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View Diary: Wall Street's moral hazard (128 comments)

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  •  au contraire (7+ / 0-)

    "The investors get paid, deserving borrowers get modified, foreclosures that are inevitable are allowed to proceed, and we move forward rebuilding these neighborhoods."

    The investors in CDOs:

    huge banks
    hedge funds
    401k funds and pension plans
    money market funds
    school districts
    city governments
    savings funds
    etc etc etc

    now, of course, with the baliouts, TARP, and the 'hidden TARP' that was just revelaed through FOIA requests ... it turns out the 'investors' are now largely the taxpayers.

    but more than that. there is a bigger problem. The Synthetic CDOs built on top of this pile of trash were actually made out of  on Credit Default Swaps, which are completely secret and closed off from any public scrutiny. Nobody knows how many are out there. Nobody knows who owns them or how much they own. how do you pay off 'investors' in something whose value is not even known, and nobody wants to tell how much its value is?

    deserving borrowers:

    most of the subprime loans were for house flipping or cash-out refinancing. how do you decide what is 'deserving'

    foreclosures that are inveitable:

    you have heard of the MERS mortgage mess right? nobody even knows who owns alot of the mortgages, because the securitization chain disappeared the titles and the liens down an electronic memory hole in the name of profit.

    rebuilding these neighborhoods:

    the neighborhoods were built in the first place, thats the problem. these empty housing editions in the middle of the desert should never have been built. you cant 'rebuild' something that should never have been built. unless you just decide to give houses for free to a bunch of people and then chop property taxes down to nothing. of course, then how would the 'investors' get payed back?

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