Snidely Whiplash

I was reading an article in the Journal today which pointed out that the banks are sitting on a load of cash, a figure somewhere around a trillion dollars. Just the other day, the feds were worried about banks having minimal reserves. In case anyone forgot, we rescued the banks with about 700 billion dollars in taxpayer money. Now, the banks are sitting on wads of greenbacks and unfortunately not lending.

I have a Countrywide loan on my house that got swallowed up by Bank of America. Never been delinquent, never been late. Relatively small balance in my declining years. I inquired recently about rolling it over with my Heloc. They said that I wasn't showing enough money in my account to discuss modification or refinancing at this time.

I was talking to a buddy about this who is retired and very well off. He bought a condo for his kids and just got ran through the ringer with B of A. A wealthy guy. I am glad that I bought my building when I did because I would never qualify in this environment or with this level of paranoid scrutiny.

So the big question is, why did we bother to rescue the "too big to fail" institutions again? Their behavior has been basically deplorable and inexcusable. They repay the mercy of the American public with bloated salaries and the swallowing up of smaller institutions. They sit on fat piles of cash and slowly strangle main street. How about a little of that same mercy for the American people? If any of us can survive.

There was a Huffington Post headline crying shame on the bankers and talking about administration pressure to get them to come across and get money out to the American economy. Bank of America is apparently far behind on it's modification responsibility. But the few superbanks that are left are really responsible to no one. Shonda, the pillorying of these institutions will do nothing. They have no accountability. They repay the generosity of the american public with overstuffed balance sheets, short memories and coal in our stockings.

Sen. Phil Gramm and his leadership in regard to the repeal of Glass Steagall helped foster this economic catastrophe. This depression era bill split investment banking from lending. Banks are scurrying now to prevent its reinstitution.  The repeal allowed the creation of firms like Citicorp Group, which is now propped up with $45 billion of taxpayer subsidies. We should have allowed AIG to fail in retrospect. In bankruptcy, their cronies and creditors at Goldman and Merrill would have received a discounted sum, instead we gave them 100 cents on the dollar.

The Obama administration has recently announced that it intends to nag the banks and hound them daily to make modifications. I am sorry, Ed Yingling and his cronies don't care. Less than 2% of the temporary loans fixed by the Obama administration have been permanently modified. That's 1711 loans, half of them made by the Ocwen Financial Company. Chase, B of A, Wells Fargo and Citigroup have only converted 948 mortgages with the administration's new $75 billion dollar foreclosure prevention plan.

The Home Affordable Modification Program (HAMP) was created in March  as the administration's main response to a growing foreclosure problem. The government agreed to provide cash incentives to mortgage servicers that reduced monthly payments for distressed homeowners, and that way those who were facing higher payments or lower incomes could stay in their homes.

Are those 1 in 4 americans that are now deemed under water and less than creditworthy going to be saddled with this scarlet letter and albatross for ever? Because certain administrations decided that financial institutions would regulate themselves...

Banks are reluctant to engage in principal reduction because their servicing fees are relative to the size of the loan and because they would have to recognize the losses if they modified. So less capital means less hiring, which means more unemployment, and more pain for John Q. Public. Privatize the profits and subsidize the losses. The capitalist's mantra.

TARP is set to expire December 31. Let it die. It has done nothing except bail out the insurance companies and the large auto companies. TARP Inspector General Neil Barofsky has acknowledged that the program had improved market stability, but he noted that it hasn’t spurred increased lending and “it’s unlikely the taxpayer will see a full return on its TARP investment.”

The American taxpayer is the principal creditor in Bank of America, Citigroup and Wells Fargo. It's time we saw a little love. That big sucking sound is the American economy going down the toilet.