That's what I said aloud when I read this piece in the NYT this morning. Banks don't want to reduce the principal of underwater mortgages because:
principal reduction could reward households for consuming more than they could afford,
You have got to be joking right? There was widespread fraud and mismanagement in your industry and we, the taxpayers, had to step in to make you whole, but heavens forbid that you throw the little guy a bone. If these homeowners were debt junkies then you motherfuckers were the drug pushers selling it on every street corner.
Do they really expect anyone to see this as something other than the banks refusing to take their lumps? Yes, if they write down the principal they take a hit. Sure, it is probably better for them just to push the properties through foreclosure, so what?
It enrages me that we are playing footsie with these sleazeballs when we the people should be reading them the riot act and telling them how it's going to be.
The government modification program has been under attack by lawmakers and community groups for doing too little too slowly. The Congressional Oversight Panel is issuing a report Wednesday that says, "Treasury’s response continues to lag well behind the pace of the crisis."
We are requiring banks to "strongly consider" principal reductions. Yeah, they have to think about it, real hardball, eh?
Next consider this gem:
"If we rewrite the mortgage contract retroactively to restore equity to any mortgage borrower because the value of his or her home declined, what responsible lender will take the equity risk of financing mortgages in the future?" Mr. Lowman asked in his prepared comments.
Um, last I recall the federal government is pretty much guaranteeing every mortgage, and fractional reserve requirements are almost non-existing, so WHAT RISK?
Lest you think I believe in rewarding bad judgment, what should happen, should have already happened, is principal reduction through bankruptcy court, a.k.a. cram downs. The borrower takes a hit on their credit, and the bank takes its lumps too, like it should be.
Some days the crap the banks are shoveling about makes my head explode.