So, by now you’ve heard of the rant of some guy I’d never heard of before (not to be confused with Barron’s Michael Santoli). Does anyone else find it amusing that Mr. Santelli was ranting on the floor of an “open outcry” trading pit? That’s right, he was ranting about wasteful spending to help homeowners while standing on a monument to the past of finance and inefficient execution.
Mr. Santelli, while I completely accept the fact that you are most likely compensated based on how many viewers you reel in and your entertainment value, and certainly not based on the quality of your journalism (this is CNBC after all, the house of Cramer), analysis, or even grasp of reality, you should still, every now and again, try reading something. From the details of the plan one could learn some simple things:
1. The plan is available only to those people whose mortgages are owned by Fannie or Freddie or those whose mortgages were backed by Fannie and Freddie and put into securities by them. Fannie and Freddie have strict limits on whose mortgages can go into those pools. They have to have high FICO scores, relatively low LTVs, and there is a maximum size allowed. Please note that this restriction, in and of itself, totally disqualifies sub-prime mortgage loans. Let me repeat: sub-prime mortgages and agency-backed mortgages are a totally disjoint set of mortgage loans–there is no overlap.
2. The program does not reduce principal owed. So, in essence, there is no forgiveness of debt, but only a reduction in interest rates and, perhaps, an extending of the term of the loan to reduce monthly payments. People still owe the same amount as before. Sounds like a welfare state to me…
3. The program doesn’t allow refinancing of second homes or investment properties. So all the speculators that own 3 houses on that were supposed to be flipped cannot refinance any mortgages except for the single first mortgage on the house they currently reside in.
4. Second mortgages aren’t covered under the plan. All the people who took out HELOCs to borrow money to buy stocks aren’t going to be bailed out either.
5. There is about $75 billion being used to help stabilize the multi-trillion dollar mortgage market. This number alone implied that there is some selection process to weed out unworthy people from being given government funds.
Look, I want the economy to improve as much as the next guy, but I think swelling the unemployment rolls by one idiotic reporter might be the kind of change I can believe in. Oh, and let’s finally close down the value-destroying open-outcry trading pits. Maybe removing that friction in our economy can help us save a few dollars.
I was going to stop here, but I’ll be honest… the complete and total stupidity of Santelli and those knuckle dragging dinosaurs who still use hand motions to make money, add trnsaction costs, and keep the computers at bay (not all of them, but most of them, I’m sure) on the floor of the C.M.E. are the reason middle America hates everyone in finance. Further, it’s the reason we need a bailout. How often did I hear “not my problem” or “because that’s where the market is” or any number of other, totally tone-deaf incantations from the mouths of people making seven-digit bonuses? Often. And, to be honest, do we have even single piece of tape with Mr. Santelli yelling about taxpayers paying for Citi? Bank of America? How about AIG? No? Well, we gave Merrill Lynch $15 billion and around $4 billion of that was immediately blown through to mint 696 seven-digit bonuses.
At least I can take comfort in knowing that Mr. Santelli will be forgotten in 100 years and that his rant likely has no lasting impact on our society–it showcases the worst, most base and uninformed stupididty. Children, pay attention in school or you’ll wind up working on the CME trading floor for CNBC.