Guess What Santa’s Bringing Debtors for Christmas

These days it’s just too easy to find new subprime mortgage items to discuss, but today is especially effortless. Eeny, meeny, miny, moe. There are no less than three stories in my newspaper today lamenting this global crisis. To wit:

Retailers are expected to have a dismal Christmas, and one of the biggest factors is the subprime mortgage disaster. Traditionally, consumers would dip into home equity lines of credit to finance holiday shopping, but declining home values and increasing monthly payments have made this impossible in 2007. Nevada, California and Florida will feel the greatest crunch. Bah Humbug!

Swiss bank, UBS AG writes off $10 billion worth of subprime debt, on top of the other $3.72 billion written off just a couple of months ago. Don’t worry though. Investors from the Far East and Middle East have arrived to prop up the sinking Western bank. This is becoming an alarming trend, as just last month the Abu Dhabi Investing Authority purchased a 4.9% stake in Citigroup, Inc.

Tightening credit markets are making it harder to borrow money for education. Analysts state that rising default rates, coupled with cuts in federal subsidies to student lenders are starting to squeeze the industry. To make matters worse for the industry, lenders can no longer rely on their illegal kickback schemes designed to steer students to certain loans that may not have been in the students’ best interests. Don’t feel bad for these lenders, though. Remember, they get special treatment in federal bankruptcy court, and rarely are these obligations discharged.

Do the Bush Administration, banks and FDIC really believe their tacit agreement to freeze teaser rates for those borrowers that are current on their mortgage payments will make a dent in the global problem that is the subprime meltdown? I doubt it. According to Senator Dick Durbin, in a speech on the floor of the U.S. Senate, Bush’s plan will help only 12% of subprime borrowers. Senator Durbin allegedly will be introducing his own bill that will allow the bankruptcy courts greater powers to reform current subprime mortgages, which will be available to 100% of all borrowers. As every day goes by, thousands of additional families are succumbing to foreclosure, and if Senator Durbin has a plan, he needs to act now.