October 6, 2008

CRASH TALK OCTOBER 6

E. Scott Reckard, Los Angeles Times - An estimated 125,000 Californians who are struggling with risky mortgages from Countrywide Financial Corp. may get their loans modified and payments reduced. In a pact that could save mortgage holders billions of dollars, Countrywide owner Bank of America Corp. has agreed to the nation's largest loan-modification program to settle charges of lending abuse brought by California and other states.

The program could reduce payments to Countrywide borrowers and provide other benefits to total as much as $8.7 billion nationwide. It would examine nearly 400,000 loans across the nation -- about 125,000 of them in California -- to see how they could be reworked and made more affordable. That could include switching customers to fixed-rate loans or reducing the interest or principal.

Bank of America said Countrywide mortgage-servicing employees would be trained to carry out the program by Dec. 1 and would then begin reaching out to eligible customers. The plan includes a foreclosure freeze for borrowers who are likely to qualify until Countrywide has determined their eligibility, the bank said.

But officials acknowledged that some borrowers were beyond help and said these customers would need the cooperation of investors who owned the loans. Such assistance was not always forthcoming in the past.

James Doran, Observer, UK
- Fears are mounting that many Wall Street banks and financial firms will refuse to participate in the US government's $700bn bail-out package, leaving global markets and world economies in a perilous state for months to come. 'There is a growing feeling that banks ... might instead decide to tough it out,' said Thomas Caldwell, chairman and CEO of Caldwell Financial, a $1bn-plus fund manager. . .

Wall Street analysts, believe the addition of so many terms to the bill might deter potential participants. One of the least attractive elements is a section designed to curb executive pay at banks that participate in the bail-out package. These include limiting stock-related pay and banning 'golden parachutes' for executives. . .

Sources close to Goldman Sachs and Merrill Lynch indicated the banks might choose not to participate in the bail-out as there is a growing view on Wall Street that the market may be bottoming out.

Analysts also believe that the mere presence of the government as buyer of last resort will be enough to get credit markets moving again, and that a large number of banks would not need to take part for the legislation to succeed.

Washington Post -
For Citymeals-on-Wheels, a nonprofit group that delivers food to homebound New Yorkers, the Wall Street crisis already means 100,000 fewer meals will be delivered to people who need them. One day this spring, the group lost about $500,000 it expected from employees of Bear Stearns as the firm collapsed. A few days later, $225,000 promised by a hedge fund vanished after its stock plummeted. This summer, private contributions were running 20 percent less than a year ago. . . . Some organizations are seeing cuts in city funding as tax revenue, foundation giving, gifts and contributions from corporate and private donors decline simultaneously.

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