Democrats May Toss Meek Under the Bus     Permalink

As loyal readers of this site may remember, on Aug. 25 we discussed the possibility that if senatorial candidate Kendrick Meek (D) were polling in the 10-15% range in October, the Democrats might try to get him out of the race (possibly by offering him a job in the administration) and then making a deal that independent candidate Charlie Crist would agree to caucus as a Democrat in return for Meek's endorsement. Well, it is October and we have a poll today putting Meek at 19% and guess what, the subject of Meek dropping out is popping up all over. It makes sense. Meek has no chance at all and Crist is popular with Democrats. If Meek were to call it quits and endorse Crist, it would suddenly be a horse race again. Otherwise, Marco Rubio (R) will be the next senator from Florida. One can only imagine all the carrots being dangled in front of Meek as there are no sticks available. The DSCC long ago wrote him off as hopeless.

Bank of America Halts All Foreclosures     Permalink

The Bank of America, the nation's largest bank, is temporarily halting all foreclosures of people who can't pay their mortgages. Majority leader Harry Reid (D-NV) is urging all banks to follow suit. If they do, the Democrats are sure to claim this as a big victory (even if the banks continue after the election). It could be the break the Democrats need to show they are doing something to help ordinary people.

Of course, the Bank of America didn't stop foreclosing because it likes Harry Reid or it wants the Democrats to win the election. Rather the opposite. But they have a problem. Years ago, a bank would loan money to a home owner and the home owner would pay principle and interest to the bank for 30 years. As long as the bank was charging the home owners a higher rate of interest than it was paying depositors, it could make money with this business model.

Then Wall St. got into the act and told the banks they could free up more capital by selling the mortgages to the likes of Goldman Sachs, which would then package thousands of mortgages together and sell shares in them. The banks loved the idea. They got a fee for originating each mortgage and didn't have to tie up their own money for 30 years. Almost immediately they did what should have seemed obvious from the beginning--they began giving mortgages to people who couldn't afford them. After all, they were going to sell most of them immediately and wouldn't be left holding the bag if they went south, which they did, causing the subprime mortgage crisis, which wrecked the economy.

But a second aspect of the securitization process is now only starting to come to light. When a home owner defaults, the mortgage holder can go to court to reclaim the property. But with most loans now being sold multiple times and then sliced and diced into little pieces, nobody really knows who the owner is and thus who has standing in court to foreclose. Increasingly, judges are refusing to let the purported owner foreclose because the purported owner cannot prove he is the real owner. This development clearly benefits struggling home owners, since they can now go to the bank and try to negotiate a deal. Banks, knowing they can't foreclose due to flawed paperwork, are much more inclined to negotiate now.

It is this situation the Bank of America is responding to. It doesn't give a hoot what Harry Reid thinks, but it is losing court cases right and left and has decided to stop filing them until it gets its paperwork in better shape. That Reid and the Democrats may claim "they forced the banks to let people stay in their homes" is slightly annoying but their first concern is getting their paperwork in better shape for the future.

Making this development even more political, Congress passed a bill allowing banks to foreclose on people even if they can't prove who owns the house in question. Nobody seems to know how the bill was passed. It just magically got through the Senate and House when no one was looking. But President Obama has now said he will veto the bill, making him a hero to many home owners who are scared of losing their homes. Some of them might just decide to vote this year.

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