Good Plan Gone Wasted

Bruce Krasting's picture

A good portion of the unemployment problem that America faces is structural. Bernanke can Twist all he wants. His maturity extension plan averages $2b of short-term versus long-term paper swaps a day. That is not even a rounding number in the Treasury/Agency fixed income market. Other than adding to the bonus pool at a few of Wall Street’s wire houses, it will make no difference at all.

There are a fair number of people who are now out of work (or underemployed) who can’t seek a job outside of their current location because they are underwater on their homes. Without mortgage relief, they are trapped.

Take the example of the welder in Cleveland who can’t take a promising new job in Nebraska because he is upside down on his mortgage. Assume that this welder has a contract of employment in his hand from an employer desperately looking for workers in the oil fields. All this person has to do to start over is to settle the mortgage in Cleveland. Note: This is a realistic example.

It’s not possible to create a new blanket law that fairly grants mortgage relief for people looking to move and have secured employment elsewhere. However, there are many potential opportunities for mortgage forbearance that already exist. What is needed is a very big stick to hold over the mortgage servicing banks to complete the process.

The “stick” I refer to would have to very threatening indeed. It would have to come from the highest regulatory authorities in the country. It would have to have real teeth in it. It might read like the following (plain language):


Board of Governors of the Federal Reserve System
Consumer Financial Protection Bureau
Federal Deposit Insurance Corporation
National Credit Union Administration
Office of the Comptroller of the Currency


All Banks and Mortgage Servicers
As of today there is a new deal. 
If a mortgagor approaches you with a request for mortgage forbearance AND this person has proof of employment outside of his/her current location we are telling you to resolve the problem ASAP.
Mortgage servicers have a variety of tools at their disposal to address underwater borrowers. These options include the Making Home Affordable Program and programs offered by or through Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), and the Department of Agriculture-Rural Development (USDA-RD). Use these programs to mitigate loss.
Banks and investors may take losses as a result of this order. We don’t care. If the borrower has a liquid net worth under $25,000 we’re telling you to eat the loss.
If the borrower seeking relief has a second mortgage or HELOC, write it off. Don’t you dare deny a borrower forbearance on a second lien. We will eat you alive if you try.
You have 15 business days to wrap this up. No delays will be permitted. If you delay the process, and the individual loses the job offer, we will hold you liable. We have lawyers itching to bust one of you.

If you do reject a request for mortgage relief from an individual who has a job in another location, you have to report the details to us, and you must explain why you did not play ball.

We will be looking at this with a fine-toothed comb. The first ten of you that we catch screwing this up are going to get the book thrown at you. We will make your life miserable. We will sue you. We will fine you. We will take away your license to operate.
If you fuck with this order, we will fuck with you. We don’t care how big you are. We will take you down. We have the power and we will use it.

Okay. Do you like it? I hope you do. I had fun writing it. Please don’t think that I had anything to do with coming up with this idea or the use of a regulatory threat to achieve the desired results. I just copied it, (in spirit) nearly word for word, from the same government Agencies that I mentioned above . It was released today. Here’s the cover page and the LINK:



If you’re in the military with an underwater mortgage, and you have transfer orders, those government agencies have basically said “Deal with it!” – “Pronto”.

Of course lawyers wrote up the memo from those Agencies. They did however make it pretty clear that they meant business with:

If the Agencies determine that a servicer has engaged in any acts or practices that are unfair, deceptive, or abusive, or that otherwise violate Federal consumer financial laws and regulations, the Agencies will take appropriate supervisory and enforcement actions to address violations and seek all appropriate corrective actions.

That is as close as lawyers get to saying, "If you fuck with us, we will fuck with you".

I'm 100% in favor of the proposal put out by the big agencies that protects folks who are in the military and who have to move. My complaint is that this offer of relief is not made available to a larger segment of the population.

It’s way past time for loss recognition. People have to restart their lives. Banks and government lenders have to recognize losses.

The government finally came up with a good idea. One that would address the critical issues of unemployment and underwater homeowners. Too bad D.C. only saw fit to offer it to their own employees. Go figure.



