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Bloomberg to WaMu: "Be careful what you wish for"


               
2007 Nov 8, 4:48am   25,152 views  161 comments

by HARM   follow (0)  

WaMu's Wile E. Coyote moment

Bankruptcy Law Backfires as Foreclosures Offset Gains (Update1)

Nov. 8 (Bloomberg) -- Washington Mutual Inc. got what it wanted in 2005: A revised bankruptcy code that no longer lets people walk away from credit card bills.

The largest U.S. savings and loan didn't count on a housing recession. The new bankruptcy laws are helping drive foreclosures to a record as homeowners default on mortgages and struggle to pay credit card debts that might have been wiped out under the old code, said Jay Westbrook, a professor of business law at the University of Texas Law School in Austin and a former adviser to the International Monetary Fund and the World Bank.

``Be careful what you wish for,'' Westbrook said. "They wanted to make sure that people kept paying their credit cards, and what they're getting is more foreclosures.''

Washington Mutual, Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. spent $25 million in 2004 and 2005 lobbying for a legislative agenda that included changes in bankruptcy laws to protect credit card profits, according to the Center for Responsive Politics, a non-partisan Washington group that tracks political donations.

The banks are still paying for that decision. The surge in foreclosures has cut the value of securities backed by mortgages and led to more than $40 billion of writedowns for U.S. financial institutions. It also reached to the top echelons of the financial services industry.

...'Let the House Go'

People are putting their credit card payments ahead of their mortgages, said Richard Fairbank, chief executive officer of Capital One Financial Corp., the largest independent U.S. credit card issuer. Of customers who are at least three months late on their mortgage payments, 70 percent are current on their credit cards, he said.

"What we conclude is that people are saying, 'Honey, let the house go,''' but keep the cards, Fairbank said Nov. 5 at a conference in New York sponsored by Lehman Brothers Holdings Inc.

All I can say is... BWAAAAHAHAHAHAHAHA!!!!!!
It looks like the Law of Unintended Consequences rules the day (again). So much for the "no bankster left behind" BK bill. Couldn't have happened to a greedier, more evil group of thugs.

Pigs getting their just desserts.
Chickens coming home to roost.
Life for a debt-free bubble sitter: wonderful.

Discuss, enjoy...
HARM

#housing

Comments 1 - 4 of 161       Last »     Search these comments

1   Patrick   @   2007 Nov 8, 5:16am  

The only real question is how can a bubble sitter escape inflation?

My own strategy so far is foreign stocks, or stocks that earn foreign currency, and PUTs on the banks, and RYWBX, which I just heard about this morning. RYWBX is an inverse dollar index fund. Seems like it ought to do great as the dollar continues to tank.

Not investment advice! More of an investment question, really.

Patrick

2   Graystroke   @   2007 Nov 8, 5:21am  

Test comment from Graystroke.

3   Richmond   @   2007 Nov 8, 5:27am  

Did the comedy writers in Hollywood go on strike so they would have time to write a script for the banks?

4   Peter P   @   2007 Nov 8, 5:51am  

Which are the best financial stocks to short? I do not want to buy inverse ETFs because I prefer to maintain a long-short portfolio. On the other hand, PUT options requires much better timing.

Comments 1 - 4 of 161       Last »     Search these comments

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