What she should be explaining, if she can, is:
– why her plan won’t lead to even tighter credit conditions.
– why her plan won’t keep housing prices depressed for longer than would letting these borrowers fail today.
– what FDIC will do going forward to prevent massive unsound lending and moral hazard.
– why she believes that subprime borrowers with no equity won’t walk away anyway now that their positive expectations of a new hummer in 2 years have turned negative, and renting will put more cash into their pockets today.

The lady doth protest too much, methinks”. – (Act III, Scene II)!

There does seem to be a liquidity problem, a foreclosure problem, a dollar valuation issue, banking problems, oil problems, inflation/stagflation concerns, but yet, we have the President saying the economy is doing a heck of a great job, and then he pops up with Paulson, as if reading a script to say the subprime thing is under control…………huh?

The lady doth protest too much, methinks”. – (Act III, Scene II)

My take on this is Machiavellianism versus Shakespearian, i.e, I think this drama is based on the fact that The Fed, with the full blessing of The Senate, Congress and all these fine people like Bair, Helicopter Ben, Paulson, etc…… were having trouble modifying/privatizing Social Security, so they gave America a 900 page Pension Reform Act, which now links your pension to muni junk bonds and bogus subprime collateral!

August 2006 – Landmark pension reform legislation passed last night by Congress and expected to be signed by the President this month includes the most significant changes to the fiduciary provisions of ERISA since its enactment in 1974. The new legislation (the “Pension Reform Act”) significantly relaxes the rules governing when asset-backed securities (”ABS”), including commercial mortgage backed securities (”CMBS”) and collateralized debt obligations(”CDOs”), may be offered to investors holding certain types of retirement plan assets. Absent an exception, issuers of ABS, CMBS and CDOs that are not structured as debt must comply with ERISA, including its stringent fiduciary and prohibited transaction rules — which is not practical for most ABS, CMBS and CDO issuers. One regulatory exception (known as the “Significant Participation Exception”) relied on by many issuers of either below-investmentgrade ABS, CMBS and CDOs or ABS, CMBS or CDOs that are not characterized as debt for tax (each of which typically cannot be characterized asdebt for ERISA purposes) applies if an issuer does not have “significant participation” by “benefit plan investors”.

http://www.mayerbrown.com/cdo/publications/article.asp?id=2901&nid=3655

Who helped educate our simple minded government employees:

President Bush Signs Pension Reform Act
The Asset Managers Division is pleased to report that President George Bush signed the Pension Reform Act which modernizes the Employee Retirement Security Income Act (ERISA). Of particular note, the new pension legislation includes a prohibited transaction exemption for cross-trading between separate pension accounts held with the same money manager and boosts the level of ERISA assets that can be invested in investment vehicles such as hedge funds. Association staff, in conjunction with AMD leadership and its members, worked closely with Congress on this part of the legislation.

Re: “I do worry that some of the investors have taken short positions on the ABX,” an index based on subprime-mortgage-backed securities, Ms. Bair said in an interview.

>> That kills me! Ms. Blair understands the ABX index; Im sure she plays the market and is a pro at swapping CMOs against RMBSs…. and all the various pools of toxic mortgages packaged into derivatives which no one on wallstreet can value these days……she sounds like she just got a lecture from SIFMA!!!!!

Re: The Securities Industry and Financial Markets Association(SIFMA) represents the industry which powers the global economy.

Born of the merger between The Securities Industry Association and The Bond Market Association, SIFMA is the single powerful voice for strengthening markets and supporting investors — the world over.

Our dynamic, new organization is passionately dedicated to representing more than 650 member firms of all sizes, in all financial markets in the U.S. and around the world. We are committed to enhancing the public’s trust and confidence in the markets, delivering an efficient, enhanced member network of access and forward-looking services, as well as premiere educational resources for the professionals in our industry and the investors whom they serve.

The framework allows servicers to modify loans without borrower signatures.

Source: American Securitization Forum, Streamlined Foreclosure and Loss Avoidance Framework for Securitized Subprime Adjustable Rate Mortgage Loans, Executive Summary, December 6, 2007, page 13, third paragraph from bottom of page

Counseling and modification expenses are to be charged to securitized trust cash flows, so service providers, like Countrywide, which has a representative on the board of the American Securitization Forum, will profit from the process.

Source: American Securitization Forum, Streamlined Foreclosure and Loss Avoidance Framework for Securitized Subprime Adjustable Rate Mortgage Loans, Executive Summary, December 6, 2007, page 7, first full paragraph

Appraised value for modifications are based on the date of origination, even if the current value is much less.
Source: American Securitization Forum, Streamlined Foreclosure and Loss Avoidance Framework for Securitized Subprime Adjustable Rate Mortgage Loans, Executive Summary, December 6, 2007, page 2, second bullet

According to the American Securitization Forum’s Framework for the rate freeze, borrowers will not have to document current income to be eligible for refinancing, even if they received initial loans with embellished incomes

Source: American Securitization Forum, Streamlined Foreclosure and Loss Avoidance Framework for Securitized Subprime Adjustable Rate Mortgage Loans, Executive Summary, December 6, 2007, page 3, FICO test

Some of the firms that may profit from the rate freeze are members of the industry group that authored the plan.