Senator:

Allowing bankruptcy court judges the power to modify (aka "cram down") residential mortgages is the key to resetting mortgages in line with current property values. I am concerned that banking lobby interests have reached some key House Dems on this issue and passage of the proposal is now less certain than anticipated. I hope / ask you to support the amendments to the bankruptcy code.

Greg D.

Quick question for the former Speaker of the Oregon House,

Didn't you have an opportunity to try and move this last special session and chose not to push too hard?

Could you qualify "live here at BO"? Do you mean "fast batch" or a parallel twitter or chat feed?

Senator, thanks for doing this.

Mortgage foreclosure reform is important for our economic recovery. But how will you make sure that we limit the help to those honest folks who were taken advantage of or who honestly got in over their head? How do we make sure that speculators and quick-flip operators don't get the benefit of taxpayer dollars?

I think this is critical to keeping faith with those of us who were responsible and only borrowed what we knew we could afford to repay.

I have a question about attaching "strings" to the TARP funds.

In the UK, they have attached a provision to their bail-out funds that the financial institutions receiving them do something positive for their clients, like unbiased financial counseling. It's pretty lame in practice, but I've a similar idea for TARP funds.

I'm sick and tired of financial institutions acting like their major revenue streams come from third party marketing and various deceits and ham-handed tactics to charge fee after fee. How about requiring financial institutions that receive TARP funds to stop engaging in third party marketing and predatory fee structures?

I know they will retort that now is not the time to cut revenue, but the point is we would like a balance. We are going to be dealing with the magnitude of this for years to come, making choices we'd rather not have to had to make. Let's share the pain. If they can't go back to what was business as usual before Reagan chucked the S&Ls to the wolves, then they are admitting that the structure has been corrupted to the point that it must be totally reformed. As they don't want that, I think you would have no problem passing this, provided the Democratic Party is willing to put it in those terms.

Is there any hope of addressing the ridiculous assessments of property value? The inflation has been totally bogus and is the basis for the "debt". This isn't like a farmer that buys seed for $5000 and only makes $3000 off the harvest. It's like a guy that convinces someone else that a rhinestone ring is worth $10,000, then loses it, plus double or nothing, in a poker game, and hears that he owes $10,000. He certainly won't point out that he really owes $20,000, but the point would be that he only owes the true value of a rhinestone ring. Helping him refinance the $10,000, don't cut it as progressive, sorry.

On an even more radical level, why is real estate a speculation market? How does that help the social good? It's one of the clearest examples where a progressive agenda does really diverge from a American style capitalist agenda. Land should be held in trust, not openly traded, any more than you would the seas.

Following up Charlie's question...

How about real "energy assistance"? What is there today suffers teh vagaries of the "charitable" organization that hosts the funds. Many require tht you hve a disconnect notice before tehy will see you, forcing you to ruin your credit. Mortgage payments matter, but monthly energy bills are the stake in the heart. Relief here would be dearly felt!

I am very concerned with the possibility of changning the mark to market practice. Any insight on this?

Greg D.

It is unacceptable that a bankruptcy judge can adjust the terms of someone's vacation home or yacht mortgage, but can't adjust the terms of a family's home mortgage. Some version of this power is going to be essential if the Obama strategy of loan modification is going to work.

From Danny Schecter:

"SAVING CITIBANK? Author/Lawyer Ellen Brown wrote to me: “They’re “nationalizing” Citigroup today — by selling common shares to the govt for $12/share when the market rate is $3 I think (I should check) — just long enough to sell off the toxic assets and let the common shareholders take the hit, then turn it back to the privateers!

“They are socializing the risks—tax payers taking the risk and then the money will be handed back to the private interests that own the bank. They are calling it nationalization but it isn’t because the bank is not a public institution. Citibank is not a public entity. We are going to feed them money to clean up their books, and then we hand it back to them.

"The banks should be put into bankruptcy FIRST, THEN nationalized. That’s the ordinary way bankrupt banks are handled: the FDIC comes in as receiver and distributes the available assets to the creditors, clearing the books, THEN takes them over and gets them back on their feet. What is happening now is that they’re nationalizing them without bankruptcy, which means we the taxpayers have to actually come up with funds to pay off the creditors."

So, Senator Merkley: What will you do to end this transparent, blatant rip-off?

