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I don't normally address political topics head on and just generally rant incoherently from the sidelines, but well, this whole bank thing is really starting to look grim.
As banks fall, other banks usually buy up their assets and take over their outstanding loans, and things continue on, but the banks can't afford to buy each other anymore. If my lender goes under, and no other bank can afford to buy their outstanding loans, do I no longer owe the remainder of my mortgage? If another bank buys it at a steep discount, why should I pay them more than they paid (plus interest over the life of the loan)? What does this cycle of failures do to property values?
Got your money in a nice safe FDIC covered account? Don't go thinking you do. One bank failure last week is expected to siphon off 10% of FDIC's funds. How many banks are out there? Do the math. They'll get crushed. Unless the Fed issues the funds to them to cover it, in which case, get your wheelbarrows out so you can carry the cash you need to buy groceries when inflation goes out of control.
It doesn't help that we've got a moron who's spent the last seven years raiding the treasury at the helm. In fact, I'm pretty sure that's going to be an aggravating factor.
It's gonna get worse before it can even hope to get better.
As banks fall, other banks usually buy up their assets and take over their outstanding loans, and things continue on, but the banks can't afford to buy each other anymore. If my lender goes under, and no other bank can afford to buy their outstanding loans, do I no longer owe the remainder of my mortgage? If another bank buys it at a steep discount, why should I pay them more than they paid (plus interest over the life of the loan)? What does this cycle of failures do to property values?
Got your money in a nice safe FDIC covered account? Don't go thinking you do. One bank failure last week is expected to siphon off 10% of FDIC's funds. How many banks are out there? Do the math. They'll get crushed. Unless the Fed issues the funds to them to cover it, in which case, get your wheelbarrows out so you can carry the cash you need to buy groceries when inflation goes out of control.
It doesn't help that we've got a moron who's spent the last seven years raiding the treasury at the helm. In fact, I'm pretty sure that's going to be an aggravating factor.
It's gonna get worse before it can even hope to get better.
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If my lender goes under, and no other bank can afford to buy their outstanding loans, do I no longer owe the remainder of my mortgage?
...I suspect you owe it either to the liquidator or the lender of last resort, in those circumstances.
If another bank buys it at a steep discount, why should I pay them more than they paid (plus interest over the life of the loan)?
Because your contract isn't affected by anyone else's actions. Same as when a company sells a debt to a collection agency.
It doesn't help that we've got a moron who's spent the last seven years raiding the treasury at the helm.
...We've had nothing but treasury-raiding morons since about 1980, judging by the trend-lines. Cynics would probably come up with a much earlier date.
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Define lender of last resort...the banks don't have any money, they aren't buying each other's loans at this point. Hell, I've heard more than one real estate agent comment that they've had sales fall through because the lender showed up at closing and said they didn't have the money.
Because your contract isn't affected by anyone else's actions. Same as when a company sells a debt to a collection agency.
Which can try to get the debt collected, but they can't afford to take on and carry a 30 year loan, and I don't see them going into the foreclosure business unless they really want to own a bunch of property to maintain which they can't sell.
...We've had nothing but treasury-raiding morons since about 1980, judging by the trend-lines. Cynics would probably come up with a much earlier date.
Reagan was a big spender, but he wasn't handing the money to his friends without even the pretense bid for contracts. Clinton left us with a budget surplus and a plan to get us out of debt. GHWB was just sort of there in the middle.
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Here, that's the Federal Reserve. While I haven't checked into the legalities, I suspect if a bank goes foom and no-one'll buy its loan assets, they'd going to end up holding the bag on account of their LoLR status.
Which can try to get the debt collected, but they can't afford to take on and carry a 30 year loan, and I don't see them going into the foreclosure business unless they really want to own a bunch of property to maintain which they can't sell.
Well, sure, but my point here is that while whoever buys or inherits may not want to hold the note, or have some other reason to forgive it or reduce it or renegotiate it, they don't have any obligation to do that. If they think one can pay, one can expect to be squeezed, etc.
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(Stephen Dutch also points out that any attempt at fiscal responsibility is usually instantly reversed by the next administration anyway, so there's a nice built-in incentive to max out the budget on stuff you want, because whatever you save is going to spent by the other guys on stuff you don't.
I'd like to think that the people might be more inclined towards fiscal responsibility if we cut every program that someone mean-minded and heartless, like me, would call wasteful, but in reality, I'm pretty much also that cynical.)
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