The New York Times has reported that Bank of America recently circulated a confidential proposal to select members of Congress warning that the losses from mortgage related writedowns could exceed 789 billion dollars.
From the article: Bold my emphasis, Italics my add.
"To prevent that, Bank of America suggested creating a Federal Homeowner Preservation Corporation that would buy up billions of dollars in troubled mortgages at a deep discount, forgive debt above the current market value of the homes and use federal loan guarantees to refinance the borrowers at lower rates." Is it just me, or are we rewarding people for having bad credit or lying about their ability to repay by forgiving debt and giving them lower rates? Why doesn't EVERYONE deserve this?
"“We believe that any intervention by the federal government will be acceptable only if it is not perceived as a bailout of the bond market,” the financial institution noted." Ok, now this one just makes me laugh.
Ok, people, the real point here is in the number -- 789 Billion Dollars-- that Bank of America floated in Washington. Could it be that the insiders have known all along that this crisis will result in over a HALF TRILLION dollars in losses? Why would they float this number privately, but continue to publically support the notion that the worst is behind us?
Because the worst is not behind us. Not by a long shot. We've got 3 more years of this, at a minimum. Housing values on a national level are going to come down 50 to 60 percent before you even begin to sniff the bottom. The real question is who is going to be dragged under this bus and how long will the bottom last.
Stay tuned.
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