ÿþ<html> <head> <meta http-equiv="content-type" content="text/html;charset=iso-8859-1"> <title>OnlineColumnist®.com: Putin Punishes Georgia</title> <meta name="generator" content="Adobe GoLive 4"> <style type="text/css"> .style2 { font-size: large; font-weight: bold; font-family: Arial; } .style3 { height: 69px; } .MsoNormal { text-align: left; } .style4 { font-size: x-large; font-weight: bold; } </style> </head> <body bgcolor="white" vlink="black"> <center> <table cool width="624" height="2719" border="0" cellpadding="0" cellspacing="0" gridx="16" showgridx gridy="16" showgridy> <tr height="79"> <td width="133" height="118" rowspan="2" valign="top" align="left" xpos="0"><a href="aboutdiscobolos.html"><img height="110" width="62" src="images/discobolos.logo.transp.gif" border="0"></a></td> <td width="7" height="118" rowspan="2"></td> <td width="482" height="79" colspan="2" valign="top" align="left" xpos="140"><img height="75" width="450" src="images/banner.GIF"></td> <td width="1" height="118" rowspan="2"></td> <td width="1" height="79"><spacer type="block" width="1" height="79"></td> </tr> <tr height="39"> <td width="182" height="39"></td> <td width="300" height="39" valign="top" align="left" xpos="322"><a href="aboutdiscobolos.html"><img height="14" width="267" src="images/divisionofNEW.GIF" border="0"></a></td> <td width="1" height="39"><spacer type="block" width="1" height="39"></td> </tr> <tr> <td width="624" colspan="6" valign="top" align="left" xpos="0" class="style3"> <table border="0" width="100%" bgcolor="black" cellspacing="0"> <tr> <td> <table border="0" width="100%" bgcolor="#99ffcc" cellspacing="0" cellpadding="4"> <tr> <td align="center"> <div align="left"> <a href="index.html"><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong> HOME</strong></font></a><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong> &#8226; <a href="articlesindex.html">ARTICLES</a> &#8226; <a href="books.html">BOOKS</a> &#8226; <a href="teflon.html"> THE </a><a href="teflon.html">TEFLON</a><a href="teflon.html"> REPORT</a> &#8226; <a href="mailto:letters@onlinecolumnist.com"> REACTIONS</a> &#8226; <a href="aboutdiscobolos.html">ABOUT DISCOBOLOS</a></strong></font></div> </td> </tr> </table> </td> </tr> </table> </td> </tr> <tr height="2"> <td width="133" height="2">&nbsp;</td> <td width="489" height="2576" colspan="3" rowspan="2" align="left" xpos="133" content valign="top" csheight="2573"> <p class="style2">Bernanke&#39;s Mortgage Fix</p> <p><b><font face="Arial,Geneva,Helvetica">by John M. Curtis</font></b><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"><b><a href="books.html"><br> </a></b></font><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"><b> (310) 204-8700</b></font></p> <p><font size="2" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"><i>Copyright December 4, 2008<br>All Rights Reserved. </i></font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </p> <p class="MsoNormal"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<span class="style4">F</span>inally seeing the light, Federal Reserve Board Chairman Ben S. Bernanke now believes a homeowner mortgage bailout plan is needed to save the economy.<span style="mso-spacerun: yes">&nbsp; </span>With bank failures and unemployment spiraling, Bernanke turns his attention to distressed homeowners, whose mortgage and cash-flow problems have damaged U.S. Gross Domestic Product.<span style="mso-spacerun: yes">&nbsp; </span>When homeowners had access to home equity lines, they contributed mightily to consumer spending, accounting for two-thirds of GDP.  This situation calls for a vigorous response, Bernanke told a banking group in Orlando, Fl., urging a new mortgage relief component to the nation s economic recovery program.<span style="mso-spacerun: yes">&nbsp; </span> When Bernanke and Treasury Secretary asked Congress Sept. 23 for a $700 billion bailout, they intended to buy up  toxic debt, known as the Toxic Asset Relief Program.<span style="mso-spacerun: yes">&nbsp; </span>Paulson reneged Nov. 12, throwing markets for a loop.