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November 29, 2009

Economy: Obama Wants Mortgage Firms to Reduce More Loan Payments

The Obama administration in a proactive move plans to announce a campaign on Monday, November 30 to pressure mortgage companies to reduce payments for many more troubled homeowners since the $75 billion taxpayer-financed effort aimed at slowing down foreclosures is stalling.

In an interview the Treasury Department’s Assistant Secretary for Financial Institutions Michael Barr said: “The banks are not doing a good enough job. Some of the firms ought to be embarrassed, and they will be.”

In recent months even as lenders have accelerated the pace at which they are reducing mortgage payments for borrowers a vast majority of loans modified through the program remain in a trial stage lasting up to only five months but only a tiny fraction of loans have been made permanent.

Mr. Barr said the government would try to use shame as a corrective, publicly naming those institutions that move too slowly to permanently lower mortgage payments. The Treasury Department also will wait until reductions are permanent before paying cash incentives that it promised to mortgage companies that lower loan payments. “They’re not getting a penny from the federal government until they move forward,” Mr. Barr said.

Lawyers who defend homeowners against foreclosure insist that mortgage companies amass ridiculously profitable fees from long-term delinquencies and that is more beneficial to them than lowering mortgage payments to affordable levels. In October an oversight panel created by Congress reported that less than 2,000 of the 500,000 loan modifications being processed had become permanent under the Making Home Affordable program. When the Treasury releases new numbers next month, it is expected to report a disappointingly small number of permanent loan modifications, with estimates in the tens of thousands out of the more than 650,000 borrowers now in the program.

Even as our economy tries to find its footing the Treasury department is under pressure to help every day Americans who should have been helped by the banks and financial institutions who benefited from the bailouts on Wall Street.  These financial institutions seem not to feel that they have any moral responsibility to help the hundreds of thousands of households falling into delinquency daily because of the economy and high unemployment numbers. These financial institutions are reporting massive profits but are not helping everyday Americans – they are lining only their own pockets.

The administration’s Making Home Affordable program was put into operation as a means of helping three to four million households from foreclosure but because of the greed of some financial institutions it seems that only 50% of those households will receive the help they should have received. The Obama administration is trying to outwit the financial institutions they helped by publicly putting pressure on these institutions to do what they promised to do.  A White House aide said that they will continue to refine the program as needed and will not be satisfied until more program participants are transitioned from trial to permanent mortgage modifications.

June 10, 2009

Banks Allowed To Payback TARP Money – Government Predicts A Profit From The Investment

Ten big banks may be thinking that they may soon be able to sponsor golf tournaments, fly their corporate jets willy-nilly, hire foreign workers instead of American citizens and pay their executives preposterous salaries once again without interference from our government.

The real reason the banks are in such a hurry to repay the TARP loans is that they seem to actually believe that by repaying the funds the government will no longer intervene in their business practices – they’re wrong.

They’re wrong not because President Obama and his administration wants to be in the banking business but because Obama and his administration is going to continue to hold the banks accountable until President Obama believes that they have dug themselves out of the deep hole that they’re in and that the banks are on a solid foundation and that American depositors monies are safe and secure.

The banks are anxiousness to win back their independence but they might be acting prematurely.  Let them be warned, if they find themselves in another deep hole President Obama most likely will not save them a second time and what will they do then? They should really, really ponder that.  If I were a bank executive I would hold onto the monies until I was 200% sure that my bank was on a seriously solid foundation.

A concern of the Obama administration is that if big banks rush to return bailout money, it could prevent them from having enough capital to continue lending.  The Treasury Department, in conjunction with the Federal and other bank regulators conducted stress tests of the 19 largest banks this spring to see if they had enough capital to withstand worse-than-expected economic conditions.

Nine passed the test. But 10 others were required to raise a total of $75 billion as a cushion against potential future losses on bad mortgage loans and other investments if the recession worsened. The Federal Reserve said Monday that the 10 banks including Bank of America Corp and Wells Fargo & Co had submitted acceptable capital-raising plans.

Eight of the nine banks that were found to not need new capital following the government’s bank stress tests last month said they will pay back TARP funds.  They are:

JP Morgan Chase, Goldman Sachs, American Express, Bank of New York Mellon, State Street and regional banking giants Capital One, BB&T and U.S. Bancorp.

Investment bank Morgan Stanley which was the only financial firm that regulators did ask to raise money after the stress tests confirmed it also won approval from the Treasury Department to pay back $10 billion.

Chicago-based Northern Trust which received $1.576 billion in TARP funds was not part of the bank stress tests but said on Tuesday that it had also won government approval to exit the program.

All 10 financial firms indicated that they intended to pay back TARP funds by redeeming the preferred shares the government acquired in them last fall. Such a move would return approximately $68 billion to the government’s coffers.

So far, the Treasury Department has allowed nearly two dozen small, mostly community-based lenders to redeem the government’s preferred shares, representing nearly $1.9 billion in taxpayer money.

In a press conference Tuesday, President Obama said such repayments “a positive sign,” but warned that the financial crisis still presented challenges to both American businesses and consumers

“This is not a sign that our troubles are over, far from it,” he said.

Proceeds received from those 10 banks will be applied to the Treasury Department’s general account and some of the funds will used to promote financial stability should the economy take a turn for the worse. A portion of those funds will also be used to reduce Treasury’s borrowing and rein in the nation’s rapidly rising deficit.

Regulators are fearful that major financial institutions which are responsible for issuing a substantial amount of credit to the U.S. financial system may cut back on lending even further as a result of paying back TARP funds and could therefore endanger what may be a budding economic recovery.

Several bank chiefs downplayed these concerns in statements issued Tuesday stating that they will be there for consumers and businesses seeking loans.

“We fully expect to continue to vigorously offer lending opportunities to our credit-worthy consumer, small business, corporate and institutional customers, invest for future growth and support the U.S. government’s overall efforts to stimulate the economy,” Richard K. Davis, chairman and CEO of U.S. Bancorp, said in a statement.

Watch President Obama’s Press Conference about TARP money payback:

 

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