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Yankee.go.home's picture

Great, more entrenched special treatment for the military.

Moe Howard's picture

In this case I agree with you. And I think there are a lot of troops that want to go home, yankee or otherwise.

BTW, next time you see a soldier, sailor airman or marine, please tell them how you feel about their "entrenched special treatment". To their face.

Disenchanted's picture



Structural problem you say...American job losses started with this structural problem long before the mortgage mess:


For example, IRS data show that foreign-owned corporations doing business here typically pay far less in U.S. income taxes than do purely American firms with comparable sales and assets. The same loopholes that foreign companies use are also utilized by U.S.-owned multinationals, and even provide incentives for American companies to move plants and jobs overseas.



Moe Howard's picture

ok, so say you raise corporate taxes to x%, no deductions, all must pay. Do you think consumers are not going to pay every dime of that tax? Are you that stupid?

Disenchanted's picture




No I'm saying remove tax incentives for offshoring jobs...but I think that horse is aleady out of the barn.


Lets boil it down, US taxpayers have subsidized their unemployment problems since the 1970's-80s...No? (possibly 1986??)


note...when I first read about this several years ago it wasn't from that source, and I don't agree with everything about the source I used in this instance.


Here's another example, but again not my original source(I confess I cannot remember where I first read about this).


4. International Tax Rules Favor Foreign Over Domestic Job Creation

Under current law, if an American corporation opens a factory in Indiana, the profits of that factory are subject to the 35 percent U.S. corporate tax rate. If the same corporation instead opens a similar factory in Ireland, the profits from that factory are subject to a 12.5 percent tax rate. If that factory generates a profit of $100, the choice is between an after-tax profit of $65 in the United States and $87.50 in Ireland. Obviously, U.S. tax law provides a large tax advantage for building and moving factories to low-tax countries.



TideFighter's picture

The moral of the story? Home ownership has devolved into a sinking and risky asset that has started to snowball unlimited future insurance and tax liabilities. Low interest rates and comical housing start stats can increase the bullshit sentiment numbers of publically traded builders, but in my area, building spec is probably over for my lifetime. It is becoming very easy to rent out a property in a matter of hours, with my choice of tennants. But profit margins are sliding, along with "hopes" that I am "investing" in future appreciation a/k/a equity farming.

I haven't seen a bank or mortgage company go after a defaulted deficiency judgment (no matter the size) in over three years. Brucie, I usually thumbs up your pieces, but no pass this time. That welder, or anyone else that can elevate their income or job status by moving should pack up the truck and go. Being tied down to a bunch of concrete, wood, and glass is beyong idiotic. Asking the taxpayers to essentially subsidize that welders credit so he/she can continue to be a homeowner somewhere else?

Perfect credit has become the new gold standard, and buying property on time exposes the buyer to the possibility of a not-so-distant future underwater mortgage and the tough decision to let valuable credit go. If you have outstanding credit, you should consider that renting may be your best option, for years-and-years to come. 

covert's picture

this is the truest and least popular message:

never borrow money and avoid the problems.


Moe Howard's picture

Everybody hates that message. "Neither a borrower nor a lender be".

The best thing ever happened to me was not having credit. When a young person asks me about building credit my stomache flips.

The first thing I think about when I think about buying something I can't pay cash for is - how in the fuck am i going to pay that back? Do I need it that bad? I end up not buying. I hope to never borrow another cent for the rest of my life.

Flip this house. Every idiot in the country ate that phony shit up. Now they want us to pay for it.

Miss Expectations's picture

"Take the example of the welder in Cleveland who can’t take a promising new job in Nebraska because he is upside down on his mortgage. Assume that this welder has a contract of employment in his hand from an employer desperately looking for workers in the oil fields. All this person has to do to start over is to settle the mortgage in Cleveland. Note: This is a realistic example"

Power plant/oil field workers, especially welders, travel from job to job all the time.  It's like a road show...going from plant maintenance shut down to plant maintenance shut down all across the country.  Welding lends itself to a vagabond existence.  Many of these folks have travel trailers and live very inexpensively and are ready to move at a moments notice.  I'm not sure that this is a realistic example.  I suggest this person take the job, get a camper and rent out his house.



