Where are the homeowners in the $700 billion bailout?

Posted Sep 22nd 2008 11:45AM by Jonathan Berr
Filed under: Other Issues, Housing, Recession

Remember that old joke that a conservative is a liberal who got mugged? Well, maybe we can now say that a socialist is a free marketer who just got a $700 billion government bailout.

Lost among all of the talk about whether Hank Paulson and Ben Bernanke have become the new overlords of the American economy, is discussion about helping save homeowners from the Bush administration. All that was said is that homeowners want the U.S. Congress to pass the rescue bill quickly.

Democrats in Congress have other ideas. Sen. Chuck Schumer (D-NY) told Fox News Sunday that " we have to do something about the mortgage crisis, not just foreclosures but the price of housing."

Schumer makes a good point, but figuring out what to do is tricky. More must be done. The consequences of massive foreclosures are too big to ignore.

I have heard the arguments before that we should not reward speculators and people who bought homes that they could not afford. That sounds great if we lived in a free market utopia. But as the last few days have illustrated, the free market ain't what it used to be.

For one thing, people would not have gotten mortgages for homes that they could not afford if the banks did not issue them. Lending standards were so lax that they bordered on the criminally negligent. That's why it seems horrendously unfair to rescue banks and leave homeowners to fend for themselves. Remember, it takes a village to raise a child and a borrower and a lender to make a mortgage.

What the "let them eat cake" crowd often forgets is that shady mortgage brokers would push people into high-cost adjustable-rate mortgages even if they qualified for a standard 30-year loan. Exactly how many people fit into this category is not clear, but banks need to be held accountable for the lives they have ruined.

The Center for Responsible Lending points out that homeowners are not able to get much relief from the bankruptcy court, which allows loans to be modified for commercial real estate and yachts. Allowing judges to change mortgages would save 600,000 homes from foreclosure, the center says.

Acting to save Wall Street without helping Main Street will have ramifications for decades to come.

Tags: Banks, Ben Bernanke, BenBernanke, featured, Federal Reserve, FederalReserve, forclosure, henry paulson, HenryPaulson, housing, real estate, RealEstate, Wall street bailout, WallStreetBailout

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Reader Comments (Page 2 of 2)

10-01-2008 @ 11:24PM

Christy said...

OK so no help for families like mine? We bought our house in 2001 for $112,000.00 and put 10% down. My husband made around $55,000.00 a year, we have 4 kids, and I was a stay at home mom. I since went to nursing school to become a Registered Nurse (paying student loans)and in 2004 my husband was transfered out west for his job. We put our house up for sale and almost 3 years later had not sold it. To keep from filing bankruptcy he had to leave his job. We moved back to the house and a year and half later still no job for him, there are some but did I mention they are only hiring illegal immigrants? Yes the immigration came in and escorted 150 illegal immigrants out of an American manufacturing plant where my husband can not even get a job. We are on the internet, phone, and pounding the pavement daily to get him a job with no luck. He has 20 years of manufacturing experience as a supervisor, process tech, maintenance, operator, and quality control, college educated but most companies have closed or will close at the end of this year. Moving jobs to China and Mexico I guess. I am the only one working, our medical insurance is horrible (and I work at the hospital) $900.00 a month for a familly with $500.00 deductable for each person each year. They have cut overtime, I have tried to get a second job and have had no luck without driving an hour one way. He had been hospitalized, I had to have knee surgery (off 9 days and went back to work against doctors orders to stay off 6-12 weeks, in a never sit down ICU nursing job) now the medical bills are climbing, I am almost 2 house payments behind, can not hardly make it a week after payday, and notified the bank 3-4 months prior that we were going to fall behind!! They can not help they said until I fall behind!!!!! How outrageous is that? Now as for helping people who can not afford their home, who can with the grocery prices, gas prices, cost of utilities, school books/lunches, medical bills, and everything else going through the roof, except my pay of $500.00 a week after taxes and insurance. I am a highly skilled critical care nurse and can not afford a $98,000.00 home? I am sorry to all of you that I am asking for help for my family during this very devistating time. I should of never went all out and spent $112,000.00 on a home for my children, my husband, and I. I guess it is okay to bail out those greedy CEO's who have ran the businesses in the ground so that they are forced to close, so they could have their jet, 5th home, yacht, or whatever they think they need. What about the working class families? I work my butt off just like everyone else, have NEVER asked for a hand out, but I sure the hell need some sort of help or this nurse and her kids are going to be homeless. So for all of you hard working individuals that do not feel that homeowners do not deserve help because you did it and your house is paid off, not all of us bought a home we could not afford, the economy, loss of jobs, increasing prices without increasing wages have forced us not to be able to afford our home.

10-02-2008 @ 2:30PM

edith price said...

my husband and daughter and i bought a home in 2005 we were told that we could come back in two years to refinance after two years we were unable to because the mortage had went up started getting behind in some bills the mortage went up after one year then after two years went up from 1200.00 to 1500.00 we were ok with the 1200.00 the rate started 7.50 to 10.50 then i found out later that it was going up to 14.50 rate when signing all documents every thing happen so fast i felt the mortgage broker and the banks so people do not get into somthing no matter what until you read all documents large or small print do not let them rush you into any thing thats going to make your life a living nightmare banks should be in falt because homeowner are so happy that they are buying a house at the time so we all are at falt. you live and learn. Things are so easy to say from some people that might not have it as hard as some so keep god first and pray every day god will take care of every one in life some things happen for a reason.

10-10-2008 @ 1:10PM

maria said...

Not all homeowners should be blamed for this mortgage crisis, I purhcased my home and I think that my bank took advantage of me plain and simple! I have a credit score of 658 and I received an interest rate of 10.5% on a two year fixed program..... These mortgage companies should be ashamed for taking advantage of people like myself who"work everday, pay bills, have children and live check to check and want to be homeowners.!