The Federal Reserve Chairman tells bankers to create more losses by writing down mortgage loans.
I just saw this story, Bernanke’s ‘Principal’, in which he recommends re-negotiating existing mortgages at a much lower amount and forgiving the debtor for the difference. This is an incredible request since all of the pain will be born by the banks, the bank’s good customers, and the share holders. As a Treasurer for a nonprofit that issues mortgages, I am pretty sensitive to questions concerning mortgages, foreclosures, and fiduciary responsibility. We believe we have a responsibility to the home owners who continue to make payments, the community, our donors, and the volunteers who helped build the house, too. Most of our foreclosure situations are solved by either temporary lowering the monthly payments or extending the mortgage terms. Occasionally we exhaust all of our options and we have to foreclose. Its painful! We follow the rules that have serviced us well for years and we move on. One family’s failure is another family’s opportunity. Bernake is asking the bankers to commit unusual and questionable transactions that are possibly unethical and may subject the bankers to additional lawsuits. I guess it is time to panic. His actions are lowering confidence in an already shaky banking system.