Moe Howard's picture

Brother, bruce doesn't want to hear about reality. It's not fair! ahahha.


Cosimo de Medici's picture

Wow, this Entitlement Mentality is insidious, even creeping into the seemingly rational BK.  It seems we have developed a society where nobody is responsible for the consequences of freely made decisions.

Nobody made anybody buy a house.  Nobody made anybody load up on debt.  Nobody made anybody have kids.  Nobody made anybody go to university.  Each of these is a personal decision, yet somewhere along the way we have developed the view that if anything goes wrong, it is someone else's responsibility to pay.

Bruce says this welder has "suffered enough".  In other words, after five years of suffering, this welder has a right to make other people pay for the consequences of decisions he freely made.  Where did this come from?  Where in "life, liberty and the pursuit of happiness" does it say somebody owes you if you get caught short?

Perhaps I am inconsistent, but I'll reach into my pocket if someone has suffered a so-called Act of God, whether it's getting caught in a natural disaster or facing starvation due to drought.  I can summon sympathy for victims of war.  I'm damn tired, however, of being asked to pay for people who made willing choices and are under it because foreseeable things went bad.  Yes, job loss or property falls, along with kids' braces, are foreseeable, as in they happen far more often than random Acts of God.

I am not a big fan of Ayn Rand, but I am tempted to become one when my fellow citizens believe I have to pay for their mistakes or the consequences of their personal decisions.  Ya pays ya money, ya takes ya chances.  Shit happens.  Think about that BEFORE signing, or in the case of kids, screwing.  That's it.

Bruce Krasting's picture

You are paying for this problem. We all are. A giant sewage treatment plant exploded 4 years ago. There is shit everywhere.

I say clean up the shit and move on. You would like to have the shit lay around for another decade.

This shit stinks bad by now. I say burry it and move on.

Moe Howard's picture

Bruce wants you to pay for the welder's stupidity "real case". Haha. Meanwhile Bruce uses an illegal alien to do his home renovations and landscaping. Haha. Along with his Swiss bank accounts.

Bruce Krasting's picture

Why was the welder stupid? He was doing what he was told to do, buy a house. It is a big mistake to assume that everyone who is underwater is stupid, lazy or a crook.

Me? I have no Swiss bank accounts, nor do I hire illegal aliens. I hire contractors liscensed to do business in my area. They hire the illegals, not me.

Do I like some of the illegals that do work on my property? Yes I do.

Moe Howard's picture

Bruce, wake up. Read what you wrote. He was doing what he was told to do, buy a house? Are you really that dumb? Is he a sheep, are you sheep too?

 Again, he is underwater because he bought at the top of the market, at a price he couldn't afford. He made a dumb ass move. I am offered money at zero interest all the time. Guess what? I don't take it. Even if they tell me to. Ha ha.

 What if he was told to jump over a cliff? TV tells me ever time I turn it on to buy a car, expensive clothes, the latest cellphone plan, the talking heads tell me to sink my money into the ponzi known as the stock market, don't buy gold, pretend the ghetto is safe for white people, etc. Shit, if I did everything the media tells me I would be millions in debt instead of debt free.

You seem smart, then you make dumb ass statements like that, showing "teenager" mentality. It's not fair, wah. Hahah.

Bruce, you posted an elaborate story on here about hiring an illegal and his son swimming in your pool. Did you forget that already? Don't you remember the big sob story about that? Don't make me dig it up. Or was that a fake story aka a creative license story? I hope it was fake because it was creepy as hell.

So it looks like you are a lazy thinker, and a liar.


justsayin2u's picture

Why doesn't our goobermint sue the shit out of Goldman, Wells Fargo, BOA, C, JPM et al to recover ill gotten gains from fraudulentlky marketing BS CMOs and used that to help offset the losses these folks have from buying at the top,  Then limit the amount of help to that which is less than 3x their income.  So if Jack makes 100k/yr gross and was stupid enough to buy a 400k house that now sells for 250k - Jack eats the 100 and gets relief on the 50.

