172,655 New Listings - March 2010 - Last update March 16, 2010 6:15 AM ESTForeclosures Lead To Financial Crisis Across the Globe
A trickle of defaults that turned to a flood of reo properties and bank reo has led to a financial crisis of global proportions. It is pushing America deeper into a period of long recession.
Recently the Congress has passed a bailout package of $700 billion but there is difference of opinion between the lawmakers and the Treasury over its implementation. The Congress feels that the foreclosure victims are being neglected and wants to adopt the stand taken by the FDIC. Treasury secretary Paulson however is reluctant to do so. Ben Bernanke the chairperson of the Federal Reserve supports the proposals of the FDIC but is cautious because it will involve extra expenditure on the part of the government. He added, “I want to say this is a very promising approach. A very strong point of the FDIC program is it’s simple and it’s run by the (loan) servicers rather than the government.”
The bailout plan was originally scheduled to purchase soured loans from banks so that the latter would have funds to advance new loans. But the Treasury has done away with that plan and is now using the money to purchase equity in healthy financial bodies. Understandably many lawmakers are upset about this change of direction.
Gary Ackerman (Democrat) of New York said Congress was taken unawares by what “seems to be the second-largest bait-and-switch scheme that history has ever seen, second only to the reasons given us to vote for the invasion of Iraq.”
This change of track surprised even banking circles. Edward Yingling of American Bankers Association said, “It’s been very confusing and very difficult. It’s confusing for bankers … customers don’t know how to react.”
Of the first lot of $350 billion about $290 billion has been directed for use. Paulson opined that he wanted the balance to be kept as reserve till President elect Obama officially took over the reins on 20th January. Paulson reiterated, “This financial crisis is unpredictable and difficult to counteract. So early last week, we concluded it was only prudent to reserve our … capacity, maintaining not only our flexibility, but that of the next administration.”
Some experts are of the opinion that USA Treasury changed tracks following the course taken by European counterparts in using rescue money to invest in healthy banks instead of purchasing soured loans. This has not gone down well with those who claim that the money was sanctioned with the view of helping foreclosure victims. It was for them that the financial system was being shored up.
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May 26th, 2009 at 2:27 pm
[...] is no longer practical. If the state of affairs in Iraq takes a turn for the worse then his schedule for withdrawal from that zone will get delayed. [...]