Last week the White House made it clear that they would use the veto power of the President to stop the effort by Congressional Democrats to assist homeowners who may be facing foreclosure.
"Opening what is likely to be an intense political battle in the deepening mortgage crisis, the White House said it strongly opposed the bill, which would let bankruptcy court judges modify the terms of a mortgage as part of the restructuring of a debt in a bankruptcy filing."
The article continued:
"But mortgage lenders, and the Wall Street firms that purchased the loans, have mounted a campaign against the bill, saying it would send a chilling message to investors and lead to higher borrowing costs in the future.
“We’re pulling out all the stops on this,” said Stephen O’Connor, chief lobbyist for the Mortgage Bankers Association. “How will lenders and investors react to the added risk? They will likely charge a higher interest rate, likely charge more points on the mortgage and likely demand higher down payments.”"
Not wanting to send any 'chilling messages' to investors, these same Wall Street firms are now borrowing billions of dollars to help their own financial future.
I read with interest today:
"The new lending program gives the 20 primary dealers of Treasury securities special access to the Fed's discount window. The overnight loans are overcollateralized and pay the prevailing discount rate, currently 2.50%."
But I guess it wouldn't be fair for a bankruptcy court to reduce a mortgage interest rate to say....something like 2.5% would it?
Who were these borrowers willing to take money from the Fed?
As noted in the same article:
"In the week ending Wednesday, the investment banks borrowed a daily average of $13.4 billion from the Fed, implying an average borrowing of about $19 billion for Monday and Tuesday.Three investment banks -- Morgan Stanley, Goldman Sachs and Lehman Bros. -- have publicly announced they borrowed from the Fed. Others may also have done so, but the names of the borrowers are not announced by the Fed."
"As part of the takeover bid, the Fed also gave J.P. Morgan up to $30 billion in support for potential losses from the riskiest assets owned by Bear. That credit line had apparently not been tapped as of Wednesday."
And the cost of aid to the public instead of to Morgan Stanley and the like?