Bobportlandor's picture

Lotto the homes off, problem solved.

Vendetta's picture

there is no bailing out of insolvency

DeadFred's picture

Bruce I didn't know you were such a comic. As if Ben cares a whit about employment when a hallowed bank might suffer a loss. You're plan would help employment but make sure you do due diligence on the scam potential. The first thing many people think when they hear of anything new is "How can I scam this?"

Bob Sacamano's picture

So if you can find a job out of state, the rules will let you walk on your mortgage.   Bizarre. 

Go Tribe's picture

As long as the house is bulldozed under to reduce oversupply, this approach would be fine. As long as 10 years of excess inventory is out there, forget about growth.

wardawg12's picture

Luv your attitude Bruce, keep it coming

q99x2's picture

Ya, and with Moody's downgrading the banks that pay them, makes thing seem pretty suspicious. Almost like a plan is unfolding.

SAT 800's picture

Why do you have to be in the Military to get relief? Because it's a military empire; you didn't notice?

W10321303's picture
In the Grip of a Permanent War Economy by SEYMOUR MELMAN


Now, at the start of the twenty-first century, every major aspect of American life is being shaped by our Permanent War Economy.

Civilian manufacturing industries are being swept away as a war-focused White House and a compliant Congress sponsor deindustrialization of the U.S. (1) They favor production–in Mexico and China, where government powers bar independent unions. As production of both consumer goods and capital goods is moved out of America, unions and whole communities are decimated. Ghost towns are created across the country. That process is far along in industries that once invented machine tools, radios, and even TV’s. Now the decay proceeds in “new economy” industries like computers and “Palm” type devices. The U.S. firms that sell such equipment typically assemble components that are manufactured elsewhere.

Capital goods have special importance in all this, for those are the tools and machines used to produce everything else. Jon Rynn has calculated that by 2004, 50% of all the production equipment required in the United States will have to be imported, mainly from Germany and Japan. (2)

Meanwhile, government financing is lavished without stint to promote every kind of war industry, and foreign investing by U.S. firms.

every kind of war industry, and foreign investing by U.S. firms. The war priorities have depleted medical and education staffs. U.S. medical planning now includes programs to recruit large numbers of nurses from India. (3) Shortages of housing have caused a swelling of the homeless population in every major city. State and city governments across the country have become trained to bend to the needs of the military–giving automatic approvals to its spending without limit. The same officials cannot find money for affordable housing.

The Permanent War Economy of the United States has endured since the end of World War II in 1945. Since then the U.S. has been at war–somewhere–every year, in Korea, Nicaragua, Vietnam, the Balkans, Afghanistan–all this to the accompaniment of shorter military forays in Africa, Chile, Grenada, Panama.

America's purpose is to provide STORM TROOPERS for the THE EMPIRE.  Those who continue to twist all of the their arguements so as to avoid this simple fact are just as INSANE as EMPEROR JAMIE

John_Coltrane's picture

If you really need to move to survive just default and move.  Don't expect savers and taxpayers to pay for your foolish debt obligations.  Fools and their money are soon parted.  Its a type of financial evolution that keeps things in check and reminds people of that old adage, "neither a borrower or lender be".

Hohum's picture

Just slip out the back, Jack.  Make a new plan, Stan....and set yourself free.

Bazooka's picture

Bruce or Zerohedge:

Would you be able to stand up as an elected politician or an ECB member and say: "we will cut social services by 50%; social security by 75%; medicair will become on existent; defense spending will be cut by a third; unemployment and food stamps will stop so we can spend equal to what we bring in taxes?

Fuck YOU! You wouldn't have the fucking balls! You both critique but without the balls to provide solutions! That's why, like you would and I would not have the balls, the current politicians and central bankers are going with the flow.

The flow will eventually lead to a cataclasmic plunge in all social services, GDP, etc.

So, don't be so fucking almight with your critiques when you really know that if you yourselves were the Bernanke or Obama or Monti, you too wouldn't have the balls to tell the populace that they will received no more social welfare, social security...all in the name of Austrian spend only what you bring in!


