I'm fascinated (=disgusted) by the difference in the conversation about the two situations. The response to Bear Stearns' woes was immediate and simple; it was considered an absolute emergency to make sure this bank doesn't fail. On the other hand, the effects of subprime lending and foreclosures have been felt by consumers for years, actively a news item for at least 6 months, and still no one can agree on a quick and effective solution, and even the (IMO inadequate) policy measures being considered will be subject to weeks or months of debate, let alone actual implementation.
These people are all full of it. How many of those folks at Bear Stearns, at the Fed, in Congress are facing homelessness? Facing incapacitating job losses? If one of the debates were having about consumers is whether or not they need to take personal responsibility for the bad contracts into which they entered, why doesn't Bear Stearns have to take corporate responsibility for building up a hedge fund full of bad loans? Why not make them distribute their assets equitably to employees and shareholders, then shut down? How come no one expects them to fall in the pit they dug for themselves, but homeowners are SOL?
This is total horse dookie. Nothing today has illustrated the gross inequity of our society more than this discussion today. I'm just about done being nice and trying to build dialogues and partnerships - as far as I'm concerned, we should start the revolution tomorrow, and take down this whole damned (use meant literally) financial system.
4 comments:
What solution would you suggest? I've been thinking about this for months and haven't come up with anything.
Now there are people with adjustable rate loans who could handle the initial payments just fine but are way in over their heads when the rates went up. They're the people you see profiled in the newspapers. That can be helped with refinancing at a fixed rate. Relatively easy.
From what I've seen (and the plural of anecdote is not data) they're not the ones who desperately need help. I know that Massachusetts set up a program to help these folks and at least after being open for business for maybe 4 or 5 months literally nobody had refinanced under it. Literally no one.
The people I've seen who are facing foreclosure fall into two categories.
(1) those who financed their regular living expenses by doing one cash-out refinance after another -- you see the problem immediately if they weren't able to handle their living expenses before and now have a bigger mortgage. Eventually that well runs dry.
(2) Those who lied about their income when applying. They make $30,000 a year but sign a form saying they earn $100,000 and take on an obligation they could never ever ever keep up with. Yes, the bankers and brokers and all that bear a lot of responsibility here too. BUT THESE BORROWERS HAD TO KNOW WHAT THEY WERE DOING. They cannot get let off the hook here.
What exactly are we supposed to do about this? Forget about exactly. What kinda sorta maybe are we supposed to do about this. The lack of solutions is not due to lack of attention or ill will -- but when people take on obligations they could never in a million years come close to fulfilling, what can be done?
Amen, sister--I've been wondering the exact same thing. Why does Bear Stearns get a bailout? Why should any corporation? They made the investment. They're an investment firm. That's what they do. It involves bearing risk. I think it would be better for the long run if we all faced some hard realities now instead of putting off the hard day of reckoning.
I saw a Tom Tomorrow cartoon today that pointed out some things we could have funded instead of the Iraq war...Soc. Security for the next 50 years, healthcare for millions of children, etc. Our whole country is basically in hock to China right now.
This is one reason why I think Obama would make a good president. The others have their good (and bad) points, but we really need someone who is capable of inspiring a large swath of Americans to pull together in the face of adversity. I don't think either Clinton or McCain will be able to do that. No president or Congress alone will "rescue" the situation--that's why we need someone who can inspire all of us rather than merely govern.
In response to the question about solutions, a brief thought:
There are people who fall into the two categories you define, but I'm not sure that they make up the majority of foreclosing homeowners. However, my "evidence" is equally anecdotal, and I don't have any statistics to back me up. Discussions with foreclosure counselors at this conference, however, tend to indicate that, while some irresponsible borrowers are certainly to be found, these don't make up the majority of folks coming to them for assistance.
I have more thoughts, but it's very late, so I'll share them later.
More thoughts, now that I'm not so tired:
Even with the first category of theoretically "worthy" homeowners, it's probably not just about refinancing a loan at this point - it's about overdue amounts, penalties, and the other financial issues that arise with whatever else you've had to try and juggle on the way to foreclosure. A solution that only deals with part of that problem may not end up providing sufficient help for a family to try investing in the effort of getting it done.
We also haven't discussed the category of homeowners who may have just barely been able to manage their payments, but any kind of other hardship - medical issues, job loss, other rising living costs - combined with mortgage issues causes them to be in a financial position from which they couldn't recover right now even with a refinance.
I would think there are some easy ways to identify liar loans just by doing the documentation check that should have been done by the lenders in the first place (remember, they also bear some responsibility for not doing basic due diligence). That way, you can eliminate people who were deliberately fraudulent from receiving assistance. I don't know if you could ever screen or judge that line between responsible borrower who signed up for a loan that they, at least initially, thought was totally within their means and those who may have taken risks by extending themselves beyond their real means.
But my point with this post is that no one is looking at Bear Stearns and asking whether they were totally responsible and how far they went over that line before offering assistance. The Fed just rushed to provide backing for an undisclosed loan amount through JP Morgan, since it can't even loan directly to Bear Stearns. If Bear Stearns' moral compass doesn't need to get checked before it gets help, why should any consumer need to prove themselves worthy to be helped? Why can't we just have the government back new loans with favorable rates for any homeowner who didn't defraud anyone?
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