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TechnoratiWeeks After Bank Bailout, No Help for Homeowners
BOSTON - Nearly five weeks after Congress gave the nod to a 700-billion-dollar bailout fund, and as the economy sinks deep into a recession, no definite plan is in sight for struggling U.S. homeowners.
![[Center for Responsible Lending Chief Executive Officer Martin Eakes testifies on Capitol Hill in Washington, Thursday, Nov. 13, 2008, before the Senate Banking Committee hearing on on the financial meltdown. Joing Eakes, from second from left are, JP Morgan Chase Executive Vice President and Chief Risk Officer Barry L. Zubrow, Goldman Sachs Group, Inc., Executive Vice President and General Counsel Gregory Palm, University Of Pennsylvania Wharton School professor Susan Wachter, Bank of America Global Corporate Affairs Executive Anne Finucane, and Leadership Conference on Civil Rights Executive Vice President Nancy M. Zirkin.
(AP Photo/Susan Walsh)]](http://www.commondreams.org/files/article_images/martineakes1114.jpg "martineakes1114.jpg")
"We have the potential for a
true economic disaster," said Susan Wachter of the Wharton School of
Economics, at a congressional hearing Thursday.
"Let us remind ourselves that the problem came from housing," she said.
It is unclear how help will be delivered to U.S. homeowners, who are defaulting on loans at record rates.
"The foreclosure problem is getting worse, not better," said Martin Eakes, CEO of Self Help and Centre for Responsible Lending, a non-profit, community development organisation, on Thursday, at the hearing of the Senate Banking, Housing and Urban Affairs Committee.
Congress meets next week to decide whether to dole out 25 billion dollars or more to the auto industry, and maybe craft a bill to assist the unemployed and create jobs. But there is no congressional plan on the table to assist homeowners. Congress may then recess until January.
Treasury Secretary Henry Paulson, who is in charge of disbursing the 700 billion dollars, said Wednesday that his next target for funds is the credit card, student loan and auto loan industries, but not homeowners.
"We continue to explore ways to reduce the risk of foreclosure," he told reporters. Paulson mentioned a new programme underway by the quasi-public mortgage lenders to make new loans currently being written more fair. The private lending industry is being encouraged to voluntarily follow suit, Paulson said.
Sheila Bair, chairwoman of the Federal Deposit Insurance Corporation, has drafted an aggressive plan for assisting homeowners in trouble, based on the idea that monthly mortgage payments should not be more than 31 percent of the household income. That plan appears stalled, possibly on hold until January and a new administration.
On Jan. 20, Barack Obama will become president, and his cabinet will have control of the remainder of the 700 billion dollars, probably about 350 billion dollars. It is not known if Obama also would tap the Treasury fund to help homeowners. Obama backs the idea of letting bankruptcy courts modify loans in foreclosure.
Eakes said he supports Sheila Bair's proposal, and Obama's idea that judges should be allowed to modify mortgages.
Lenders need a mandate, because they are not voluntarily working out better terms on troubled mortgages, Eakes said. Credit Suisse, a large mortgage lender, reported recently that it modified just 3.5 percent of delinquent subprime loans in August, its most recent figures, he said.
Until foreclosures are stemmed, the overall economy will not be able to dig itself out of trouble, Wachter said.
"The economic downturn could become ever more severe due to the interaction of financial market stress with declines in house prices and a worsening economy all feeding back into and adverse loop," Wachter said.
Foreclosure filings increased 5 percent in October, to 279,561 homes, according to RealtyTrac. Arizona, California, Florida, Georgia, Michigan, Nevada, New Jersey, Ohio and Texas saw the highest rate of foreclosures, said the firm.
As the nation heads into the New Year, nearly 3 million families will have lost their homes, and 2.3 million more will be adrift as of the end of 2009, according to an analysis of Mortgage Bankers Association data by Eakes's group.
"These losses, in turn, are infiltrating nearly every part of American life, from police and fire protection to community resources for education," Eakes said.
The Organisation for Economic Cooperation and Development announced on Thursday that 30 developed nation economies had sunk into a recession, including Japan, the United States and most of Europe.
Their economic output is expected to shrink through 2009, with the U.S. economy the worst off, said the organisation, based in Paris. The OECD began analysing economies in the 1970s and it is the first time it has seen such a large group of economies simultaneously slide.