Bazooka's picture

There is no socially acceptable solution any politician can put forth. Cycles and social mood will dictate not politicians or CBs.

I challenge ZeroHedge to come up with socially acceptable or rather any feasible solutions! I've had enough of your critiques and William Banzai Japo bashing.

Solutions! Who has the solutions? Who has the balls to actually run for an elected position and say to to all the constituent: YOU ARE FUCKED as I"M CUTTING ALL DEFICITS!

Vendetta's picture

Its called 'between a rock and a hard place', otherwise known as the 'monetary and financial system'.

malek's picture

Not sure why you're throwing temper tantrums here.

Everything you listed is happening as we speak, only at a glacial pace over the next 15 years or so.
Social Security, Medicxxx, and everything is being inflated away - if the propagandists can keep us calm or distracted, the "best" case for the ruling kleptocrats.

Why the %#@! do you think I'm buying gold?

The only thing one can offer is a short very sharp pain instead of years of continuous and slowly increasing pain.

sherryw's picture

Ah, what's your solution? We'd love to hear it. We're all in this together.

Vendetta's picture

a bottle of good wine or single malt scotch?

Lednbrass's picture

Well the closest to that has been Ron Paul who has said (and I think would do it) this quite clearly, and got nowhere with it because the population in general is entirely too infantile to accept reality and possibly too dumb to understand it.

There is no solution that is "socially acceptable" which is why reality will impose an entirely unacceptable solution in brutal fashion in the future. What you want is somebody to come up with a magic answer that will continue to levitate our financial and political systems so that nothing bad occurs, which cannot and will not happen. This is childish, you are waiting for Martian investors or unicorn milk sales to save the day. It is not possible in any way, shape, or form- and so this system must inevitably crash.

Your challenge is silly and shows that you dont understand much.  What you have said in essence is "I CHALINGE TEH ZERO HEGE TO IVNET A NEW MATHMATIKS WEAR 2+2=7 AND EVRIWUN AKSEPTS IT"!

Thats just the point Sparky- there is no long term solution anymore that people will collectively accept. Someone is going to cry like hell whatever happens, nobody wants to take their snout out of the trough. Our system is too corrupt and rotten, and the population itself too debased, degenerate, and lazy.  Yours is the demand of a Stage 3 cancer patient screaming for a fix to your problem that doesnt involve debilitating chemo on the grounds that it will only make you feel worse, or a junky who doesnt want detox because it sucks.

This is why you see so much gallows humor here from both contributors and commenters who understand where this is going. There is no solution that what passes for humanity these days will agree on or accept, and as a solution will not be accepted and implemented a massive blow up will and must happen.  Mathematics can be bent and fudged for a bit, but it cannot be infinitely ignored any more than gravity can. Solutions are here all the time, but most do not want to hear anything but "Let the good times roll"!

The old TANSTAAFL quote is quite true, and this society and much of the world will have that very painfully and probably bloodily stamped across its collective forehead before this is done.

smb12321's picture

Great reply.  The only "solution" to some things is starting over.  Like the UK after WWII, the best we can do is hope for a soft landing in a world of lowered expectations.  The aspirational society is dying on the vine.  Wealth is vilified unless you're an idiot actor, singer or jock - then for some reason, it's OK.   It's devolved into getting by to the next week or election as the case may be. 

I agree that a common solution is impossible.  After the Big Collapse there will still be Krugmans arguing that the problem was we didn't have enough debt. 

The Alarmist's picture

As a net supplier of capital (a saver) whose pocket has been picked by those who lived well beyond their own means for years, I find it a bit satisfying that the leeches are now bound to their homes like the little debt serfs they signed up to be. I have no sympathy for the buggers. Now, if only we could get them to work the land instead of sitting around collecting benefits ....

smb12321's picture

Many of these got caught up in the euphoria of the moment.  In our neighborhood, folks in 5,000 sq ft homes (less than 5% down) forgot the basics:  Gas, electricity, water, insurance and taxes shot up.  So despite a couple earning six figures each, money was always "tight" and only a few rooms are furnished.

