McCain Guru Linked to Subprime Crisis

Straight from Politico.com:

The general co-chairman of John McCain’s presidential campaign, former Sen. Phil Gramm (R-Texas), led the charge in 1999 to repeal a Depression-era banking regulation law that Democrat Barack Obama claimed on Thursday contributed significantly to today’s economic turmoil.

“A regulatory structure set up for banks in the 1930s needed to change because the nature of business had changed,” the Illinois senator running for president said in a New York economic speech. “But by the time [it] was repealed in 1999, the $300 million lobbying effort that drove deregulation was more about facilitating mergers than creating an efficient regulatory framework.”

Gramm’s role in the swift and dramatic recent restructuring of the nation’s investment houses and practices didn’t stop there.

A year after the Gramm-Leach-Bliley Act repealed the old regulations, Swiss Bank UBS gobbled up brokerage house Paine Weber. Two years later, Gramm settled in as a vice chairman of UBS’s new investment banking arm.

Read the rest of the story here.

Fed May Buy Mortgages?

Here is an eye opener for a Monday morning from Bloomberg:

Forget lower interest rates. For the Federal Reserve to keep the financial markets from imploding it needs to buy troubled mortgage bonds from banks and securities firms, say the world's biggest Treasury investors.

Even after cutting rates by 3 percentage points since September, expanding the range of securities it accepts as collateral for loans and giving dealers access to its discount window, the Fed has been unable to promote confidence. The difference between what the government and banks pay for three- month loans doubled in the past month to 1.92 percentage points.

The only tool left may be for the Fed to help facilitate a Resolution Trust Corp.-type agency that would buy bonds backed by home loans, said Bill Gross, manager of the world's biggest bond fund at Pacific Investment Management Co. While purchasing some of the $6 trillion mortgage securities outstanding would take problem debt off the balance sheets of banks and alleviate the cause of the credit crunch, it would put taxpayers at risk.

If you think that the dollar was in trouble before, you ain't seen nothing yet. Finish reading the article here.

Facing up to Debt Contagion

First off, check out the definition of contagion. Now you ready to read about debt contagion in this opinion article from USA Today:

These days must be humbling for Wall Street financiers, high government officials and others who not long ago were preaching the virtues of leaving debt markets alone to heal themselves.

They've plainly failed, and at potentially enormous cost to everyone else.

Facing the possibility of a serious financial meltdown, Federal Reserve Chairman Ben Bernanke on Friday engineered a temporary federal bailout for Bear Stearns & Co., a Wall Street investment bank battered by its heavy involvement in mortgage-backed debt, while the troubled firm rushed to sell itself to a more stable suitor.

This action came on top of a broader assistance package unveiled Tuesday that included the Fed taking $200 billion in toxic mortgage-backed securities off the books of major firms in return for U.S. Treasuries — a terrible trade-off for taxpayers but apparently necessary to keep the financial system functioning.

You can read the rest of this article here.

401k To Pay Off Mortgage Debt

Well that is what they are saying over at Daily Paul...

I emailed my deadbeat congressman requesting he move on this. It just makes too much sense. Allow our 401k $$ to be used to pay down/off mortgages, saving consumers hundreds of thousands of $$ in interest, freeing up monthly $$ for investing or consumption. They need to take away the taxes and penalties so we can do this. It would:

1. Help homeowners to save themselves in this mortgage crisis.
2. Help banks to ease back all of this leverage.
3. Help the economy to bounce back with this new found liquidity.

The Dems would say, "US citizens would just borrow this $$ again, and cause another bubble, losing their retirement in the meantime". Hey. We'll meet you half way, I say. Take the $$ amount transfered from the 401k to the mortgage, and have that deducted from the property appraisal for loan purposes (have a sunset date of like 5 or 10 years - or even when they turn 59 1/2, like a regular 401k plan).

This makes way too much sense. I would transfer mine in a heartbeat.

Here is the full article...

Anyone have any thoughts on this idea?

Reverse Mortgages

If you are unfamiliar with reverse mortgages, the following article should help clarify things:

Foreclosures are up, and it looks like they won't be coming down anytime soon.

Troubled homeowners have a few options to stave off foreclosure, and Congress is looking at creating others. But older homeowners, age 62 and up, for years have had a tool that's sometimes overlooked: a reverse mortgage.

This allows you to take out a loan against your home to pay off your existing mortgage and remain in the house as long as you want. You don't have to repay the reverse mortgage until you move out or die. At that time, the house is sold and the lender repaid.

Reverse mortgages can be an expensive form of borrowing, and you must have some equity built up in the house to get one. But for older, cash-strapped homeowners headed toward foreclosure, the reverse mortgage can be the answer.

This article in its entirety can be found here.