From Reuters:
U.S. lawmakers pushed for the country’s largest mortgage lenders to suspend foreclosures in all 50 states after Bank of America Corp announced on Friday it would temporarily halt evictions nationwide.
BofA, the largest U.S. mortgage servicer, is the first U.S. bank to institute a nationwide moratorium on foreclosures, expanding on a 23-state suspension announced last week while it conducts a review of its procedures…
While those immediately facing foreclosure will get a bit of relief because of this, the actual effect will be bad – this will put an even larger question mark over our entire housing market and, by extension, our already insolvent financial system. This, to me, is just a symptom of the break down of our financial system.
One thing to keep in mind is that the people running the financial show are not necessarily people who have a clue about finance. Oh, to be sure, they know the game we’ve got right now – or, at least, the game we had until 2008’s crash – but they don’t really know how money is made and how it is invested. I work for an absolutely gigantic, multi-national banking firm and from what I can gather, senior management was blithely going forward even as recently as a month ago thinking things were going swell (there have been some indicators of late that this is changing…a few moves in senior management which make me think they realize, at long last, that fake money and huge debt do not make for prosperity).
Its not better on the government side as our government finance people are drawn from the same pool as private sector financial firms…business school graduates who are instructed in Keynesian economics as if it were revealed truth. Given all this, it does not surprise me at all that even in something as straightforward as foreclosure (which, remember, means that a person borrowed money and didn’t keep paying), they still screwed it up. And now, I’ll bet, all major banks will have to halt foreclosures as everyone tries to figure out what to do – complicated by the fact that Democrats scent a chance to scare up some votes by taking a populist stance against the banks (to be sure, we GOPers should, too…but not in the manner of the Democrats…they just want to whip up anger, we should be demanding reforms which make banks rational).
This mess will be a long time being cleaned up – and until we do, housing won’t even stabilize, let alone recover.
UPDATE: California gets in to the act – asking Wells Fargo to halt foreclosures (which is a spreading demand…and likely wrapped up in election year politics; the CA AG is Jerry Brown, currently running for governor).
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