<span style="mso-spacerun: yes">&nbsp;&nbsp; </span></p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>House Speaker Nancy Pelosi (D-San Francisco) and Senate Majority Leader Harry Reid (D-Nev.) both urged Paulson and Bernanke to provide homeowners direct mortgage relief.<span style="mso-spacerun: yes">&nbsp; </span>Both recognized that the nation s soaring foreclosure rates threaten real estate values and the overall economy by crippling consumer spending.<span style="mso-spacerun: yes">&nbsp; </span>When the $700 billion bailout was approved Oct. 2, Paulson and Bernanke believed the money was best spent on buying bad debt and injecting needed liquidity into financial institutions.<span style="mso-spacerun: yes">&nbsp; </span>Agreeing with Pelosi and Reid, Federal Deposit Insurance Corp. Chairwoman Sheila Bair urged Paulson and Bernanke to spend a portion of the bailout directly on mortgage relief.<span style="mso-spacerun: yes">&nbsp; </span>  Reducing the rate of preventable foreclosures would promote economic stability for households, neighborhoods and the nation as a whole, said the Fed chairman, urging loan restructuring.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Bernanke s plan involves lenders reducing the principle balance and corresponding interest rates to match current market conditions, making mortgage payments more affordable.<span style="mso-spacerun: yes">&nbsp; </span>Bernanke acknowledged the reluctance of lenders to write down principle balances without federal help.<span style="mso-spacerun: yes">&nbsp; </span>Allowing banks to reclaim lost equity from mortgages through non-repayable grants reassures financial institutions.<span style="mso-spacerun: yes">&nbsp; </span>Paulson also wants to provide cash to Fannie Mae and Freddie Mac to buy up more mortgages, an action that could push down interest rates to around 4.5 percent.<span style="mso-spacerun: yes">&nbsp; </span>President-elect Barack Obama has asked Paulson and Bernanke to come up with a mortgage relief plan.<span style="mso-spacerun: yes">&nbsp; </span>He s been working out the details with Rep. Barney Frank (D-Boston) Chairman of the House Financial Services Committee he plans to introduce the day he takes office.<span style="mso-spacerun: yes">&nbsp; </span>Barack views mortgage relief as essential to economic recovery.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>FDIC s Sheila Bair, a forceful advocate of urgent mortgage relief, has run afoul with New York Fed. President and newly minted Treasury Secretary Timothy Geithner, seeking to end her reign on the FDIC.<span style="mso-spacerun: yes">&nbsp; </span>Of all government officials, Bair has bucked Paulson and Bernanke on the subject of mortgage relief.<span style="mso-spacerun: yes">&nbsp; </span>While Bernanke has come around lately, he and Paulson opposed using taxpayer bailout money to buy up so-called  toxic assets. <span style="mso-spacerun: yes">&nbsp; </span>Bair s ideas have resonated with Obama on the issue of retiring bad homeowners debt.<span style="mso-spacerun: yes">&nbsp; </span>Paulson, his assistant Neel Kashkari and Beranke have been committed to bailing out banks not individuals.<span style="mso-spacerun: yes">&nbsp; </span>Bernanke s recent suggestion parallels Democratic proposals to help stem the foreclosure epidemic, depressing real estate values around the country.<span style="mso-spacerun: yes">&nbsp; </span>Advocating principle reduction, Bernanke finds himself with a tough sell to commercial banks.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Geithner s attempt to oust Bair indicates that he seeks to protect Paulson s uncertain gamble to place all his eggs in financial institutions.<span style="mso-spacerun: yes">&nbsp; </span>Bair differs with Paulson on the issue of allocating $70 billion in bailout funds to directly help homeowners.<span style="mso-spacerun: yes">&nbsp; </span>Geithner s a bit old school that blames homeowners for biting off more than they could chew when it comes to mortgages.<span style="mso-spacerun: yes">&nbsp; </span>Bair sees the complicity with Fannie Mae and Freddie Mac lowering borrowing standards to make homeownership available to a wide cross-section of otherwise unqualified borrowers, including many women and minorities.