Why are financial industry paychecks so big?
Those who want to do something about bringing that pay down ought to focus on why there has been so much money in the financial sector in recent years. It should be no surprise that people in that business wanted to be paid a lot; the surprise should be that there was so much money to go around.
NEW YORK — CIT Group, a major lender to small businesses, is preparing to file for Chapter 11 bankruptcy protection as early as this weekend, sources familiar with the matter said Friday, which would likely wipe out the federal government’s $2.3 billion stake in the company.
A CIT bankruptcy filing would be one of the largest in U.S. history, with potentially broad ripple effects. The firm provides loans to about 1 million companies, including many already struggling in the economic downturn.
A RECENT study suggests that most homeowners have qualms about abandoning a mortgage that they can afford to pay, even if it straps them to an investment that’s unlikely to pay off anytime soon.
Senior regulators and some lawmakers clashed once again with the Obama administration on Thursday, finding fault with central elements of the White House’s latest plan to unwind large financial companies when their troubles imperil the financial system.
But after he completed his testimony, significant parts of the plan were challenged by Sheila C. Bair, chairwoman of the Federal Deposit Insurance Corporation. She raised numerous objections about the structure of a proposed council of regulators, and said that it would fall short of its goal of protecting the system from the shock of a large failure.
Andres Duque thought he got a real steal when he paid $125,000 for his Little Haiti condo. But four years later, similar units are selling for $35,000 and even less.
And so, faced with the prospect of being underwater on his mortgage — owing more than the unit is worth — for the next 20 years, Duque, 33, made what seemed to him like a rational choice: to cut and run.
He stopped paying the mortgage, basically forcing the lender to take the condo off his hands through foreclosure.
A seven-month-old government program to help homeowners with little or no equity refinance their mortgages has so far reached fewer than 3 percent of those targeted, with many struggling borrowers deciding that the benefits of a new loan aren’t worth the closing costs.
This lackluster performance reflects the difficulty of helping the growing segment of “underwater” homeowners — those who owe more than their home is worth.
“It’s time for those banks to fulfill their responsibility to help ensure a wider recovery,” Obama said. “We’re going to take every appropriate step to encourage them to meet those responsibilities.”
Today, Mr. Garcia is living in his Southern California home nearly payment free. The turn of events came after the lender,Corp., employed an unusual tactic that is being used on occasion to help some debt-strapped seniors locked into exotic mortgages known as option ARMs from losing their homes.
Mr. Garcia decided to refinance his home in early 2006 and use the proceeds to renovate his three-bedroom house, which was purchased in 1970 for $23,000. At the time of the refinancing, the house was appraised at $465,000, with the mortgage broker recommending that Mr. Garcia take out $400,000.
Here’s the deal. The government is spending trillions to keep interest rates down to support the economy and prop up housing prices, and those low rates have inflicted collateral damage on savers’ incomes. “It’s a direct wealth transfer from savers and retirees to overly indebted borrowers,” says Greg McBride, senior financial analyst at Bankrate.com.