Word: deposits
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...There are a number of clever ways that will mandate how the principal will be handled. According to Bloomberg, "Like earlier efforts from the Federal Deposit Insurance Corp. and housing industry groups, the new plan will make use of interest-rate reductions, loan extensions and so-called principal forbearance, in which part of a mortgage's principal is deferred to the end of the loan's term...
...complaint says Stanford perpetrated a "massive fraud based on false promises and fabricated historical return data to prey on investors." The alleged fraud centers on an $8 billion certificate-of-deposit (CD) program. (Read about Stanford's love of cricket...
...have announced major new efforts, since it is generally in a lender's best interest to keep borrowers in their homes, even if they're paying less. Foreclosure is such a costly process, a lender might easily only recoup half of what it's owed. In August, the Federal Deposit Insurance Corporation instituted an aggressive loan-modification effort at the failed IndyMac Bank, and that program is now a template for what the government might encourage at a national level. Basically, the FDIC wants to set up a series of incentives, like $1,000 for each modification, as well...
...switch to doing more lending through investment-banking operations has only made matters worse. For deposit-based loans, the banks have wide discretion as to when they record a loss. Some do it after a borrower misses his first payment. Other banks wait until the loan is 120 days past due. But for loans made through a firm's investment-banking division, the bank has to reduce the value of those debts according to what similar pools of loans are worth. This is known as mark-to-market accounting. And when investors grow increasingly nervous that borrowers will...
...Regulators are split on what to do next. The Federal Deposit Insurance Corporation is backing a plan to create what it calls an aggregator bank, which would buy up the loans of BofA, Citigroup and the rest of our now troubled system, theoretically putting an end to the escalating losses eating away at the banks' capital. But if the government buys those assets at current market rates, banks would be forced to take immediate losses on the sales, doing more harm than if the government just left the troubled loans where they are. Sources say the Federal Reserve would prefer...