Wednesday, November 19, 2008

Paulson: Bait and Switch

By: Chris Taylor, Foreclosure Specialist

Once again your government who lobbied for you to support the bailout has lied again.

Secretary Paulson, whose net worth has almost doubled to 750 million is siding with the other industry leaders (Bank CEO's, lobbyist, etc) and has clearly stated that if you are in trouble with your lender, FEND FOR YOUR SELF!

The current system, which rewards the failing banking system by paying huge bonus's at the tax payer's expense is turning their back on the consumer. Currently,banks are pursuing foreclosure activity and opting to discontinue to loan modification programs because they believe the re-default rate is too high and that loan modifications don’t work.

Paulson has stated over the last two weeks that the treasury has decided to abandon the acquisition of troubled assets in exchange for buying bank stock. Paulson believes that if the government buys bank stock that it will shore up the bank’s balance sheet, thus unlocking the credit markets. The banks will be better stewards of T.A.R.P. (Troubled Asset Relief Program aka: Bank Welfare program) than the homeowner in foreclosure.

Banks are actually tightening credit standards , and freezing current credit lines.. They are taking a conservative approach to the management and extension of credit because they believe credit performance will continue to decline

Imploding Economy

It doesn't take a Harvard educated economist specializing in the Great Depression to understand that if spending continues to decline, unemployment will increase. If unemployment increases loan losses will also increase. A bank will not continue to lend in this kind of economic environment when they know that the default rate is increasing. This is why we are seeing banks increase their rates on credit card portfolios. This trend will continue thus adding to the trend of limiting access to affordable credit in the market.

Let’s review the most recent events to support this claim:

* Citibank increased rates on their credit card portfolios by 3%. (they are also cutting 53,000 jobs)
* Circuit City to close 20% of all stores causing thousands to be let go
* Lowes Stores report 25% reduction in sales
* Intel reports unexpected decline in sales and cannot predict the future of microchip sales and 3,000 job cuts
*Dupont, 30% decline in sales
*State budgets are all being reduced and taxes are being raised

These results demonstrate the power of the American consumer and if we don’t support from the ground up the problems will continue.

Loan Modifications, and special loan programs insured by the Federal Government need to be implemented immediately. These programs should be available to all current homeowners current and delinquent. These changes will begin the flow of money into the economy that will stop the hemaraging and begin the healing of the economy.

Please let your local congressman know your concerns about why the government is taking the wrong direction.

In our economy will continue to fall for the 10% of homeowners in distress. This lack of spending is causing major job reductions around the world. Imagine if this number increases to 15% -20%? Where will unemployment be then Mr. Paulson? We will be happy to know that the banks will be well capitalized, hoarding their money and not putting it to use.

For the rest of us little people we can only hope that the incoming administration and congress will actually work for the people.

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