How are we adjusting these days?
When Wall Street bet everything on the property boom, it spelled the beginning of an economic windfall. Over time, though, only few got their speculations right, perhaps because of the number of Americans taking out mortgages they couldn’t afford. Bring in the insurance derivatives and the nonintervention of the federal government before the bailout, and you have a crisis that is currently shaking the global financial industry.
How are Americans adjusting? With lower home values, stricter bank credit and continuous bankruptcies, corporate and personal financial restructuring have been the keys.
After Countrywide Financial’s recent announcement of its loan modification program, the FDIC-acquired IndyMac Bank now brags its simplified loan plan can help delinquent borrowers. By making their loans more affordable, the bank hopes to bring down foreclosures to lower rates and spark a series of loan modifications through troubled financial firms.
Well before the $700 billion bailout goes to assist GSEs like Fannie and Freddie, it is crucial to forestall more effects of the crisis in loan restructures such as Countrywide’s and IndyMac’s. Troubled homeowners who have the possibility of foreclosure must adhere to the standards set by their lender in paying their mortgage during our tougher current conditions. Banks must devise a way to monitor unnecessary expenses by their borrowers as well.
Tighten Belts, Sell Assets
The Consumer Confidence Index from August signals a drop in confidence on the country’s business conditions and the job market. This indicates lackluster spending in the coming months for the average consumer.
For the affected employees of distressed firms, it’s not only the rank-and-file staff who is worried. It’s also former Lehman Brothers Holdings CFO Erin Callan, who has listed her two-bedroom condominium in Central Park West, NY. After the bank’s acquisition by JPMorgan Chase, Callan had no choice but to be demoted and receive a modest cut in pay. The unit, which is now sold at $11.8 million, is awaiting a buyer.
John Bovenzi, the new IndyMac CEO, is also doing his share of selling. With reports of his company’s impending sale, he is starting to dispose of luxury items like the executive car, framed masterpieces and company entertainment benefits. The disposed assets will be used to fuel back capital.
More casualties are on the way in each of the four corners of Wachovia and AIG, and we can’t help but wonder where their couches, paintings and sculptures will be going.