The $80 billion big bank band-aid

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There are a number of big developments in the credit crisis today, with more coming tomorrow:

Today, from The N.Y.Times: ‘The biggest banks in the United States, with active encouragement from the Treasury Department, unveiled a plan to keep the housing-related debt crisis from worsening. The L.A.Times calls it an ‘$80 billion fund to buy bonds.’ The N.Y. Times says the new entity could raise as much as $200 billion. A Goldman Sachs economist quoted by the N.Y. Times is unimpressed.

Also today, Fed Chairman Bernanke gave a ‘gloomy assessment of both the mortgage and housing markets,’ according to the N.Y. Times. Bernanke: “Despite a few encouraging signs, conditions in mortgage markets remain difficult.’ Asked today about the mortgage-backed securities, Bernanke answered, “I’d like to know what those damn things are worth.’ It’s not clear if he meant that as a joke.

Coming tomorrow: Treasury Secretary Paulson, the driving force behind the bank fund, will do some serious jawboning, the N.Y. Times reports: ‘Mr. Paulson plans to step up pressure on mortgage lenders and mortgage-servicing companies to renegotiate terms for people in danger of defaulting on expensive sub-prime loans.’ More from Paulson in an interview Monday: “The current process is not working well. ... I want to see more results. I don’t want to see foreclosures taking place where 50 percent of the people haven’t talked to anybody.”

Our take: All of these developments signal that the mortgage market is not improving; these are all signs of growing concern on Wall Street and Washington. The Bush White House -- speaking through Paulson -- is clearly upset that the mortgage industry is not doing enough to rework loans and avoid foreclosures. The President and Paulson have already leaned on the industry -- in public -- to work with borrowers. It isn’t happening.

Your take? Comments? Insights? Email story tips to lalandblog@yahoo.com.