More From Eric Dixon at http://www.NYBusinessCounsel.com

Support Independent Investigations With Bitcoin:
Send Bitcoin Here: 171GMeYRD7CaY6tkXs8dSTjLbAtFazxhVL

Top 50 Twitter Rank of Worldwide Startup Advisors For Much of 2014
. Go to my professional site for solutions to your legal, business and strategic problems. The only lawyer who is a co-inventor of multiple, allowed-for-grant patents on blockchain technology!!! Blockchain and Digital Currency Protocol Development --
Top Strategic Judgment -- When You Need A Fixer -- Explore Information Protection and Cryptographic Security -- MUST-WIN: JUST DON'T LOSE -- SURVIVE!: Under Investigation? Being Sued? Handling Extreme Stress -- Corporate Issues -- Startup Issues -- Investor Issues -- Contracts To Meet Your Needs -- Opposition Research -- Intellectual Property, Media and Reputation Issues -- Independent, top-notch legal, strategic and personal advice -- Extensive ghostwriting, speechwriting, book writing, issue research, press and crisis management services. Listed by American Bar Association's Law Bloggers (Blawgers). Contact EDixon@NYBusinessCounsel.com. European Union audiences: This site uses a third party site administrator which may use cookies but this site is intended for AMERICAN clients and prospective clients only!

Wednesday, December 30, 2009

Bad Policy Alert: Bank Mercy Today Means Bank Pain Tomorrow


An article in today's New York Times laments the low percentage of new or modified mortgages given to holders of outstanding mortgages who are seeking modifications -- some three percent according to a cited estimate.

Readers should understand that every modification (think: a favor, or "cutting someone a break") granted by a bank, for whatever reason, altruistic or otherwise, will reduce that bank's ability to make future loans.   After all, the banks' asset bases (also known as the "borrowing base") are finite and their lending ability may become more constrained -- with or without any modifications -- if they are forced to drop their leverage ratios.   The increased leverage above traditional levels has been one prime factor in the banks' recent troubles.

The banks should not be pressured into doing any modifications.   The people really funding today's modifications are the same people who are paying their unmodified loans on time today...and who may be in dire straits tomorrow precisely because they were responsible today, and yesterday, and no one came to their rescue.

Wouldn't it be ironic that the people most at risk of eventually losing their homes will be the ones who initially kept paying their bills on time and in good faith?   After all, there will be a time when the bailouts stop.   Not everyone will get a bailout.   I predict the last ones to run out of money -- the ones who today are paying on time -- will be the losers in this perverse game of musical chairs.   Talk about a moral hazard; such a scenario will teach an entire generation that playing fairly and by the rules is for suckers.   But why talk about fairness -- that's so 20th Century!

No comments:

Post a Comment