Are bailed-out banks about to cause another mortgage meltdown?

Not only this...

But banks are using "mark-to-market" and other creative accounting techniques to hide their losses.  Do we really believe banks made 7.6B in profits in the first quarter when 1 in 8 home loans is in trouble or in foreclosure?  

Funky loan structures (as Pam described), Derivatives Trading, Credit Default Swaps (we don't have any exposure because AIG insures it), and Mark-to-market all combined to create a perfect storm.

Obama and Congress need to get their act together and get regulations in place and fast.  Of course, the banks have so much money in politics (nowadays its our own money they are using), that any regulation will probably be so watered down it will be nothing but a band aid on the problem.

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by: Will St. James @ Sun May 31, 2009 at 10:14:05 AM CDT

how did it get so f*cked up?

I've gone through the process of obtaining a mortgage three times -- once in 1992 to buy my first home, a refi in 2002, and another in 2003 when I bought my current home. Each time my finances were scrutinized up and down. It's not an comfortable feeling, but it was easy to understand that the bank wanted to ensure it was paid back.

I fail to understand how anyone going to get a loan doesn't think they have to qualify, and if they don't, certainly the lending institutions do know a risk when they see one.

It's clear that the Obama administration needs to shut these practices down now and get back to basics. Either you qualify or you don't. We have to get out from under this first mess.

All this article proves is that the same people who got us here didn't learn anything.

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by: Pam Spaulding @ Sun May 31, 2009 at 10:21:18 AM CDT

The Giant Pool of Money

If you want to know how it all got so screwed up, NPR's This American Life has a fantastic show called The Giant Pool of Money that really explains it all.

http://www.thislife.org/radio_...

The basic gist is there are many ultra-rich entities (people, countries, corporations) looking for safe investments. Bundles of mortgages were about as safe as they can get because there was a real asset, finances were scrutinized, etc so the "giant pool of money" kept buying up mortages and people got really rich selling them.

But they ran out of good mortages to sell, so they just started to give them to everyone and used creative accounting to hide the fact that they were unlikely to get paid back because the people making the loans never cared about getting paid back, they only cared about making a mortgage so they could sell it to someone else.

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by: kathygnome @ Sun May 31, 2009 at 11:42:33 AM CDT

[ Parent ]

And once again...

...they'll probably publicly blame the Community Reinvestment Act for "forcing" them to take on "unqualified" borrowers -- when CRA-affected banks actually have lower foreclosure rates because they hold onto the loans they make.

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by: M @ Sun May 31, 2009 at 12:48:48 PM CDT