Chase Mortgage Banker Chased Through the Halls of Congress-Just Walk Away

David Lowman, the chief executive of Chase's mortgage business was chased through the halls of the Sam Rayburn House office building, as underwater homeowners pressed him for more concessions.

The reason the bankers gave for only doing a few mortgage modifications was that the modifications would not be fair to those who pay their mortgages on time. That is the position of Rick Santelli which I debunked here. Don't think that I believe this effort to help homeowners is good for a free market because it isn't. Still, the real reason bankers don't want to help these homeowners out has nothing to do with feeling sorry for the guy who pays his mortgage on time.

No, the real reason is that mortgage modifications show that the banks made loans that were ethically corrupt in the first place. The banks would rather pretend that their loans were moral and ethical. And an even greater reason is that the banks cannot afford to write down these mortgages. They probably are hiding horrible loans off their books or in some Lehman type shell company, and they simply cannot afford to do the program.

Of course, their failure to cooperate with the Hamp program is going to frustrate the owners and cause many to walk away. However, the banks are betting that the American people are too "moral" to walk away as I discussed in my article:The American Public is Incredibly Stupid About Walking Away from Debt and Underwater Mortgages. Yes, the banks are betting that the American underwater homeowner is too timid to act in his own economic self interest.

America, prove these bankers wrong. Act in your own self interest for crying out loud. Since when is walking away from a scam immoral? You may face some clawbacks if you walk away from a recourse loan, but they cannot squeeze blood out of a turnip. Change your phone number and fly below the radar if you have to. Just remember that the government didn't bother to clawback from banks the difference in discount rate borrowing and treasury bond interest profit. That would make me mad enough to walk away!

You can see my frustration and hope that these homeowners call the bluff of these big banks. Surely people who are thousands upon thousands of dollars underwater have a clear picture that their house values will never return to current levels. It will take these houses years and years to return to bubble prices. Those who have left their homes are not even renting. They moved in with extended family.   Without household formation there is little demand for houses. The upside potential of pricing is pretty weak. And places like Los Angeles have no economic link in their house prices when comparing them to income or rents. As Patrick says over and over, prices make no sense when compared to rent and income.

The Republicans say Hamp should be abandoned in favor of creating jobs. But, if it were up to the Republicans, a person couldn't even get unemployment that they paid into! And maybe Obama should trade a Hamp walkaway for a massive prosecution of those who were responsible for allowing ponzi loans, up to the highest levels.

Household formation will likely take an even greater hit as boomers retire. It was bound to happen, and yet, it is happening when housing is at its weakest. That was really smart Wall Street. Of course I have always believed that the housing ponzi scheme was a response to the dot com crash. And I believe that the folks in the know were aware that the dot com bubble would crash many years before it did. So, the off balance sheet banking of Basel 2 was a response to issues beyond the tech crash. Easy money real estate was on the agenda of the central banks as early as 1998. 

Be Smart as Big Banks Will Try Other Ponzi Schemes to Part You from Your Money!

That makes one wonder what ponzi banking scheme they are planning now. It will be harder to make people bite for easy money. People are smarter. That is why they have governments by the necks and are bleeding them dry worldwide as they push the stock market up on day after day of low volume. It is a joke if it weren't so sad. But I think people see the timelines of events happening in the financial world and figure that these banker games are dangerous to their household security and solvency. So it would seem that people will try to tough it out. They are suffering too much as banks want them to pay for toxic loans. But Americans are a tough bunch. Not too smart, but tough.