgages to over a million people facing the loss of their homes. The HOLC stopped lending circa 1935, once all the available capital had been spent. HOLC was only applicable to nonfarm homes, worth less than $20,000. HOLC also assisted mortgage lenders by refinancing problematic loans and increasing the institutions liquidity. When the HOLC ended its operations and liquidated assets, HOLC turned a small profit

[HowHasItComeToThis]

1. SAME OLD REPUBLICAN THEFT FROM THE TAXPAYER

HEY THAT IS YOU STUPID

http://biz.yahoo.com/ap/080918/wall_street.html

NEW YORK (AP) -- Wall Street rallied in a stunning late-session turnaround Thursday, shooting higher and hurtling the Dow Jones industrials up 400 points following a report that the federal government may create an entity that will take over banks' bad debt.

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A report that Treasury Secretary Henry Paulson is considering the formation of an entity like the Resolution Trust Corp. that was set up during the savings and loan crisis of the late 1980s and early 1990s left investors ebullient. Investors hoped a huge federal intervention could help financial institutions jettison bad mortgage debt and stop the drain on capital that has already taken down companies including Bear Stearns Cos. and Lehman Brothers Holdings Inc.

Worries about financial land mines on companies' books have hobbled the world's financial markets and led to the intense volatility in the markets this week.

"It's going to take a lot of the bad debt off the balance sheets of these companies," said Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York, commenting on the possibilities of an entity akin to the RTC. It could alleviate many of the pressures causing the credit crisis, he said, and open up the credit markets again. But Fullman noted, "the devil's in the details."

"Bear markets are very sensitive to news. And on a scale of 1 to 10, this one is a 13," he said.

The report gave direction to a market that had bolted in and out of positive territory for much of the session as investors shuttled between the safety of Treasury bills and gold and the bargains posed by stocks that have been pounded lower.

According to preliminary calculations, the Dow soared 410.03, or 3.86 percent, to 11,019.69, surging 560 points from its low of the day, 10,459.44.

[DJ13]

2. Well, an HOLC type of program would benefit the citizens

An RTC type of program only serves to benefit the wealthy stock holders.

So of course the Bush administration would choose the RTC program.

[mrJJ]

3. Smoke and Mirrors

RTC allow the banks to sell their foreclosed real estate to the taxpayers; so that the banks can clean their balance sheets? ROFLMAO yeah ok. Uncle Sam gonna be the landlord? Taxpayer going to get hosed again. Besides Paulson doesn't have that authority.

We'll own AIG in 2 years if they don't pay off the "loan". Most likely we'll refinance them. Give me a break! All smoke and mirrors. Let em sink and get over with it.

[Kurt_and_Hunter]

5. Why are you even here?

You talk casually about the government standing side and letting something happen that would be an incredible human tragedy for everyday people.

Your concern for 'the taxpayers' as some distinct class seperate from the national economy is very weird.

[mrJJ]

11. RTC is a no starter

RTC is deffinitley a looser. What penalty does the "Bank" actually the corporation sustain? Seriously? They all fed at the trough when the times were good. They dangled no down no verification loans to people.

I don't have the stats but give a hypothetical 5% - 8% down payment figure, plus fees, which were probably rolled into the mortgage. Everyone got their commissions and fees. Mortgages were rebundled and resold. They all made their profits. The people that foreclosed on? What did they get?

You think that its a good idea to allow the corporations to walk away with No penalty? an RTC is a bad idea... Paulson "Loaned" $85 Billion to AIG. AIG was the Big drunk on the block. They do have some very respectable assets that are rolled into their 250 subs... But the odds are that AIG will not be able to repay the 85 Billion in 2 years. so we will have to refinance them.

As far as other options are concerned I have NOT made an opinion. RTC? no penalties? Might as well print monopoly money and give it away.

[Kurt_and_Hunter]

12. I am not sold on an RTC, but letting things go how they go isn't an option

And I'm not excited about benefiting certain individuals who should be exiled to a rocky island somewhere.

But just letting things work themselves out isn't an option. IMO.

I have no big problem with the AIG deal because the stockholders lose, the executives lose, and the loan terms are down-right abusive. Yes, some people outside AIG do better than they otherwise would who shouldn't, but the alternative would hurt a lot of people who don't deserve it. Given the choice, I'd rather wince at some people doing too well than at some people doing too poorly.

If the rich people get screwed they're just less rich. If ordinary people get screwed they're screwed. So even as a matter of simple justice the upside doesn't equal the down-side.

And I can't accept justice and market outcomes as interchangeable concepts, so I don't think too much about the justice of these situations. To me it's just a matter of doing whatever hurts the fewest non-villains.

As to how the particulars of an RTC style bail-out comport with my ethical sense, that's entirely in the details.

[mrJJ]

17. Sun Tzu would like this

The Key is who or whom the players will be sitting at the negotiating table. I am not a radical in any way shape or form. There are less than 50 days before this election. No one should jump on either sides band wagon. One side has shown its hand and has decided to give act without consulting with the opposing side... but then again thats the way they play the game.

I personally believe a healthy USA is contingent on having strong economic policies that will foster the peoples welfare.... I emphasize peoples welfare. This is not an easy task. All sides have to "win" something... not an easy thing to do. As far as an RTC... theres only 1 winner.

It will be very difficult to bring all the different factions of the Democratic party to a single consensus on this issue. In my opinion they ALL have to sit down and agree to whatever proposal is made. Then and only then can you begin a dialogue with the opposition.

[Kurt_and_Hunter]

4. Adding to the OP:

As a political matter, you have a situation where there is irresistible momentum for a project of immense scale to stabilize the mortgage debt crisis.

