Before a focus group of Homeowners in foreclosure the topic was: What role did credit ratings agencies play?
Q- Good morning. Let's get right to it. If I had a train load of junk, toxic waste and used diapers...would you buy this train load or parts of it...as an investment?
A- No...but what does that have to do with my foreclosure?
Q- According to The Louisiana Municipal Police Employees Retirement System, U.S. House investigators, Connecticut Attorney General Richard Blumenthal, the Financial Times and California Atty. Gen. Jerry Brown...some one did just that...sold a train load of kryptonite to superman. Do any of you...feel like superman?
A- No...but I feel like a train did run over me.
Q- In the financial world...this train load of kryptonite was sold as if it were bars of gold. You would invest in gold bullion...if you thought the price had a realistic chance to increase over time and give you a steady income...right?
A- Gold is expensive...I never had that kind of money.
Q- Pension systems did have that kind of money. And they invested trillions.If these pensions represented your pension plan...what would happen to your pension?
A- Golly, I don't know...but what's this got to do with my foreclosure situation?
Q- Let's connect the dots. Your pension dumps trillions into the investment market, based on triple A ratings into 'solid' investments. Those dollars are used to fund new mortgages. But it's more money than the real estate market has a demand for. In other words...there really aren't that many qualified buyers in the marketplace to soak up all that money. Are you with me?
A- No.
Q- Let's try it another way. You all drive cars...correct?
A- Well...yeah.
Q- How many times in 5 years do you buy a new car?
A- My car is 9 years old.
Q- Exactly. You don't have a need to buy a new car every 5 years...do you?
A- No.
Q- What if I...as a new car dealer...told you Joe..."your grandson will be 16 in 3 years. You'll have this car paid off in 3 years...just about the time your grand son turns 16...and that's when the insurance starts...because between now and then...just park the car in your garage. And...if you buy this car today...for nothing down, at this really low, low monthly payment of $50 dollars a month and here's the great news...you are guaranteed to qualify...because I won't ask you...how much you make...could you pass a deal like this?
A- Not if you put it that way.
Q- Now if I was moving cars that way...how could I continue to get funding for such picturesque loans?
A- Beats me.
Q- Well, suppose my dealership was being bankrolled by Big Money Guys on Wall Street. And Big Money Guys was selling kryptonite to pension funds. And the Ratings agencies were telling investors...like pension funds...that kryptonite was rated...triple A. Do you think the pension funds would pour money into Big Money Guys?
A- You mean...Big Money Guys was lying to the rating agencies?
Q- No. I mean...the rating agencies seem to know they had kryptonite...it appears...they just didn't care.
A- Well...that's how I got stuck with this McMansion with an ARM that's about to reset and take by arm, leg and bowels with it?
Q- Did it really happen that way at your closing?
A- No...I thought I was getting a 30 year fixed...but at closing...with the kids, the Mrs. and my friends all waiting for the good news...I signed the papers...because the lender told me..."don't worry...you can always refi...'because the home prices are still going up."
Q- Weren't you concerned...about the loan reset?
A- Well, sure...but like I said..."the lender assured me...I could 'refi' or sell quickly...and make a killing."
Q- So...it never really concerned you that the people who put up the money, the pension investors...might get caught with their pants down?
A- Why should it...if they were willing to put up the money...and I could get the money...why not?
Q- That's why we called this conference...The Moody's Blues...because now everyone has the blues...because of Moody's. Did you get something out of this meeting?
A- Well, I still got the blues...but what am I gonna do about my foreclosure?
Q- In our next session...we'll address that. But before we close...Joe...may I ask you...have you thought about whether your pension fund bought into this junk?
A- Well...no. You think that's why my company is talking about abolishing our pension system and going to a 401K?
Q- Let me think on that. If there is no longer any money in your pension fund...Joe...you're in a unique position...as a consumer...and an investor. How does it feel to be an investor...Joe?
A- Between a rock and...a hard place? When is your next session...
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