It's Time to Treat America's Homeowners as Well as We've Been Treating Wall Street's Bankers

[unhappycamper]

It's Time to Treat America's Homeowners as Well as We've Been Treating Wall Street's Bankers
Arianna Huffington
Posted February 16, 2009 | 08:00 PM (EST)

If you were to make a pie chart showing the amount of attention given to the banking part of the financial crisis -- both by the government and by the media -- and the amount of attention given to the foreclosure part, the catastrophe being faced by millions of American homeowners would barely rate a sliver.

But we are facing nothing less than a national emergency, with 10,000 Americans going into foreclosure every day and 2.3 million homeowners having faced foreclosure proceedings in 2008.

When we put flesh and blood on these numbers, the suffering they represent is enormous and so is the social disintegration they entail.

For a small sample, check out Brave New Foundation's new site, Fighting For Our Homes, where you can see video of people doing just that. People like Debra from Pennsylvania who, due to health care costs, is facing foreclosure on her home of 33 years or Penny from Texas who has been pushed to the brink of homelessness as the result of costly repairs necessitated by Hurricane Ike.

"The banks are too big to fail" has been the mantra we've been hearing since September. But when you consider the millions of American homeowners facing foreclosure, aren't they also too big to be allowed to fail?


Rest of article (and links) at: http://www.huffingtonpost.com/arianna-huffington/its-time-to-treat-america_b_167429.html

[ixion]

1. It's interesting... there's been spin that the consumer not spending is what is causing the trouble

therefore making the consumer "too big to fail", collectively speaking, and yet where does all the money go? To the top 1%, as usual, because they're "too big to fail", even though they're a much smaller entity than the "consumer".

Great logic, that. :eyes:

[Coyote_Bandit]

2. Homeowners?

Yeah, right.

What is really meant is homeowners who (1) carry a mortgage and (2) are facing foreclosure because of their inability to make those mortgage payments.

That excludes homeowners who have liquidated assets and sometimes made tremendous sacrifices to make those payments or to own their home outright.

The fellow who bought the small 80 year old 900 square foot home in need of repair and paid cash outright for it because he could afford it ought not be forced to pay taxes to subsidize the home ownership of the fellow who bought the new 5000 square foot home.

[ejpoeta]

3. Just think... if instead of giving all that money to the banks, we had given it to homeowners

to pay off their mortgages, we would have had a better result. the mortgages would have been off the balance sheets of the banks. with a few caveats.... the homeowner could not refinance their home. perhaps add a certain amount to their federal taxes for a number of years until the money given by the government was paid back in full. then they could refinance or whatever. And if the people sold their home, the government would get the money back that way. we would still be getting the money back to the government, but it would be like we were borrowing our own tax dollars. this would be a one time thing. if you got into trouble again, your on your own.

[Coyote_Bandit]

4. If you are going to bail out the folks that got into trouble then

you ought to reward the folks that sacrificed and were responsible enough not to require the bailout.

It is inequitable for the guy in the 80 year old 900 square foot house that needs repair to subsidize the consumption of the fellow in the new 5000 square foot house. The guy in that little old house has perfect credit and a good job and could have qualified for the same mortgage but he chose not to (and, yes, I actually know this fellow). Turns out that mortgage and that excess consumption wasn't such a good deal. If you are going to give $$$ to bail out the guy who made the poor choice and enjoyed the benefits of his excess consumption then equity requires that you give equal $$$ to the fellow who sacrificed and did not get into trouble.

The issue isn't one of bailing out failed mortgages - rather it is whether it casn be done equitably. Many of those folks facing foreclosure still have their jobs and will be receiving stimulus funds. Meanwhile, there is not one fucking thing in that stimulus package that will benefit the long term unemployed. I guess it's ok to throw those folks under the bus - and if they happen to have any taxable income to expect them to underwrite and subsidize assistance to folks who are otherwise receiving stimulus dollars. Fuck that.

[ejpoeta]

5. i was referring to the money that the banks got. not the stim

if instead of giving the money to the banks, we gave it to homeowners to pay their mortgages. What good does it do when you have someone who pays their bills on time but ends up upside down because of the ten forclosed properties on the street. Sure, folks may hove gotten in over their heads... but not all the people with troubles with their mortgages are because they were irresponsible. a lot of folks were talked into loans. maybe they should have known better than to trust the lenders, but some folks listen to the bank because the bank wouldn't give them a mortgage they didn't think they could pay back. I understand that there are a lot of folks who have been responsible. but their mortgages were sliced and diced and are in the same bundle as the ones that were overextended.

what i was saying was that we handed over all this money to the banks with no restrictions or anything. and where did that get us!!! instead of doing that we could have just given it to the people with mortgages for crying out loud.

[Coyote_Bandit]

6. Money is fungible

A dollar is a dollar. The end result of bailing out a homeowner who can't pay the mortgage while depriving the homeowner that has sacrificed to make the payment or to own the home outright is that one gets a financial benefit while the other subsidizes and funds that benefit. Doesn't matter where that money comes from. The end result is inequitable.

No doubt, there should have been strict restrictions and oversight of the Bush bailout money.

There are homeowners who own their homes outright without a mortgage obligation. There are homeowners who own their homes outright who live in areas that have not and likely will not be severely impacted by declining home prices. Think about rural areas or areas that were already depressed by economic poverty. Why should these folks have to subsidize the excesses of the new 5000 square foot house guy? They shouldn't. Equity would require that if the new 5000 square foot house guy gets a subsidy then these other folks should be rewarded for the sacrifices and choices they made to avoid being the 5000 square foot house guy.

I've got nothing against individual mortgage bailouts PROVIDED that there is a comparable financial reward to taxpayers who do not require such a bailout. Unfortunatley, one of the basic prinicples of economics is that resources are limited and I believe that would not be feasible.

Fixing the mortgage mess isn't going to do much of anything to fix the economy anyway. The mortgage mess is nothing but a symptom of deeper issues. A real economic fix will require:
(1) rebuilding manufacturing;
(2) rebuilding infrastructure;
(3) changing attitudes to value blue collar work;
(4) changing attitudes so that personal value is not measured by consumption;
(5) protecting the ability of our citizens to work and earn a livlihood - something that has implications with respect to labor organization and rights, immigration, work visas and trade tariffs;
(6) building an educational system that actually provides vocational skills and competencies;
(7) enacting both living wage and maximum wage laws;
(8) providing single payer health care to every citizen and shifting tax burdens from individuals to businesses;
(9) facilitating small business development rather than further corporate growth; and
(10) restricting volume discounting in order to permit small businesses to have the ability to compete with large businesses.

Even with the Bush bailout and the stimulus there isn't going to be enough job creation in the forseeable future to replace the jobs which have been lost. The single best use of taxpayer funds to stimulate the economy and to create jobs would be something resembling unlimited funding for small business loans and subsidized health coverage for small business owners and their employees and families.

Anything less than addressing these ten issues and encouraging the development and growth of small business is a band-aid designed to treat a symptom and make people feel better while completely failing to address the underlying issues.