The Bush admin (and McCain, apparently) are hot for an RTC model. It may be the best solution.

But Hillary and Bill are both interested in a HOLC model.

What I am wondering is whether they are offering a way to agree with the scale of the thing, but draw a distinction with Bush/McCain.

[Neshanic]

19. In an RTC solution, who will open their books first?

How will we trace all the tranches and who actually owns, say a house?

[Kurt_and_Hunter]

22. That's a problem, as well as the fact that sales to the RTC would be voluntary unlike the S&L crisis

The government would be buying bad mortgage paper from willing sellers to bleed some bad paper out of the system.

In the S&L crisis the government took over the institutions entirely.

It may be that the government's most important role would be in establishing a market. If the government is offering me 27% on this MBS, will a private entity pay me 28%?

As of today nobody will touch the stuff at any price, but if they know the government will buy the stuff at SOME price then it encourages some risk-taking with that paper.

[abumbyanyothername]

23. Tranches

It is not that hard to trace, just tedious.

The bonds themselves are mind-numbingly homogenous.

Signed, someone with 25 years of a very numb mind.

[Median Democrat]

6. The Question Will Also Be What Banks Give Up - Obama Has Proposed...

Allowing bankruptcy court to modify mortgage loans, but banks have opposed this. This has been raised as a point of negotiation.

[Kurt_and_Hunter]

8. That's a fine question.

[Kurt_and_Hunter]

7. About the HOLC:

The Home Owners' Loan Corporation (HOLC) or Home Owner's Refinancing Act, was a New Deal agency established in 1933 under President Franklin D. Roosevelt. Its purpose was to refinance homes to prevent foreclosure. It was used to extend loans from shorter loans to fully amortized, longer term loans (typically 20-25 years). Through its work it granted long term mortgages to over a million people facing the loss of their homes. The HOLC stopped lending circa 1935, once all the available capital had been spent. HOLC was only applicable to nonfarm homes, worth less than $20,000. HOLC also assisted mortgage lenders by refinancing problematic loans and increasing the institutions liquidity. When the HOLC ended its operations and liquidated assets, HOLC turned a small profit

[HeraldSquare212]

9. The FDIC is working with mortgage holders from IndyBank, changing risky ARMs into fixed-rate

so I imagine that's the plan going forward. There will be other assets that an AIG or Bear Starns holds that have to be liquidated by the federal governmet over time.

[Adelante]

10. This is what Obama is doing

I haven't seen the entire speech in New Mexico today, but Politico has this snip of the prepared remarks, and apparently Obama is releasing something tomorrow. (I watched a video today of Wes Clark at the New America Foundation yesterday and he talked about what has to be done in these terms as well.)

Obama previews Wall Street plan

The events of the past few days have made clear that we need to do more right now. We do not have time for commissions and we can’t afford to lurch back and forth between positions when dealing with an economic crisis, like my opponent has. That is why I am calling on the Treasury and the Federal Reserve to use their emergency authorities to maintain the flow of credit, to support the availability of mortgages, and to ensure that our financial system is well-capitalized.

Tomorrow I will be convening a meeting with my top economic advisors to discuss a plan based on the ideas I’ve been talking about with former Fed Chairman Paul Volcker and other advisors of mine. Then I’ll call for the passage of a Homeowner and Financial Support Act that would establish a more stable and permanent solution than the daily improvisations that have characterized policy-making over the last year. Specifically, it would accomplish three primary goals.

First, it will provide capital to the financial system. Second, it will provide liquidity to enable our financial markets to function. And third, it will do what I’ve been calling for since I supported legislation on it early last spring, which is to get serious about helping struggling families to re-structure their mortgages on more affordable terms so they can stay in their homes. We’ve made a good start but we need to do much, much more. We cannot forget that there are many homeowners who are in crisis through no fault of their own, and a solution that does not have them at its core is no solution at all.

http://www.politico.com/blogs/bensmith/0908/Obama_previews_Wall_Street_plan.html?showall

[Kurt_and_Hunter]

13. Thanks. Sounds like he will be adding the HOLC model to the package.

Which is to say, direct efforts to forestall foreclosures on individual homes. It's important to stabilize actual homes and neighborhoods in addition to merely stabilizing the mortgage paper market.

"...helping struggling families to re-structure their mortgages on more affordable terms so they can stay in their homes."

[Adelante]

16. I don't believe it is an addition

I've heard him talk about it several times this year. Tomorrow's release should show the details of what he has in mind.

[Kurt_and_Hunter]

21. Sorry, I'm thinking about the scale, not the method

A program like that can be $10 Billion or $500 Billion.

I'm not suggesting this stuff hasn't all been talked about. But until recently there was little taste for a BIG program.

Scale is the difference between a program that helps some people and a program that has some macro effect on the national real-estate market.

Since BIG is now on the table, a beefed up proposal of what has been discussed before may be in the works.

[Adelante]

24. Beefed up sounds right nt

[abumbyanyothername]

25. The entire US mortgage market is 12 Trillion

Since we have already wasted over $1 trillion on a war in Iraq, I think we can afford a National Mortgage Corporation program.

Until they decide to re-privatize it.

[Bluenorthwest]

14. Obama was great today

In NM. Loved his speech. So did the crowd.

[Neshanic]

15. Dodd brought up the RTC solution. I think Clinton's is something to consider.

[Kurt_and_Hunter]

18. The more I read, it's probably more an adjunct than alternative

The RTC is to stabalize the banking system and mortgage markets.

The HOLC is to save individual houses.

Both are important.

[Neshanic]

20. Very much so, but in this climate, the players know that they cannot be traced

so easily, and it will take years to untangle the mess.

But something needs to be done, people are depending on it.