BGS3 News – U.S. Treasury to Buy Shares of Leading U.S. Banks

BGS3 News Update:

Since the passing of H.R. 1424, (commonly referred to as the “bailout plan,”) there has been little up-to-date public news about what the U.S. Treasury Department has been doing with its newly-bestowed powers. While the American people have been assured several times that work is being done to fix our troubled economy, the details of this work have been completely under wraps.

But BGS3 can now report that on Tuesday, October 14, 2008, the Treasury Department revealed a plan to use $250 billion to purchase preferred shares of several leading U.S. banks.

Nine banks, defined by U.S. Treasury Secretary Henry Paulson as “healthy institutions,” have agreed to sell preferred shares to the government in order to help repair the economy. Included in these nine banks are Citigroup Inc., Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp. and Morgan Stanley. The government has limited its spending to $25 billion of risk-weighted assets per institution. Banks applying for government purchases have been given a deadline of November 14. BGS3 regularly negotiates with several of these banks, and it is with the help of these banks that BGS3 has been able to prevent high numbers of foreclosures across the country.

Additionally, on October 27 the Federal Reserve will begin to purchase short-term debt in the form of commercial paper (commonly used by companies for paychecks and supplies).

Sec. Paulson explained that these changes are necessary for banks to begin lending to their customers as well as other banks.

President Bush addressed concern about the U.S. government both regulating and partially owning these financial institutions, stating, “The government’s role will be limited and temporary. These measures are not intended to take over the free market but to preserve it.”

The housing crisis has clearly been a big factor in how our economy has plummeted to its current condition. BGS3 has been fighting foreclosures actively through Program 3648, and BGS3 is achieving record-numbers of short sale closings every month. But unfortunately, foreclosure rates are also increasing. These major changes could possibly lead to more prevented foreclosures and loan modifications, but only time will tell. BGS3 will continue updating its readers on this situation and what it means in regards to the housing crisis.

SOURCE: Administration unveils revamped bank bailout


VIDEO: http://www.bgs3.com/realtors.html

BGS3 Blog - Bailout Predicted in 1999

The revised bailout plan has been passed, and met with mixed opinions by the American people.

During these troubled times it would seem that everyone has their own solution, and every solution has its own public outcry warning against it. Our economy needs help as soon as possible, but acting quickly and acting efficiently are not necessarily synonymous.

The housing crisis has clearly been a big factor in how our economy has plummeted to its current condition. BGS3 has been fighting foreclosures actively through Program 3648, and BGS3 is achieving record-numbers of short sale closings every month. But unfortunately, foreclosure rates are also increasing. To help better understand how the housing crisis began, the Official Blog of BGS3 would like to direct your attention to an article from The New York Times, published on September 30, 1999. The article, “Fannie Mae Eases Credit To Aid Mortgage Lending” by Steven A. Holmes, summarizes itself in its opening paragraph, which reads:

“In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.”

The article goes on to explain the reasoning behind this ill-fated plan:

“Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

“In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates – anywhere from three to four percentage points higher than conventional loans.”

But perhaps the most sobering part of this article is that even then, almost exactly nine years ago, the potential for disaster was apparent:

“In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.

“’From the perspective of many people, including me, this is another thrift industry growing up around us,’ said Peter Wallison a resident fellow at the American Enterprise Institute. ‘If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.’”

The full article can be found here: Fannie Mae Eases Credit To Aid Mortgage Lending

VIDEO: http://www.bgs3.com/realtors.html