<span style="mso-spacerun: yes">&nbsp; </span>Bair rejects the idea of the Fed refusing to name the banks currently receiving bailout funds.<span style="mso-spacerun: yes">&nbsp; </span>Bair wants more transparency and accountability for financial institutions receiving federal bailout money.<span style="mso-spacerun: yes">&nbsp; </span>If Bernanke can pour out $7.7 trillion into banks without naming names, he can give $70 billion to homeowners.</p> <p class="MsoNormal"> <![if !supportEmptyParas]>&nbsp;<![endif]><span style="mso-tab-count:1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </span>Bernanke has started to feel the heat of Freedom of Information Act requests to find out where and how much bailout money he s given to various banks.<span style="mso-spacerun: yes">&nbsp; </span>His recent concessions to homeowners puts him at odds with incoming Treasury Secretary Tim Geithner whose views parallel Paulson s, showing little interest in directly bailing out homeowners.<span style="mso-spacerun: yes">&nbsp; </span>Geithner shouldn t be clashing with Bair, who s been the lone voice, apart from some Congressional Democrats, in dealing with the foreclosure crisis.<span style="mso-spacerun: yes">&nbsp; </span>Instead of squabbling with Bair, Geithner should be trying to figure out the best way of helping struggling homeowners.<span style="mso-spacerun: yes">&nbsp; </span> We are looking very hard at Bair s proposal to use some of the bailout funds for urgent loan modifications.<span style="mso-spacerun: yes">&nbsp; </span>Whether buying back mortgage-backed securities or restructuring loans, the Fed and Treasury must do more to help struggling homeowners get back on their feet.</p> <p class="MsoNormal"> <bAbout the Author</u>John M. Curtis writes politically neutral commentary analyzing spin in national and global news.&nbsp; He's editor of OnlineColumnist.com and author of <a href="books.html"> <i> Dodging The Bulle</i></a><i>t</i>&nbsp; and&nbsp; <i><a href="books.html"> Operation Charisma</a></i>.</p> </td> <td width="1" height="2576" rowspan="2"></td> <td width="1" height="2"><spacer type="block" width="1" height="2"></td> </tr> <tr height="2574"> <td width="133" height="2574" valign="top" align="left" xpos="0"><img height="172" width="111" src="images/johninframe3.jpg"></td> <td width="1" height="2574"><spacer type="block" width="1" height="2574"></td> </tr> <tr height="1" cntrlrow> <td width="133" height="1"><spacer type="block" width="133" height="1"></td> <td width="7" height="1"><spacer type="block" width="7" height="1"></td> <td width="182" height="1"><spacer type="block" width="182" height="1"></td> <td width="300" height="1"><spacer type="block" width="300" height="1"></td> <td width="1" height="1"><spacer type="block" width="1" height="1"></td> <td width="1" height="1"></td> </tr> </table> <table border="0" cellpadding="0" cellspacing="2" width="597"> <tr> <td><font size="1" face="Arial,Geneva,Helvetica"> <hr noshade size="1"> </font><a href="index.html"><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong> Home</strong></font></a><font face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular" size="2"><strong> || <a href="articlesindex.html">Articles</a> || <a href="books.html">Books</a> || <a href="teflon.html">The Teflon Report</a> || <a href="mailto:letters@onlinecolumnist.com"> Reactions</a> || <a href="aboutdiscobolos.html">About Discobolos</a></strong></font> <div align="left"> <p><font size="1" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular">This site designed, developed and hosted by the experts at</font><font size="2" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular"> <a href="http://www.cmeonline.net" target="_blank"><img height="30" width="138" src="images/cmelogoANIM.gif" border="0" align="absmiddle"></a></font></p> </div> <p><font size="2" face="Arial,Helvetica,Geneva,Swiss,SunSans-Regular">©1999-2005 <a href="aboutdiscobolos.html"> Discobolos Consulting Services, Inc.</a><br> (310) 204-8300<br> All Rights Reserved. </font></td> </tr> </table> </center> </body> </html>