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FDIC Chair Proves She's a Complete Bozo



October 07, 2007 – Comments (11)

NEW YORK ( -- The heat on U.S. mortgage lenders and servicers was turned up a few degrees this week when the country's chief bank regulator publicly proposed that they permanently freeze interest rates on subprime adjustable-rate mortgages (ARMs) for many homeowners.

"Keep it at the starter rate. Convert it into a fixed rate. Make it permanent. And get on with it," Federal Deposit Insurance Corp. Chairman Sheila Bair said in prepared remarks at an investor's conference.

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Sure! Why not? After all, gotta find some way to bail out all those people who were too greedy or ignorant to figure out that 2%, 3%, 4% doesn't last... Why should red-blooded Americans have to honor their contracts? Why shouldn't home prices just keep rising on a tide of dumb lending, made permanent?

Thanks to our peeps at Housing Panic for pointing this idiocy out for us.

And remember, folks, these are the people running (was that ruining?) our economy. This is not a drill.

11 Comments – Post Your Own

#1) On October 07, 2007 at 9:49 PM, nuf2bdangrus (< 20) wrote:

As a banker, and a homeowner who took ARM's and responsibly refinan ced out of them, I can tell you that what she said was the most incredibly irresponsible thing to say.


It seems we are moving towards a culture where we don;t want anyone to be hald accountable for their mistakes, oh, let me rephrase that, neitehr rich or poor should be accoutnable, the middle class will eat it on the chin, inflation, taxes, investment losses etc.


In the Asian crisis of 1997, we chastised them egregious bankers about inflating their  economies instead of letting the failures work their way through the system.  Not 10 years later, we are doing the very same thing.


As an investor, I am almost handcuffed, by the incredible irrational hyperactivity of the bubbling amrkets, contrasted against a housing crisis that is best characterized as a "slow moving train wreck".

The market WANTS to go up.  BAd news is good news.  Up up up we go.  Meanwhile, recessions, which by definition are the reapportionment of goods and services to their proper allocatins by supply and demand, have been declared personal non grata by the Fed.  The longer we forestall such, the more severe it will be.


What disgusts me most about her comments, is that this kind of behavior is not only expensive, the moral hazard is damaging twofold.  The public face is to help "strapped homeowners", but that's a bunch of baloney.  The moral hazard forces investors like myself to be faced with dimisnhed purchasing power of my dollar if I put it in a traditional savings vehicle, or jump on the bandwagon of hyperinvestments, since Uncle Ben as placed another "put" on the market.  The final "put" would be a bailout of the billions of dollars on the hook.


I am completely disgusted that such a high ranking official would dare utter these words.  And very worried. 

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#2) On October 07, 2007 at 9:50 PM, nuf2bdangrus (< 20) wrote:

Forgive my terrible spelling, I didn't recheck b4 posting

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#3) On October 08, 2007 at 12:47 AM, hall9999 (93.45) wrote:

  This really sounds dumb and it pisses me off too.  It seems that this solution is a matter of pragmatism.  Even though they'd be carrying these loans at a loss lenders will lose less money than with forclosure.

  In cases where deceitful lending got the borrower into the loan then the lender is getting what they deserve.  In cases where the borrower was just dumb or greedy we'll be rewarding them for being dumb and greedy.  But hey, isn't that how we run our country?  Isn't that how we choose our leaders?

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#4) On October 08, 2007 at 1:33 AM, joefoolcom (< 20) wrote:

I've always paid more for fixed rate mortgages, knowing i was paying more for the luxury of having a rate that doesn't go up.  Ah the ironies of modern life.

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#5) On October 08, 2007 at 8:29 AM, rd80 (96.82) wrote:

hey, if we're going to change lending contracts, why not just go back and reset the purchase price of the house so they can have some extra money while we're at it. (sarcasm off)

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#6) On October 08, 2007 at 10:50 AM, TMFBent (99.57) wrote:

Where's the government official stumping for me to get paid back on all those stocks I bought at the wrong (high) prices? Surely, I shouldn't have to be accountable for that, any more than any of these ARM-purchases should have to be accountable for paying on the contracts to which they agreed.

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#7) On October 08, 2007 at 11:08 AM, floridabuilder2 (98.77) wrote:

This type of brilliant comment would make her a front runner in the democratic primary... along with no more tax breaks for the rich and free health care for all....  not that the republicans have shown any sign of intelligence either recently

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#8) On October 08, 2007 at 12:28 PM, TMFBent (99.57) wrote:

Everyone's a socialist when its someone else's money on the line.

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#9) On October 08, 2007 at 2:11 PM, Seipher (73.40) wrote:

Perhaps I'm just an amateur but I was under the impression that these people are trying to avoid another recession.  If actions like these have that kind of potential, who cares about whose fault it is?  Besides, these lenders were the ones playing with butane, let them drop rates or sell off deflated houses (which they decided to finance).

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#10) On October 08, 2007 at 2:14 PM, TMFBent (99.57) wrote:

In other words, start a government-commanded, socialist economy where government whim replaces the efficient capitalist system we've been working on for all these years?

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#11) On October 09, 2007 at 12:16 AM, Seipher (73.40) wrote:

I saw a Bank of America commercial last night offering lower fixed rate refi's.  Maybe its economically sound for lenders to take this course of action and the goverment won't have to intervene

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