The banks had grown because the Glass-Steagall Act was dissolved. They sold bogus credit default swaps. They are junk because no one has checked if the party on the other side has the money to pay up. People wanted to buy risk. (GM has more invested in bets on General Motors survival than on GM itself)

Senator, thank you for your time. It seems to me that the biggest challenge in providing mortgage assistance is trying to draw the line between "deserving" people who are facing foreclosure because of circumstances outside of their control, and those that were "irresponsible" in their purchase choice and bought beyond their means. Ultimately, it may make little difference in terms of actual effectiveness of a mortgage plan, but it could make a difference in the political repercussions. How or should this line be drawn?

senator merkley, thanks for taking the time to talk with us today.

i'm glad you are taking on the mortgage crisis. i agree with you that home ownership is the most viable path to financial stability and accumulating wealth for most middle-class working americans.

that said, my understanding is that oregon, due in no small part to it's strict land use planning laws, did not see the bubble that many other states (CA, NV, FL, i'm looking at you!) did and that we are statistically actually in pretty good shape compared to most other states, wrt foreclosures.

with that in mind, while the mortgage crisis needs attention for the country as a whole, is it truly the most pressing crisis in our state at this time? i'm asking because i honestly don't know. is unemployment a bigger concern? the energy crisis? could focussing attention here on energy efficiency measures do more to shore up the economy than overstating the impact of mortgage foreclosures?

thanks for answering.

"What am I missing":

In the February, 2008 special session, I pushed very hard to end the two major practices that are hurting working families. The first was to end "steering" payments through which a lender secretly pays a broker to steer a family into an inappropriate loan. The second was to ban pre-payment penalties which serve as a steel trap to lock families into exploding, exploitative, interest rates. We got this bill passed with 31 votes only through the help of three Republicans. Unfortunately, the Oregon Senate did not address the issue and the bill died.

Chet:

The Obama team is determined to make sure that their assistance goes to legitimate homeowners and not speculators or investors. They are currently writing detailed criteria to address this and I'm looking forward to seeing it.

Thank you, Senator. I am looking forward to seeing their criteria as well.

Another concern: In order to refinance their homes under this program, will people have to work through mortgage brokers? And if so, will they have to pay closing costs again?

I understand the Obama proposal may include a $1000 bonus to any lender that refinances these loans. I think that's enough of a payment to these banks; and we should avoid adding on additional closing costs.

Charlie Burr:

The Senate leadership and the White House have agreed to pursue an energy bill in the near future. I absolutely support a lot more on the energy conservation side. Most studies show that the biggest bang for the buck comes from conservation. But we also have to invest heavily in wind, wave, geothermal, and solar power, not to mention dramatic restructuring of our transportation system.

Regarding lending, there is one hopeful sign, which is improvement in the commercial paper market. But overall, lending is still frozen. One big problem is that banks are protecting their equity against potential write-downs that could wipe them out. The second problem is that they are suffering from a crisis of confidence and are afraid that loans they make now will fail. It's a mess. I think the Obama team is on the right track, however, by putting a lot of conditions on the behavior of banks and working to strengthen secondary markets for loans.

Senator,

Thanks for clearing that up but I still have a small question (that others can answer for me as I know you are busy).

These Senate and House are different beasts - I grant you that. But....you had a majority in both and you were the leadership. Your telling me you weren't able to work with the Senate to get this passed? Weak answer, I'm sorry. At the end of the day the State Leg gets to say it didn't pass but you looked good going into elections.

Harry Kershner:

You're absolutely right. The repeal of Glass-Steagall was a huge mistake. The belief that Wall Street would regulate itself was deluded. Does anyone remember the S&L crisis after the S&L industry was deregulated?

Moreover, the credit default swap industry - fifty trillion dollars! - grew overnight due to the complete failure of oversight by the SEC.

Today I met with the Chair of the New York Stock Exchange. He told me that the credit default swap industry used the term "swap" in place of the term "insurance" to avoid regulation by the New York state insurance regulators. Amazing.

So we ended up with fifty trillion dollars of bogus insurance helping to sell inflated mortgage backed derivatives. These derivatives have infected financial institutions around the world and we're now facing the biggest economic challenge since the Great Depression.

Trishka:

We have to attack all three economic crises at once in order to try to break this vicious vortex. Today we learned that Oregon unemployment is now 9.9%. That is a four percent increase in four months. The economy is falling off a cliff.

While you are right that the mortgage problem in Oregon has not been as high as in some other states, it is growing fast. I believe the renttrack statistics for foreclosures show that we have gone from about twentieth in the country to about fifth in just a few months.

And every time we have a foreclosure, we have a family with destroyed finances and we have an empty house further pulling down house values in the community. Moreoever, failed mortgages are at the heart of the collapse of the financial institutions. For all these reasons I want to do everything possible to address this issue.

Senator,

The proposed mortgage assistance legislation provides relief mechanisms for people who are still living in their houses, making their mortgage payments, and not too upside-down. What about the people who have had to move for a new job and were not able to sell their homes (like military personnel)? These people are just as impacted as the people who have stayed in their homes and made payments?