The news comes as leaders of the world's richest 20 nations gather Friday and Saturday at the White House to discuss coordinated efforts to ease their ailing economies, like tax incentives and regulation.
Bush, whose administration has embraced a hands-off, free-market ideology, indicated he would be opposed to efforts to regulate.
"It would a terrible mistake to allow a few months of crisis to undermine 60 years of success," Bush told reporters Thursday.
Today's economic crisis can be traced back to unscrupulous actions of some lenders, who wrote millions of mortgages with sky-high interest rates and other unfair terms that homeowners are now unable to meet.
"Today's financial crisis is a monument to destructive lending practices -- bad lending that never before has been practiced on such a large scale, and with so little oversight. Unfortunately, the entire country is paying the price," Eakes said.
Banks bought and sold the high-risk mortgages, and created complex investment products from them that they traded around the globe, earning record profits. The complex mortgage products and their trading was unregulated. Now that homeowners are defaulting on their loans, many of the investments held by the banks are almost worthless.
"Well before the foreclosure crisis erupted into the public eye and began to dominate news headlines throughout the country, [non-profit organisations] pleaded with Congress, the administration, and the financial services industry to quickly take sweeping measures to keep borrowers in their homes," noted Nancy Zirkin, president of the Leadership Conference on Civil Rights, at the hearing.
26 Comments so far
Show AllIs it a fact that Islamic nations and businesses do not deal in interest for religious reasons?
Does anyone know the names and numbers about these? Are they in this mess, too?
Gosh, I hope this isn't a struggle for the world between those who have oil, don't charge interest, but have no nukes V. those that borrow to buy oil, have economies that have leveraged their assets 40-to-1, and have nukes...
Greed is the Creed
Debt is the Net
Business is our religion, and our Government has been rotted by it.
You want to fix it? Start by stripping corporations of legal personhood, and requiring them to price in human and ecological costs. Pump in the bailout funds at the bottom of the pyramid and let them rise to the top, healing most of the system. But the game is not being played to fix anything.
What we are witnessing and passively participating in is the playing out of the masters class of corporate looting.
Oh, they'll end up with all the loot allright, but the wheels are coming off the getaway car. Where can they go?
Islam has prohibitions against collecting interest on loans and against investing in immoral business. I do not know the definitions of immoral, whether it applies to weapons, predatory lending, pork products or exploitation of women and children or what.
There is law called sharia law. There are lawyers who practice sharia law by devising many indirect ways to get around the ban on collecting interest. As in the rule-following expression of any religion, (or at least the ones I know something about, Christian, Jewish and Moslem) the technicalities are there to be side-stepped.
Joe
Thx for the reply.
Well, as long as they can charge interest, I am somewhat re-assured. It'd be tough to explain a loss on derivatives to the Imam...and expect a bailout...
No BAILOUTS for homeowners or auto makers---for anyone---instead--the government should spend money towards a healthcare system and creating an environment that will encourage innovation---new technologies
For the last eight years I have been priced out of the real estate market. In this time quite a few other people with considerably less savings than me jumped into the market with low teaser rates and sold their house in 2-3 years before the rates adjusted upward to net a profit of 10-20%. I have also witnessed many people whose houses increased in value and used them to take out second mortgages so they could go on shopping sprees. During this time, I have stood on the side lines, conservatively socking money away--and watching the value of my money decline---as housing prices and the equity markets grew. All this time I have been renting waiting for markets to adjust ---so I could buy with a large down payment.
NO one ever talks about the millions of people who have been renting who have been waiting to buy houses---owners want their housing prices to keep going up and up and up even if they are stoked by free money, and CDS, so they can use them for ATMs for their retirement---states want them to continue to rise so they have a bigger tax base----well, there are still many people who do not own homes--who have acted responsibly and are ready to buy when the prices return to where they should be--pre-2000 levels---everyone is fine with a free market as long as prices are going up but they want to be bailed out and protected and reimbursed as soon as they turn south---Reward those who decided not to speculate--- they should get their just reward for conservation and patience--presumably characteristics prized in a green democracy
The government needs to learn to fear the citizens. They do not fear being voted out of office. But, in some way, they need to learn to fear the citizenry. Any suggestions?
-- EKATON --
Here is a country that wants to rule the world - even if it bombs it to pieces - and yet, it can't or won't take care of its own people. Must we wonderful to live in the US as a white, anglo-saxon protestant or WASP. The swindling, stealing, lying, deceiving is enough to make one puke.
