It is time to act. Join us on Dec. 10 on Wall Street and in cities across the country. Stand up to stop the wave of home loan defaults that threatens to foreclose not just on people's homes but on our hopes.
The problem keeps getting worse. Two million homeowners face foreclosure over the next year. Their neighbors will lose billions of the equity they have in their homes. Millions will find themselves stuck, unable to get a decent price for their homes in a flooded market. Tens of millions more will tighten their belts. Communities, from Cleveland to Las Vegas to much of Florida and beyond, will struggle with budget crises.
This is a recipe for recession. Fed Chairman Ben S. Bernanke told Congress he expects slowing growth and rising unemployment. How could he not? The financial sector, which generates nearly one-third of all corporate earnings, has written off about $40 billion in troubled loans this year, with more to come. Gas prices are hitting $100 a barrel, even as we head into the cold winter months. Food prices are rising. Americans, already burdened with stagnant incomes, now are piling up credit card debt just to make ends meet. We're headed into rough waters.
But so far there has been no action on any program of any scale to keep people from losing their homes, fouling their neighborhoods and driving cities and schools into budget crises and the nation into recession.
The investment houses and banks already have been helped. The Federal Reserve lowered interest rates; the Treasury pushed to set up a $70 billion fund to help Citibank and others manage the losses. They didn't sort out the worthy from the irresponsible. The Treasury didn't suggest risk counseling for the financial houses that lost billions.
But for homeowners, the Federal Reserve and the Treasury call for case-by-case solutions, for strapped homeowners to get individual counseling, even when they know this can't meet the crisis. In Congress, Rep. Barney Frank has pushed for action. But Republicans are opposed, and Senate Democrats seem increasingly to cater to the fortunes of Wall Street rather than Main Street. With the exception of John Edwards, the presidential candidates and their economic advisers address the issue as if it were someone else's problem.
This makes no sense. Many homeowners now facing foreclosure were steered into subprime mortgages, often laced with hidden fees that they never knew about. Single women, young couples, Latinos and African Americans were particular targets of aggressive mortgage brokers. The brokers didn't care if the loan made sense because they sold it off immediately to the financial houses. And they had a big incentive to hide the fees and interest rate jumps because those made the loans worth more when sold. Now new homeowners who have kept up their payments are facing foreclosure.
Citibank warns that it is too big to fail, that the Treasury must act to bail out the banks. But 2 million homeowners are too many to fail; they will take down our economy if they do.
So it is time to challenge the timidity and the cribbed imaginations in Washington and to demand action before the crisis brings down the entire economy. We need action to postpone all resets for those who have maintained their payments. We need Fannie Mae or the FHA to step up to require renegotiations before foreclosures. It is time to support homeowners, not just speculators.
© 2007 The Sun-Times