Government mortgage bailout unlikely

Government mortgage bailout unlikely - strategist

	Published : Tue, 27 Nov 2007 17:36 By : Agencies Print this Story

NEW YORK (Thomson Financial) - A government bailout of lenders facing insolvency because of the mortgage crisis is unlikely, said Charles Gabriel, Capital Alpha political strategist, speaking on a Morgan Stanley conference call Tuesday.

'There are many who think that we will be heading toward a bailout,' Gabriel said. 'It is very difficult to construct a bailout with any kind of financial tax forbearance, and nobody even likes that term.'

Although electoral candidates are in a position to consolidate their political gains, their populist rhetoric and seeming opportunism have resulted in little action, Gabriel added. Such an action would put financial institutions at major risk, he noted. Gabriel pointed to Sen. Charles Schumer's letter Monday urging regulators to look into the Federal Home Loan Bank of Atlanta's increased loans to embattled housing lender Countrywide Financial Corp. Gabriel said the nature of Countrywide's and others' mortgage loans should be examined before lenders are offered assistance to determine whether they were truly predatory and how they affected borrowers.

The odds that banks will win legislative relief in December have diminished, Gabriel said. 'The notion that we are now going to have a compressed discussion in Washington about a superseding policy notion of either a forbearance on capital or core capital ratio ... I'm really skeptical of that,' he said, adding, 'I think the government is willing to let this patient endure a lot more pain.'

However, the political strategist sees other states following California's lead in providing interest-rate relief to borrowers whose adjustable-rate loans will soon reset from low teaser rates to unmanageably high rates in the next few months.

Michelle Rama

mr/jw

The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.

Government mortgage bailout unlikely - strategist