Presidential contender Sen. John McCain stepped into a political hornet’s nest Tuesday night when he proposed that the U.S. Treasury department “buy up the bad home-loan mortgages in America and renegotiate at the new value of those homes at the diminished value of those homes.”
In subsequent explanations, McCain’s economic adviser Douglas Holtz-Eakin said McCain is proposing that the government would buy mortgages from banks and investors at the original value of loan, no matter how inflated that it now appears to be, and then give the home owner a new mortgage at current value at a more affordable interest rate. “Obviously, the taxpayer is on the hook for the difference,” Holtz-Eakin said.
Barack Obama’s top economic advisor Austan Goolsbee was among those highly critical of the idea. “This proposal, if enacted, would be a massive government subsidy from taxpayers to the most irresponsible banks, including the ones that committed fraud,” Goolsbee said, adding, “This proposal would give the taxpayer all the risk, with no gain.”
Source: BusinessWeek.com, Jane Sasseen
being that I’m from NY and have worked on Wall Street with Lehman…I was saddened, and a bit fearful when I saw the headlines.. Then after my prayers,- I know that God is still on the throne and all that is, will not break my spirit. With renewed strength, my prayers are with those whose lives are greatly impacted by the current state of the U.S.
Financial Giants Fall Victim to Mortgage Crisis
Weighed down by losses in the U.S. mortgage crisis, the stability of major financial institutions continues to be shaky. On Monday, U.S. investment bank Lehman Brothers Holding Inc. filed for bankruptcy and Bank of America announced that it would be buying struggling Merrill Lynch.
Lehman’s is the largest casualty, so far, in the past year in the ongoning credit crisis. Lehman filed for bankruptcy on Monday following a failed attempt over the weekend to find a buyer.
Concerns over the stability of other firms also looms, particularly after the U.S. government’s decision not to provide any bailout for Lehman. In March the government provided financial backing for JPMorgan’s takeover of Bear Stearns, the first big bank to fold under the mortgage crisis.
Also on Monday, No.2 U.S. bank giant, Bank of America announced it would be buying Merrill Lynch in a $50 billion deal.
|“Acquiring one of the premier wealth management, capital markets, and advisory companies is a great opportunity for our shareholders,” Bank of America Chairman and Chief Executive Officer Ken Lewis said in a statement. “Together, our companies are more valuable because of the synergies in our businesses.”The buyout is expected to close in the first quarter of 2009.
Source: Reuter News, Ellis Mnyandu (9/15/08) and Associated Press, Madlen Read and Tim Paradis(9/15/08)