Yesterday, Michael Strain mentioned this article in Politico Magazine about the huge financial liabilities we taxpayers face due to the U.S. government’s penchant for pretending to be a bank.
There is no consistent banking policy for the 120 federal credit programs, as Michael notes. But no matter what standard is applied, their value is questionable.
For instance, some programs do require borrowers to demonstrate credit-worthiness. But if the borrowers are credit-worthy . . . they should be able to get capital in the private sector. Why should the government back these loans?
Other programs require that the borrowers show that they can’t get credit elsewhere — the Small Business Administration does this, for example. In that case, why should the government expose taxpayers to risk ordinary, risk-tolerant investors aren’t interested in?
Adding insult to injury, studying these government loans — at least the corporate ones – often reveals that parties borrowing under the pretense that they can’t get credit elsewhere can indeed get it elsewhere.
I’ve noted over and over again that many of the beneficiaries of the Ex-Im Bank were both credit-worthy and capable of getting private-sector capital, rendering them theoretically ineligible for help under Ex-Im’s charter. The same is true of green-energy loans and pretty much all other loan programs the federal government runs.
Despite this being a case we would have won on the merits, it ended up being another, come-from-behind win, based on evidentiary issues. Despite the Judge initially overruling my numerous objections to evidence coming in through testimony of a non-qualified bank robo-witness, eventually, during my Motion for Involuntary Dismissal, the Judge announced she was reversing all her prior rulings during the trial on certain key pieces of evidence. She ruled that she was instead sustaining my objections, excluding the pay history, acceleration letter and account information statement as the witness, Kevin Gavigan, was not qualified and as a result, my motion was GRANTED – CASE DISMISSED!
This was after the Plaintiff put on their case in chief. I never got a chance to put on our case, which would have proved that this particular client NEVER MISSED A PAYMENT. Yes, that’s right, this client NEVER MISSED A PAYMENT and was sued by Bank of America for a completely manufactured foreclosure.
Law360, Los Angeles (January 07, 2015, 4:17 PM ET) — Citibank NA and JPMorgan Chase & Co. on Tuesday escaped Racketeer Influenced and Corrupt Organizations Act claims in proposed class actions accusing them of charging unnecessary services to mortgage borrowers in default, after a California federal judge ruled that the plaintiffs failed to state a claim.
Granting the banks’ motion without leave to amend, U.S. District Judge Yvonne Gonzalez Rogers decided that the two amended complaints didn’t offer sufficient evidence that the banks formed enterprises to perform unneeded property inspections and defraud borrowers.
The Obama Administration is directing, via executive action, the Federal Housing Administration to reduce annual mortgage insurance premiums by 50 basis points, from 1.35% to 0.85%.
“…(T)oday, the President announced a major new step that his Administration is taking to make mortgages more affordable and accessible for creditworthy families,” according to a statement from the White House.
The White House statement says that the typical first-time homebuyer, this reduction will translate into a $900 reduction in their annual mortgage payment.
“Existing homeowners who refinance into an FHA mortgage will see similar reductions to their mortgage payments as well,” the statement reads. “In total, this action will help millions of families save billions of dollars in mortgage payments in the coming years, helping to support the housing market recovery.”
While the White House says that the new premium level is fully consistent with the FHA’s commitment to continue strengthening its financial health through growing reserves, the Republicans in Congress have reservations that the Congressionally-mandated reserves are well funded.