Vera,
Please don't leave the neocon Israeli mafia out of the mix. Or did you not notice during the last 8 years?
"It would a terrible mistake to allow a few months of crisis to undermine 60 years of success," Bush told reporters Thursday.
Let me include, he also said "all that's needed is 'smarter' government."
The foreign press jumped all over that one!
"Bush, whose administration has embraced a hands-off, free-market ideology, indicated he would be opposed to efforts to regulate."
"Hand-off, free market ideology"? No such thing when the president has access to a "Plunge Protection Team" and a Congress that "loves to grandstand about oversight" but has no clue where taxpayer, corporate "bailout" money is going.
Our "K" Street government hasn't changed at all!
Obama is our last chance. Time will tell if he can or is willing to do anything about it.
Obama blew the last chance he had, but sure, we'll give him another, and another, and....Now that Obama is surrounding himself with the usual suspects, how do you think it will play out. Will he cautiously replace this gaggle of the complicit one by one, until "Voila!!". Obama will do nothing without authorization from the board of directors. And the Dems wrote the rest of us off two years ago. Too many people just don't get that Obama has no power and has continually sided with the power brokers.
K Street has already bought and paid for both sides of the aisle.
Chicken Little was right, the sky IS falling.
Not only is the sky falling, the lies keep coming.....
Banco Santander made an instant 2 billion dollars when they bought Sovereign Bank thanks to a new tax law that was written into "The Bail Out".....Congressmen are said to be furious. However, letting Goldman Sachs run "The Bail Out" is much more important than doing anything.
I, myself, would want the GAO supervising "The Bail Out" with
no Wall Street "Conflicts of Interest".
But, then we went to Iraq with Retired Generals on TV
saying it was necessary and they lots of "Conflicts of Interest".
The G20: The U.S.A has a GNP of 13.81 trillion dollars
a reserve of 38.32 billion
Germany has a GNP of 3.32 trillion dollars
a reserve of 40.77 billion
Japan has a GNP of 4.38 trillion dollars
a reserve 955.07 billion
China has a GNP of 3.28 tillion dollars
a reserve of 1.9 TRILLION DOLLARS "El Pais" November 15, 2008
Page 26
The United States Government has made up more stories under the Cheney/Bush Administration than in the past 235 years. From the election of 2000, the American People were disinformed by the Mass Media who collaborated with a "Gang of Liars, Thieves, and Murderers." Human life in 2001 was calibrated at 3 million dollars. Getting rid of the "Investigation of Enron" was simple, destroy all the evidence in World Trade Center #7. (Have you ever watched the small fires on the 12th floor and thought that is what the NIST said brought down that building?)
We had the "Keating Five" in the 80´s where loans were given to non-existant companies. Those loans were never recovered and nobody bothered to find out who got them.
Enron had 1000 off shore accounts, at one time, and nobody bothered to find out where the money was.
Thieves just get smarter. They put their Directors in government and then those same ex-directors get to hand out money:
AIG informed its clients September 30, 2008
"Effective May 1, 2008 A new Global Real Estate Fund was
added to Portfolio Director. The Sub-advisers are
Invesco Aim and Goldman Sachs"
Those of us who have accounts have not seen what money went into that new Real Estate Fund. However, who got 85 billion dollars from the Ex-Director of Goldman Sachs? And, Where did that money go?
Herbert,
Here's a site you might want to visit:
http://bailoutsleuth.com/
A possible reading-between-the-lines suggests that the bailout is encouraging refinancing.
But folks, the G20 are meeting! You'll all be saved. Hooray!
The truth is that twenty world leaders will put their fingers in the collapsing capitalist dyke and try to pretend that everything would be fine if only people would start spending again.
How many recessions and depressions have there been in the last 100 years? How many more do we have to experience before someone observes that the economic system that we have is deeply flawed AND is destroying the planet.
My most recent post explores this question. Where?
www.dangerouscreation.com
Is it a fact that Islamic nations and businesses do not deal in interest for religious reasons?
Does anyone know the names and numbers about these? Are they in this mess, too?
Gosh, I hope this isn't a struggle for the world between those who have oil, don't charge interest, but have no nukes V. those that borrow to buy oil, have economies that have leveraged their assets 40-to-1, and have nukes...
Greed is the Creed
Debt is the Net
Business is our religion, and our Government has been rotted by it.
