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Backroom deals

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February 23, 2008 – Comments (3)

Calculated Risk has a post about a back room deal BoA is trying to get taxpayers to fund

According to the proposal $739 billion in mortgages are at moderate to high risk of defaulting.  So, tax payers buy the mortgages at deeply discounted prices and pay to forgive the debt above current market value and tax payers pay the difference to refinance these borrowers at lower rates.

The marketing strategy to the public is that you present this as a bailout of homeowners, not the bond market or the banks.  At all costs steer away from the fact that the banks get off scot-free for their gross negligence and are immediately able to line the pockets of their executives again and that the bond owners get their money back.

Additionally, completely steer away from the fact that taxpayers would then be on the hook for even more should the mortgage market decline further and these people simply walk away anyways.

Gotta hand it to the banks, "We believe that any intervention by the federal government will be acceptable only if it is not perceived as a bailout of the bond market." 

I am sure their information processing psychologists were coaching, "the way you present this thing is that it has nothing to do with you, it is about the bond holders and the home owners.  Keep it along the line that you are the Robin Hood for home owners and bond holders alike.  Do not answer any questions about the banks and bring the focus first to the homeowners, and if necessary, the bond holders." 

3 Comments – Post Your Own

#1) On February 23, 2008 at 1:31 PM, EScroogeJr (< 20) wrote:

But do you really imagine that it won't succeed?

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#2) On February 23, 2008 at 1:54 PM, dwot (73.08) wrote:

It will be interesting to watch unfold...  The purse is already empty, I am not sure how anyone expects this happen...

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#3) On February 23, 2008 at 1:59 PM, abitare (93.22) wrote:

The new business model, privatize profits and make the losses public.

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