A buddy in CA is making a decision as I write.  Purchased his match box for $650K and it's now worth $380K.  He's kept paying but is at the end. He's trying to escape the state and move to Texas or here (TN)

NoTTD's picture

Hey, Krasting, Fuck You right back.

I, and everyone in my immediiate family and my business partners, have all paid our bills, paid our mortgage and put money in the bank.  You know: Suckers.  Now assholes like you come along and say, hey, you know what would be cool?  Let's reward everyone who over bought, over borrowed and over spent!  Let's let them all off, so they won't "suffer" any more! Afterall, we need to protect them from not making a profit on the house they bought. Gosh, wouldn't that make us feel good?   

You want a real revolution in this country, then start this program. You can't possibly be as naive as you sound.   And I"ll just say Fuck You one more time for good measure.

Bruce Krasting's picture

The program exists. It was annouced yesterday. But it only benefits people in the military.

So you worked and saved and paid bills. Me too. I'm a sucker too.

But leaving this mess to fester for another decade (as you suggest) will not do anyone any good. Not you or me.

Cortez the Killer's picture

Thumbs up.  Ive learned three things since coming to this site.  In America:

Personal responsability is dead

debt repayment is optional

manners are so 20th century


And oh yeah, The Jews did it.

Moe Howard's picture

Joos. At least spell it right.

horseman's picture

When Bush, followed by Obama, gave the public treasury to the banks against the peoples will, they changed the entire dynamic of what most of us Americans felt about our country.  None of us responsible Americans, myself included, are now willing to sacrifice for the greater good because we know we are only being used as suckers.  After tarp, we will ride this thing to the grouind and try to rebuild from the ruins. 

nmewn's picture


They were warned about the moral hazard of TBTF and using EBT cards in strip clubs...let it burn.

Vendetta's picture

never mind the bankers, politicians and regulators who enabled the entire situation. 

jomama's picture

it wouldn't hurt to grow a sense of humor, either.

Moe Howard's picture

Was bruce joking about this?

WTF_247's picture

This will never happen - why?  Because it might actually help people.  The government is SUPER FAST to give money to banks, no strings attached.  Need 10 billion?? sure, no problem here you go.  The government could simply refinance every loan in the US if they wanted to - just pay down the interest (buy points) and the rate is adjusted.  Bond holders get the 1 time payout and further interest is lowered.  No need for filling out any paperwork unless you want a different kind of loan (10 year vs 15, fixed vs adjustable etc).

When it comes to helping taxpayers (the ones whose money it is) every single program is an unmitigated disaster and wastes enormous amounts of money.  They put ridiculous stipulations on average people but none on the banks.  They make the programs impossible to qualify for or so complicated that people give up.  

Look at some of the stupid "jobs" programs they create at the cost of 500k per job or even higher for a 50k per year job.  Why even bother with that whole mess - just hand out 50k checks to the people that would be employed and save money.  Heck you could give them 1 check each year for 5 years and save money.

The government could instantly make this type of loan forebearance program work if they wanted to really do it.  Apply and you are automatically granted access to move and the govt will make up the difference on the house.  All you have to do is prove that you have a new job at least X miles away (lets say 50) from where you are at and you have to move.  They could even make up a new government form to handle the issue which has to be filed by the employer verifying that you are actually working there along with your first 2 pay stubs.

In many of the hardest hit areas I think this is a huge, huge issue.  Many people choose to move anyway (no choice) and just let the banks foreclose on the house.  If you have no job and no prospects of a job beyond minimum wage and get offered a good job in another state its a no brainer to just bail and take the job.  The house is going to get foreclosed on anyway so why wait around.


smb12321's picture

Except for the blatantness of it, I've wondered why someone didn't suggest simply mailing checks to folks for, say, $40K.   This would have been incredibly simpler, more efficient, more effective and less costly.  I mean, if the whole purpose of government is to take from those who produce and distribute it to those who don't or can't, then let's at least do it with the least amount of effort.