US Lenders Offered Chance to Get Out of Debt
The US government continues to work hard to help US lenders get out of debt caused by bad mortgage loans. How the government has managed to determine that lenders are more needing of a bailout than the homeowners about to lose their properties to foreclosure remains a mystery.
Bloomberg is writing:
Banks shut out of the market for short-term loans are finding salvation in a government lending program set up to revive housing during the Great Depression.
Countrywide Financial Corp., Washington Mutual Inc., Hudson City Bancorp Inc. and hundreds of other lenders borrowed a record $163 billion from the 12 Federal Home Loan Banks in August and September as interest rates on asset-backed commercial paper rose as high as 5.6 percent. The government-sponsored companies were able to make loans at about 4.9 percent, saving the private banks about $1 billion in annual interest.
To meet the sudden demand, the institutions sold $143 billion of short-term debt in August and September, according to the FHLBs’ Office of Finance. The sales pushed outstanding debt up 21 percent to a record $1.15 trillion, an amount that may become a burden to U.S. taxpayers because almost half comes due before 2009.
The government is “taking a lot of risks through the Federal Home Loan Banks that are unnecessary,” according to Peter Wallison, a fellow at the American Enterprise Institute, a Washington-based organization that analyzes public policy, and general counsel at the Treasury Department from 1981 until 1985.
Hopefully homeowners will be shown the same mercy when the lenders that themselves have been bailed out, decide to foreclose upon the troubled borrower. Sadly, such seems unlikely.
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