The Banks Are Hypocritical in Their Stand Towards the Foreclosure Crisis
Since the surfacing of the financial crisis the banks in USA have been making noises and posturing about helping to resolve the problem but they are hypocritical in their stand towards the foreclosure crisis. Some bankers at a glamorous meeting on 18th April 2007 went so far as to say that there were doubts if the crisis at all existed. Sandor Samuels of Countrywide insisted that they would continue peddling sub-prime loans with teaser rates, as there was nothing illegal about it.
Democrat Senator Dodd began to corner and question them. A much-hyped Home Preservation Summit was held and in early May 2007. A Statement of Principles coming from the Summit was released – it being all froth and bubble and nothing of substance. Dodd accepted $5.9 million as contributions from the financial industry and became busy with his campaign programmes.
When Samuels was questioned about his part in the summit he said that he had spoken both informally and formally about sub-prime loans. He is now one of the top legal officers of Bank of America that has since then taken over Countrywide.
The financial group is dogged in not proceeding with modifications because of accounting rules. If a bank lowered a particular mortgage then it would be expected to lower the value, on its balance sheet, of all the similar kind of mortgages in that region to show that the area was facing an economic slump. If this was done then the losses incurred with be staggering and even higher than $1.1 trillion as calculated by Goldman Sachs last January.
By the middle of 2007 the Bush government was gravely concerned about the non-cooperative stand taken by the banking industry. The Treasury Secretary at that time and previous CEO of Goldman Sachs held a meeting of the industry bigwigs in one of the most elegant rooms of the Treasury. There were hurried talks under gaslight-replicated chandeliers. Neel Kashkari a junior banker from Goldman had been brought in by Paulson to urge the moneybags to move swiftly so that more people were not thrown out of their homes. Kashkari spoke to them strongly about they being the most knowledgeable about adjusting rates, extending durations of loans and lowering principals where and when necessary.
Few months later Paulson summoned the bankers again and did not merely cajole the thembut literally pounded them for doing something positive.
These steps resulted in the formation of Hope Now Alliance from October 2007.
