Halloween 2008 – The Horror of Foreclosures

Published on October 25, 2008

‘It’s unacceptable that lawmakers have yet to come out squarely in favor of bold homeowner relief in the bailout bill,’ The New York Times said editorially last month as the Department of the Treasury bailout bill was making it torturous way through Congress.
‘Secretary Henry Paulson, the biggest advocate of bailing out Wall Street, is also a big roadblock to helping hard-pressed borrowers. He wants to keep relying on the mortgage industry to voluntarily rework troubled loans, even though that approach has failed to
stem the foreclosure tide – and does a disservice to the taxpayers whose money he would put at risk in the bailout.’

‘Many of the assets that Mr. Paulson wants to buy with the $700 billion have gone sour because they are tied to mortgages that have defaulted or are at risk of default. Unless homeowners get some help – and it’s a pittance compared to what Mr. Paulson wants to give to bankers – the downward spiral of defaults, foreclosures and tumbling home prices will continue, which could push down the value of those assets even further.’

‘We could make a strong moral argument that the government has a greater responsibility to help homeowners than it does to bail out Wall Street. But we don’t have to. Basic economics argues for a robust plan to stanch foreclosures and thereby protect the taxpayers’ $700 billion investment.’

‘Millions of Americans are losing their homes.

(Already, some 3.6 million have done so since the subprime-mortgage crisis began.), notes economist, Joseph Stiglitz, in a very illuminating article in the November edition of Vanity Fair magazine. He goes on to write, ‘Financial markets produced loans and other products that were so complex and insidious that even their creators did not fully understand them; these products were so irresponsible that analysts called them `toxic.’ Yet financial markets failed to create products that would enable ordinary households to face the risks they confront and stay in their homes.’

And, ‘Throwing the poor out of their homes because they can’t pay their mortgages is not only tragic – it is pointless. All that happens is that the property deteriorates and the evicted people move somewhere else. The most coldhearted banker ought to understand
the basic economics: banks lose money when they foreclose – the vacant homes typically sell for far less than they would if they were lived in and cared for. If banks won’t renegotiate, we should have an expedited special bankruptcy procedure, akin to what
we do for corporations in Chapter 11, allowing people to keep their homes and re-structure their finances.’

Meanwhile, the worldwide economic meltdown continues.

As MIT Professor Noam Chomsky has observed, ‘The immediate origins of the current meltdown lie in the collapse of the housing bubble supervised by Federal Reserve Chairman Alan Greenspan, which sustained the struggling economy through the Bush years by debt-based consumer spending along with borrowing from abroad. But the roots are deeper. In part they lie in the triumph of financial liberalization in the past 30 years -
that is, freeing the markets as much as possible from government regulation.’

Halloween 2007 was the day the world stock markets peaked and it’s been more-or-less downhill every since.

At the start of September, John Authors, investment editor for the Financial Times, wrote, ‘Before Halloween closes the door on October, investors can be forgiven for thinking the horror show engulfing equities has yet to climax.’ (BlackCommentator.com/posted by (Bulatlat.com)

BlackCommentator.com Editorial Board member Carl Bloice is a writer in San Francisco, a member of the National Coordinating Committee of the Committees of Correspondence for Democracy and Socialism and formerly worked for a healthcare union. http://www.blackcommentator.com/295/295_lm_halloween_2008.html

Pages: 1 2 3