You want to fix it? Start by stripping corporations of legal personhood, and require them to price in human and ecological costs.
Hey David! Nice to hear from you. I have had your website listed in my favorite bookmarks (just like Common Dreams) for quite awhile now. I frequent your site often and enjoy reading all your posts there. Cool to know you troll around these waters as well.
Blessings,
John
No help for us renters either. Those of us who played by the rules and waited for prices to fall to reasonable rates will now find our purchasing power destroyed as the dollar loses values to pay for this bailout. YUP I'm bitter about this. No help either for those who diligently paid their mortgages on time, bought homes they could afford, and now see thier neighbors get to keep their McMansions that they could not afford to buy to begin with. Nope those home owners aren't bitter either for playing by the rules. Playing by the rules gets you no where in America this is the message that is now being sent. Getting up to your eye balls in debt...now that is the American dream we are told. Screw responsibility.
However, the realtors, mortgage lenders, Wall Street,housing flippers/gamblers, HDTV, the FED, and everyone else that made a fortune gets to walk away unscathed. You and I get to pay.
www.patrick.net a good place to find out more about the bubble.
For years, in both the United States and Canada, we have been fed a steady swill of how "Private Business" is more efficient and of of how Governments should be run like a business and by businessmen.
I think we see the results of this. Businessmen could not care less about the health of a populace, or whether they earn a decent living, or of a countries moral fabric.
They have ONE Motivation. Making money for themsleves and making themSELVES wealthier. No Businessman goes into business to make his everyone wealthier.
It is all about SELF.
When the same people gain political office and power, they can only be motivated out of SELF interest. That is what drives them. It will be their nature to plunder and loot and to enrich themselves at the expense of a countries Citizens.
That is how BUSINESSES are run after all. To Profit off the collective labor of the workers.
Bussinessmen are the absolute worse people to elect to Political office and running a Governmnet like a business is absolutely one of the worst things that can be done for its citizens.
Another insight into the crisis ...
http://www.realclimate.org/index.php/archives/2008/11/faq-on-climate-models/langswitch_lang/de
Comment number 57
(The letter referenced at the end is interesting.)
JCH Says:
4 November 2008 at 8:32 AM
"On economic models, in 2004 representatives (Hank Paulson, then the CEO of Goldman Sachs, was one of them) of some the investment banks met with the SEC to request achange in their required capital reserves. There was one dissenting opinion, mailed in from a guy with a PO box:
http://www.sec.gov/rules/proposed/s72103/s72103-9.pdf"
It seems the seeds of the present crisis were fertilized by Paulson in 2004
The bullshit just keeps going round and round.
Congress now admits that it "made a mistake" by failing to include specific provisions for oversight and accountability in the use of the recent bailout $billions.
But how is that possible? How, when numerous commentators loudly warned against the idiocy of a no-strings-attached approach? And how, when the entire reason for the bailout was due to lack of similar oversight and accountability to begin with?
Is there any more proof needed that the US Treasury is nothing but a piggy bank for corrupt Business? Or that the congress is nothing but the thieves' handmaiden?
I don't think so....
The US Treasury = The Chancellors of the Dog and Pony Show
Absent at the witness table was Dean Baker, an economist who predicted this CRASH at least two years ago, and has a real plan for helping mortgage holders. As for Paulson, six weeks ago he put panic to the Congress and now he's bailing out insurance companies while the banks sit on their dole??? Liar, liar, bastard's sire.
-30-
The only good laugh I've had in re this financial crisis, was listening to part of what "W" had to say on Wall St. yesterday. I usually can't listen to him at all, but I laughed at "capitalism is a success and don't over regulate" babble. Unfortunately, capitalism as practiced in this country has been a huge success for those a)at the top, and b)banks/Wall Street, c)cronies of "W" and Cheney. They literally "made out like bandits". That's not incompetence that's theft with permission.
Paulson:" we continue to explore ways to reduce the risk of foreclosure ". What a lot of malarky! What he is really saying is that the homeowners risking foreclosure are irrelevant and it is Wall Street and companies like Goldman ect.that are important to me.It is the same ol same ol with the wealthy,elite. Nothing ever changes with this greedy and immoral, miasma of government by the rich; for the rich; and of the rich. Mr. Paulson: how about exploring ways to reduce the risk of Goldman and bailing out the homeownwers overnight!