Banks Receive Stealth Bail Outs

Discussion in 'Economy' started by Madeline, Oct 3, 2010.

  1. Madeline
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    Madeline BANNED

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    When a financial market segment collapses, there is enormous money to be made in the winding up just as there was in the puffery that caused it....and usually by the exact same evil-doers. In the mid 1990's, the tail end of the junk bond crisis killed off a few insurance companies who had invested in these products. When the insurance companies were liquidated, their holdings had to be sold. Who showed up to handle those sales? You guessed it -- former junk bond salesmen.

    In Ohio and most likely, in every state, the sale of homes to buyers who could not reasonably be expected to pay their mortgages -- often crappy mortgages anyone would have been likely to default on -- created enormous profits for banks, but also for real estate lawyers, title insurance companies, home inspectors, property insurance companies and their agents, etc. We've all vented on the ginormous bail out for banks.....and at the very least, we thought our government would pass any further bail out law out in the sunshine, where we could watch.

    But apparently, we were wrong. In Cuyahoga County, banks that hold mortgages on foreclosed property have refused to spend any dollars on maintaining them. The housing stock here is predominately old wooden homes that deteriorate rapidly when left vacant. Seems no one else is responsible for the upkeep of these homes either, or at least efforts to find a deep pocket to pay have proven fruitless.

    So the federal government has created and funded a program to tear these homes down. Did you read about that in your local paper? In any correspondence from your Congressional representatives? Because I sure did not. Whatever this new federal program is, it was adopted in the dark, away from the prying eyes of citizens.

    Nevermind the insanity of destroying housing stock when a short sale etc. might have allowed the banks to recover some of their investment -- following that fiscally conservative path would have meant the banks would have had to redesign internal procedures, hire and train staff, etc. It is cheaper for the banks to walk away because of tax laws and banking laws that have been passed to cede even more taxpayer money over to the banks. Yet another stealth bail out for banks.

    Transferring the title to these homes to the county or city so they may be destroyed will require real estate closings and all those attendant costs....costs that will be reaped by the various service providers who shoveled people into these homes on crappy mortgages to begin with. Does that strike you as unsavory? It certainly offends my nose for justice.

    The US taxpayer is funding the tear down of homes that could be sold, because banks will not fulfill their legal obligations to the community and keep them maintained. The taxpayers are funding the losses the banks otherwise would incur through US tax and banking laws. Were there some recently made amendments to these laws? Some new regulations? I'd bet my next pension check there were -- probably written by the banks' lobbyists. Paper profits over real estate gains, if one is fast and cheap and the other is slow and expensive to attain -- and to hell with the communities decimated by abandoned foreclosed homes.

    In short, there is another wave of stealth bail outs of banks going on in Cuyahoga County -- and I suspect, in damn near every other US county. Pisses me off no end. If it pisses you off as well, let your representatives in Congress know.

    Foreclosed homes to be demolished in Parma | cleveland.com
     
  2. loosecannon
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    loosecannon Senior Member

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    cash for clunkers? There is a fair amount of talk about a housing glut, about the falloff in new construction and loses in new construction employment. In my state alone new construction is down 80% since 2005. That means 4 of every 5 construction jobs in 2005 no longer exists. And growth was our leading industry.

    There is also a fair amount of discussion about how there are jobs available in the US but people either don't have the requisite skills for these jobs or they just live in the wrong places.

    Cuyahoga County may be one of those wrong places, I dunno.

    I have never heard of this program, don't know anything about it. I also do not know if banks are allowed to keep homes that are in default. It seems to me like banks probably have a legal obligation to write off the bad loans and auction the property.

    Maybe somebody here has more knowledge of banking and can clarify that point.

    But in some places, like Detroit, homes can't be sold for even $1, and there are 10's of thousands of them vacant. In cases like that it may make sense to reclaim the land and demolish the homes, perhaps turning the lots into micro parks and public spaces.

    I just don't know anything about these homes.
     
