Private Sector: 1 Washington: -75,000,000,000

Doesn't take a genius to figure out that reducing a borrower's principal closer to market value is more effective at keeping them in their home long term than a temporary payment cut, but the USS Failboat and its crew of merry morons are too intent on steering us into an iceberg. The sheer idiocy of our government is only matched by our administration's undeserved arrogance.

clipped from www.bloomberg.com March 4 (Bloomberg) -- Patricia Greenberg’s townhouse in Irvine, California, was losing about $10,000 a month in value when she received a letter in February 2008 that looked too good to be true: An investor was offering to cut her $472,000 mortgage by 26 percent and her monthly payment by a third. It was no ruse. New York hedge fund manager Ralph DellaCamera Jr. says he’d purchased the mortgage for 60 cents on the dollar and forced the originator, MLSG Home Loans of Reno, Nevada, to eat the loss. Protecting his investment, DellaCamera lowered Greenberg’s debt to keep her in the home. DellaCamera reduced Greenberg’s mortgage by $121,300 and her interest rate to a fixed 6.375 percent from an adjustable 9.629 percent. The changes allowed DellaCamera to lock in a $65,900 profit [holy crap, capitalism works! and no phantom Keynsian multipliers anywhere!]. Greenberg now pays $2,400 a month instead of $3,800 and plows some of her savings into upgrading the Cape Cod-style residence [i.e. stimulating the economy]. One in five borrowers in the $10.5 trillion U.S. mortgage market owes more than their property is worth, but just one in 10 have received the principal reductions that research demonstrates is more effective at preventing defaults than the temporary payment reductions promoted by banks and the federal government. One reason banks resist lowering borrowers’ principal is that doing so could threaten their solvency. In the worst slump since the Great Depression, the banks’ unrealized losses exceed their capital cushions by $400 billion, according to Nouriel Roubini, a professor of economics at New York University’s Leonard N. Stern School of business. [so let's keep propping them up at the taxpayer's expense and pray that this problem will magically dissappear] “If your collateral is worth significantly less than the loan, it may be better to compromise and get half a loaf than hold out for the whole loaf and get nothing,” says David Dietze, president of Point View Financial Services Inc., an investment adviser based in Summit, New Jersey. [why would I take half a loaf now when I can milk the government so much I'll be too bloated to even eat a crumb!] “The banks need to flush out all the bad assets, says Louis Amaya, 44, NAD’s chief investment officer. “Let guys like us buy them, service them, reliquefy them into good loans.” The process will “put a lot of them out of business,” Amaya says. “There’s going to be some hard, short-term pain that needs to happen in order for us to start rebounding.” [wait, now I'm not even getting half a loaf for running my business into the ground?! American people don't want pain, they want unicorns shitting skittles and they want them now! Hedge funds are eeeevil! Don't listen to their logic, they're not even government regulated!] President Barack Obama announced a $75 billion rescue plan Feb. 18 that promotes more affordable monthly payments for as many as 9 million borrowers through government-subsidized interest rates and extended loan terms up to 40 years. While buying time for the financial system to stabilize and the economy to recover, the government program steers clear of restoring homeowners’ lost equity, a more effective method of stemming foreclosures, according to research by Credit Suisse Group AG, Goldman Sachs Group Inc. Bank resistance to more aggressive action was reflected in a December study by the Comptroller of the Currency, a federal banking regulator. After six months, more than 55 percent of the loans modified last year re-defaulted, that report showed. By comparison, 28 percent of homeowners whose modifications trimmed their principal by a fifth or more were late after six months. The Obama administration’s failure to close the negative- equity gap means that its plan “will likely join the dud parade of federal rescues,” says John Kiff, an International Monetary Fund economist in Washington. [Don't listen to the IMF! They're only concerned with helping the rich get richer! All I'm trying to do here is keep my poor bank from going bankrupt! Won't anyone think of the bankers?!]