So disappointed, but I have a conflict which just arose!

Sorry about the outline format, folks, I didn't write this one.

Barbara--I agree with you. I don't like this bailout solution, and I'm especially suspicious because of the haste with which it is being pushed on us. And when I see what has been tacked onto it by our greedy legislators, I'm even more determinedly against it. Hopefully, you saw my comments on the Mark to Market Accounting rule. If it's true that this is responsible for 70% of the current crisis, then it ought to be part of the solution out of it! I'm cutting and pasting here one rational-sounding plan which was emailed to me yesterday:

I. INSURANCE A. Insure the subprime bonds/mortgages with an underlying FHA-type insurance. Government-insured and backed loans would have an instant market all over the world, creating immediate and needed liquidity.

B. In order for a company to accept the government-backed insurance, they must do two things:

1. Rewrite any mortgage that is more than three months delinquent to a 6% fixed-rate mortgage.

a. Roll all back payments with no late fees or legal costs into the balance. This brings homeowners current and allows them a chance to keep their homes.

b. Cancel all prepayment penalties to encourage refinancing or the sale of the property to pay off the bad loan. In the event of foreclosure or short sale, the borrower will not be held liable for any deficit balance. FHA does this now, and that encourages mortgage companies to go the extra mile while working with the borrower—again limiting foreclosures and ruined lives.

1. Cancel ALL golden parachutes of EXISTING and FUTURE CEOs and executive team members as long as the company holds these government-insured bonds/mortgages. This keeps underperforming executives from being paid when they don’t do their jobs.

C. This backstop will cost less than $50 billion—a small fraction of the current proposal.

II. MARK TO MARKET a. Remove mark to market accounting rules for two years on only subprime Tier III bonds/mortgages. This keeps companies from being forced to artificially mark down bonds/mortgages below the value of the underlying mortgages and real estate.

b. This move creates patience in the market and has an immediate stabilizing effect on failing and ailing banks—and it costs the taxpayer nothing.

III. CAPITAL GAINS TAX a. Remove the capital gains tax completely. Investors will flood the real estate and stock market in search of tax-free profits, creating tremendous—and immediate—liquidity in the markets. Again, this costs the taxpayer nothing.

b. This move will be seen as a lightning rod politically because many will say it is helping the rich. The truth is the rich will benefit, but it will be their money that stimulates the economy. This will enable all Americans to have more stable jobs and retirement investments that go up instead of down.

This comment is for Seth:

As a licensed loan consultant, I would like to protest your statement that we are not regulated. Mortgage brokers are far more heavily regulated than banks who do loans.

Bank loan officers do not have to provide the 20+ pages of disclosures that we provide. And we are being promised even more disclosures in 2009. Banks do not have to license their loan officers in this state, since they are regulated under banking law and not the Dept. of Financial Institutions.

Banks do not have to show their profit items or itemize all of their fees on Good Faith Estimates, and many of them do not follow RESPA regulations as to providing the Good Faith Estimates and T-I-L statements within 3 days of the application.

The main reason I work in brokering loans as opposed to a retail environment is that I enjoy representing the client, and don't want to have to push some product for a bank (This doesn't mean to slam good loan originators who work for banks!). The role of the mortgage broker in the market however is to force the banks to compete against each other, for the benefit of the customer.

Federal and state regulations tend to favor giving business to retail banks as opposed to small-business mortgage brokers. Who do you suppose has the most amount of lobbying influence-large national banks with names of whom you've heard, or mortgage brokers?

Some of the recently-deceased banks are the ones who sold Option-ARM products like candy, regardless of the appropriateness for the client, had cozy preferred-lender arrangements with builders, etc., and did not routinely provide disclosures, even when asked by clients.

There is no way that any mortgage broker who wishes to stay in business would let a loan officer operate like this.

Kelleen: thank you for your lucid explanations. I have been attempting to do the same for those around me. Too often, the tendency is to focus on blaming one's pet political obstacle, regardless of the facts involved, or the fact that at this point, we need solutions more than blame, although we undoubtedly need to understand the real causes of this crisis.

Interestingly enough, it is not mainly the consumers who have created this "run" on liquidity, but the investment community. So many sources are responsible for this, but I think I'll point out a few facts not mentioned so far.

1. What I have read so far is that of all the subprime loans, 75% of them are still paying on time, and not under water. So, I'd like to give a bit of credit to these folks. They probably feel they are all being blamed. Personally, I'm happy some of them were able to be helped out of bad circumstances which may have been beyond their control.
2. Out of all mortgages, about 93% of them are up to date on payments.
3. The preponderance of the foreclosures have been in Florida, Nevada, California, and, I believe, Michigan. And...many of the foreclosures were on investment property, not primary residences.

Mark to Market Accounting on Not-for-Sale Assets which are Illiquid.

Doubtless, many here know far more about this than I do. As I understand from some intelligent economists, approximately 70% of the current financial crisis is due to this accounting rule, which, although well-intentioned, requires banks to account for their assets (including all the mortgage-backed securities) whether they are trying to sell them or not, at firesale prices.

This is somewhat insane. Most of the properties backing these securities are still there, and are still worth quite a bit, even if they aren't worth what they were worth 2 years ago. The bank isn't trying to sell these securities, and the homeowners of those properties are still paying taxes at high tax-assessed valuations, so, obviously, the city and state also consider the properties to have substantial value. However, if no investors want to buy the securities, and there is zero market, the value of these securities is marked at zero, requiring banks to raise more capital. A temporary, or partial, or somehow limited, suspension of the Mark to Market ruling would have presented a more realistic evaluation of a bank's welfare and might have prevented many bank failures. As it is, such a course of action would probably go a long way to helping out, without requiring taxpayers to foot this bill.

There are additional intelligent ways in which the current situation could be handled without the bailout plan as it stands right now, padded with 450 pages of pet pork added by the House of Reps. and their even worse cohorts in the Senate.

Richard----I would like to contribute to your efforts--count me in!

Super place to meet more Biznik super-professionals. I highly recommend Biznikers to speak with Richard Baum, who has a great idea for an opportunity to help the homeless re-integrate into society, which we in Biznik are in a good position to bring about. Be sure to ask Richard about this. Thank you, Valerie & Dainen for hosting this great event.

I love these Microsoft haikus! I circulated them around several months ago---they always bring a smile! Look forward to next event!

Hi, Craig!!! You are soo funny---thanks all for the hoot!

Both our two choices

Find blaming others easy,

Better to find cause.

Wine or beer which one?

Wish that I could come today.

Both sound very good!

Despite what you hear

Accounting rules are at fault

Only bank biz stinks ------------------ Fair Market Value

Ain't the Way to Go for banks

SEC needs to change this

---------------------------- Too much panic urged

Always house market cycles

Banks are own problem.

Andrew--

What a great idea Wish my afternoon was free Perhaps some day else?

This is near my home Would you please try this again? I miss Biznik friends!

Very good article, Valerie! I enjoy having someone's business card soon after meeting because actually seeing their name helps reinforce their name--later on, I'll have a better chance of remembering the conversation.

I'm so sorry--my earlier appt. has run overtime---can't make this one! FA

So sorry not to make it, I've got to get out a quick pre-approval for a client before noon!!! Have a great one! FA

I'd love to participate---thanks, Tonya and David, I'll be in Edmonds at the other Biznik event! looking forward to catching the next speed-bizniking event!! Have a great time, all! FA

What a great idea, Helen!

So sorry to have to cancel--family business came up suddenly! Will catch this next month!

Howard, I'm sorry, not feeling well, can't make today!