Also, quite a few markets are more upside-down than the 5% allowed in the legislation. Will you be sponsoring legislation that helps these people? I would forward a recommendation that we create a Federal Mortgage Equity Loan Program similar to the Federal Student Loan Program. People could obtain Federally insured loans for the upside-down portion of their mortgage for owner-occupied, and down to 80% for non-owner occupied. These Federal Loands would act like Federal Student Loans - no repayment for X-years, cannot bankrupt out of, 1st-in-line debt at death.

Thank you Blue Oregon for having me. I'm sorry I couldn't stick around to answer all of your questions. I look forward to participating in additional online discussions with you in the future.

thanks, senator. i didn't know about the shift in foreclosure rates from 20th to 5th. that certainly places the problem in a different light. it's great that you are all over this. oregon is well represented.

I think President Obama has a great plan to help with this. I was so impressed. I encourage everyone to check these sites out: http://www.whitehouse.gov/blog/09/02/18/9-million-plus/

http://www.treas.gov/initiatives/eesa/homeowner-affordability-plan/ExecutiveSummary.pdf

Kari, just curious, what is a "real identification system" anyway?

"For years it's been obvious to me and to millions of Americans that the current system is broken and the playing field is blatantly uneven for homeowners."

Nice firebomb, sir. You do realize a lot of banks are in trouble also? Plus a lot of responsible people who only bought what they could afford and try very hard to make payments are getting nothing at all from the govt program.

I mean I hear a lot of grief and gnashing of teeth, but would love to her your solution. I already know about the suffering.

PS - If you drive away the anonymous contributors, you'll lose a lot of "unique visitors" and your website will start losing ground to other websites in town.

Thanks for the info. That answered my question.

I wish people would stop referring to falling housing prices as a crisis. The crisis was that we allowed speculation in shelter to inflate the biggest asset bubble in history. In the presence of a bubble, falling prices are not the problem; they are the solution.

I fully support the ability of judges to write down mortgage principal in order to reduce foreclosures. It will allow housing prices to quickly fall to a sustainable level and in the process charge the cost of the bursting bubble to the people that profited most by inflating the bubble: the banking and real estate industries.

You are right; writing down the mortgage principal won't solve all of the economic problems. However, I think we're better off taking the losses quickly than stretching out over decades.

One of the reasons why the credit markets are frozen is because the big banks are afraid of finding out how little their loans are actually worth. They are essentially trying to hide their losses and hoping that the situation will improve or that the government will bail them out by buying the bad loans at inflated prices. Writing down mortgage principal will short-circuit this process. The true value of these bad loans will be recognized, and then people will begin trading them again, albeit at significantly reduced prices.

The bubble loans are not completely worthless, just as the bubble houses are not completely worthless. But everyone is afraid of finding out what they're really worth. Recognizing their true diminished value will get the credit markets going again, just like recognizing the true diminished value of housing will bring buyers back into the housing market.

It is essentially correct that housing prices must stabilize, but they will not stabilize at bubble prices. We should speed economic recovery along by quickly letting housing prices fall to a sustainable level.

Senator, Thank you for approaching your constituents in this forum. I think it is CRITICAL to call a moratorium on foreclosure evictions until a plan is in place to address this issue. It is detrimental to the common good to empty houses, put people on the street and potentially further burden the community. While I am concerned that we don't reward the unscrupulous I am more concerned that we don't punish the innocent. I have lived in my house for 23 years and never missed a payment. I did however, take advantage of refinancing, to allow me to stay home to raise my three children in their early years. Life didn't turn out as I'd planned and I am now a single mother with a job that is potentially on the line. If I lose my job, it may not be long before I lose my house. I believe we are in a national state of emergency. I urge you to seek all available solutions that protect working families and the most vulnerable.

It's his duty people; quit fawning. The questions always ignored on BO went ignored, to the praise of the regular Dems.

I think the federal bill misses the point on non homeowner occupied homes. Even though a homeowner moves because they lose their job, can no longer afford their home, or other not for profit reason -- it doesn mean they should not be allowed to refinance above 80%. Not all landlords are renting their homes because they want to, they are renting to keep their head above water.

I would like to float a proposal for an economic stimulus plan past you for your consideration. The basics of the idea are in an article at http://tinyurl.com/dknr3c . Please review this article and let me know what you think. This will be the basis for a more in depth paper on the concept.

Thank you for assisting with this project.

Robert K. Minniti, CPA, CFE, Cr.FA, CFF, MBA

Senator,

Uh, you missed one component to your "Vortex" - higher energy prices! Higher energy prices (otherwise known as "don't drill offshore, let all other nations send us oil") directly led us to this crisis! If we do not wake up and explore all energy facets, including drilling for our own oil, we are only in phase one of our demise...