Geithner Imposing New Mortgage Requirements on Banks

Word is starting to get out about the new Bank plan concocted by tax cheat Tim Geithner.

Treasury Secretary Timothy Geithner told Democratic lawmakers that banks getting U.S. aid will be required to modify mortgages to help borrowers avoid foreclosure, according to a person at a briefing.

Geithner said other requirements will be imposed on banks under the Obama administration’s plan to capitalize the financial system, the person said. Geithner, who is scheduled to unveil his plan Feb. 9, spoke today in Williamsburg, Virginia, where House Democrats met for a retreat.

A requirement to modify mortgages would be a departure from the approach of Geithner’s predecessor, Henry Paulson, who rejected policies requiring the industry to modify loans for troubled borrowers. Paulson helped to launch a voluntary effort called the Hope Now Alliance to reach borrowers at risk of foreclosure and help them change their loan terms.

Democrats in Congress faulted Paulson for spending $350 billion from the $700 billion Troubled Asset Relief Program without setting requirements for use of the money. Lawmakers have urged President Barack Obama to set limits on how banks spend the fresh U.S. capital, and require stepped up lending and foreclosure relief.

I thought Geithner was supposed to be some kind of a hot shot financial wizard? Other than cheating on his taxes and getting away with it, I don't see much there.

This plan still does not address the toxic securities themselves and that is the key to the matter. It just hands more money to the banks to sit on and keep them afloat, but it does not remove the cancer form the system.

As long as "mark to market" still is in effect, banks are staring at the prospect of making a good loan to a solid borrower who pays the debt service on time, and still have to write down part of the loan due to dropping short term market values. This is absolutely insane, and the banks will continue to still back and hoard cash until that situation changes. In the mean time, real estate values will continue to fall because of that reality.

The Treasury needs to have the SEC and FASB void "mark to market" as a valuation model, which will cut the problem in half immediately and put a floor on the market. Then they need to create a Resolution Trust #2, get the toxic assets off the banks books and work out the loans long term. I bet 90% of these loans end up being good in the long run anyway.