Tuesday, December 08, 2009

Cramdown Means You Guys Lose

Not only that, cramdown is difficult to manage at the financial services level. No wonder they hate it.

Too bad. Someone has to lose, after all. "Innovation" in the financial services industry helped destroy the economy, and the malefactors shouldn't be able to just walk away scot-free from the damage they helped create. Cramdown merely empowers judges to administer bankruptcy and to tailor bankruptcy to individual circumstances. Consider "cramdown" to be another "innovation" if you please - instead of inflating housing values, it makes them crater. Which is good for young families just entering the market!

Economies stagnate unless there is an efficient bankruptcy mechanism - just ask the Japanese, with their "lost decade" of the 90's:
Financial industry groups are launching a broadside against an amendment to financial overhaul legislation that would empower bankruptcy judges to alter home mortgages.

The industry for years has fought against the policy, which it calls "cramdown", and argues that the change would hamper the housing market's ability to recover. Supporters, including a range of consumer advocacy groups, say it is a necessary shift to force mortgage lenders and servicers to rewrite the terms of mortgages and reduce the foreclosure rate.

...A wide range of financial industry interests is urging lawmakers to oppose the measure. "These provisions will harm the housing market, increase bankruptcy filings and abuse of the bankruptcy system, and increase the cost and availability of credit for new home buyers and those that want to refinance their mortgages," ten industry groups wrote on Tuesday.

The groups include American Bankers Association (ABA), Financial Services Roundtable, Independent Community Bankers of America (ICBA) and Securities Industry and Financial Markets Association (SIFMA).

The two main lobbying associations for credit unions are also pressing lawmakers to oppose the measure.

"This proposed amendment stands to have a detrimental impact on credit unions and the mortgage market and we cannot support it," the National Association of Federal Credit Unions (NAFCU) said in a letter.

The Credit Union National Association (CUNA) said in a letter that the amendment could lead it to oppose the broader financial regulatory bill.

"We are deeply concerned that consideration of the Conyers amendment could upset the balance that we feel has been achieved," in the overall bill, said Dan Mica, president of CUNA. "And its adoption as part of the legislation would force credit unions to strongly oppose the broader regulatory restructuring bill."

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