“President Bush, seeming very much the clown-in-chief, led the way last week by proposing a mortgage crisis bail-out that would appear to have no chance whatsoever of working as advertised. He called it, arrestingly, the New Hope Alliance. It blithely assumed that those ‘servicing’ mortgages — that is, collecting the monthly payments — have the ability to suspend scheduled upward re-sets of adjustable mortgages for five years for certain select homeowner payees — so that theoretically said homeowners could avoid foreclosure.
“What might have worked in 1934, when the originators of mortgages were local banks that also ‘serviced’ them (i.e. collected the monthly payments) is unlikely to avail today since the mortgages have been sold off in bunches to pension funds, hedge funds, money markets, and foreign investment funds — none of which have an interest or the ability to renegotiate loans with millions of schlemiels from Cleveland to Denver to Fresno — while the companies ‘servicing’ these contacts are mere errand boys, with no say over the terms of anything they collect on.”
“Anyway, this argument is academic because the New Hope Alliance is just a political sham. The purpose of it is not to save the hapless occupants of over-leveraged houses, but first to buy a little more time so that the worker bees in the financial industry can justify awarding each other multi-million-dollar Christmas bonus packages, and second, to postpone the ‘workout’ of all this bad investment as far into the future as possible.
“I have been wrong in the past about timing things, but I don’t see any way on God’s green earth that such a workout of mis-investment can be put off until somebody else is sworn in to lead the government in January 2009. The capital allocation system is already listing and groaning like a leaky ship in a hurricane.
“Maybe all the players really know that keeping the ship afloat until Christmas is really the best they can hope for. Christmas means a lot in this country. It represents all Americans’ old hope that miracles can happen. Bums turn out to be Santa Claus. Old curmudgeons are transformed overnight into loving uncles. Angels save us when we jump despairingly into icy torrents. And Goldman Sachs executives pass out multi-million-dollar checks to the wizards who ‘innovated’ an ingenious way for the rest of their country to commit financial suicide.”
Spirit of the Season, James H. Kunstler, December 10, 2007
A Christmas Clusterfuck, brought to you by JHK.
Why don’t we just nationalize…oh wait, that would really freak everyone out. Never mind.