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  3. Toro
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    Toro Diamond Member

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    Well, without knowing too much about this, nor knowing anything about the neighborhoods where this will happen, in theory, destroying the excess housing stock isn't necessarily a bad idea. If the government wants to keep the price of homes falling, then one way to do that is to get rid of the excess supply.

    Whether or not the government should be trying to keep the price of homes up is another matter.
     
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  4. Madeline
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    I'm not so much questioning the demolition of these homes as I am WHY are taxpayers funding that expense? And WHY do we incentivize banks to abandoned foreclosed homes rather than piling on the pain until they scream "ouch!" and look for bank-funded solutions????
     
  5. loosecannon
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    loosecannon Senior Member

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    Our nation is run by politicians not technicians like China.

    There are thousands of screwball programs within our federal system. This sounds like part of the stimulus bill. Legislation that was given almost no deep thought and study before it was thrown together for no other purpose than to inject money into circulation. And buy votes.

    Did this effect you personally Madeline?
     
  6. Madeline
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    Madeline BANNED

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    It could. Parma is an inner-ring city, and I live in Cleveland proper but I'm near to it. If this spreads through Cuyahoga County, we could be talking about a Million homes, loosecannon. I shudder to think what all the implications of that would be. My neighborhood is in good shape because Cleveland public safety workers must live inside the city limits, and most choose my neighborhood....but if I drive 5 minutes, I can see streets that look as if they belong in a third world country. Doubtless they are not propping up my propery's value.

    It is cheaper to dispose of trash in Ohio than virtually any state in the union. These old homes almost certainly contain lead, asbestos and other contaminants that doubtless, state law allows to be disposed of without proper safeguards. In addition, we have a HUGE public corruption problem here. Suddenly infusing 1 Million x say, $2,500 per home into the county is likely to gurantee that corruption flourishes (and as I pointed out, there are payments to others besides the demolition company).

    I am pissed off, loosecannon -- I think what bothers me the most is, no one seems to know a thing about the "mystery federal program" lifting this burden off the banks. Why the fuck are we underwriting their costs yet again?

     
  7. william the wie
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    william the wie Gold Member

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    China has followed your prescriptions and has at least one completely empty city, the proposed new capital of Inner Mongolia, and many cities that are mostly empty. Shanghai hit 35% occupancy after the meltdown and that may been an artificially high number for occupancy. Reporting is limited but MSN, CNN, MarketWatch and other online news services usually report the same things and their archives are easy to access if you wish. I find it simpler to go to au.com and various other Far East sources that keep accurate records to keep track of the craziness. When I find that I can buy a house cheaper in Alabama than Tasmania, I figure the Chinese resource boom is wacko. It costs 75% less to buy a vacation/retirement home north of Auburn near Lake Martin than the listed price of a comparable in the suburbs of Hobart. So China is not an example of good economic management.

    OTOH when my back of the envelop numbers for all forms of housing in the US tell me that we are at about 60% occupancy instead of the desired 90% rate. Unless Japan moves in with us we are going to have a housing glut for a fairly long time or a lot of houses are going to be demolished.
     
  8. loosecannon
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    loosecannon Senior Member

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    well Madeline, the article spoke in terms of a few homes. I doubt the fed budgeted enough money to tear down more than a few in each county at $15,000 apiece.

    I don't think anybody knows what lurks within legislation anymore. With bills each between 1000 and 10,000 pages long even your senator and representatives never read them.

    Our government is outta hand. I think you should be mad about it. I do know this much, you can have more impact on how this plays out in your county at the county council level than you can at the federal level. In my county I can set up a meeting with the county commissioner over something like this. He will spend 10 minutes listening and he will do what he can.
     
  9. william the wie
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    william the wie Gold Member

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    Dupe
     
    Last edited: Oct 3, 2010
  10. Madeline
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    Madeline BANNED

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    I cannot even get my County Commissioners or City Ward Leaders' staff on the phone, loosecannon. By itself, that indicates a corrupt local government in my mind. I have never lived somewhere this unresponsive before. I guess I could attend meetings and speak, but what a nuisance.

    BTW, the Plain Dealer reports the cost of one demolition at under $1,500 -- but that can't possibly be right, can it?
     

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