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$125 billion for banker bonuses, nothing for 765,558 foreclosure victims

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What is wrong with us? We gladly fork over $125 billion to capitalize a handful of banks that got us into this mess that's cost $37 trillion since 2007. But we can't muster up any help for people whose houses go into foreclosure. Why are we using our taxpayer money to give bankers the extra capital they need to pay bonuses while not requiring them to lend it out to keep the economy moving?

And why don't we do something to get to the root of this problem? That is the enormous borrowing of money to finance the purchase of houses many of which are worth less than the unaffordable mortgages taken on to buy them. When people have a mortgage that's bigger than the value of their house, they walk away. When others see their mortgage payments skyrocket while their incomes stay flat, they stop writing checks. And their houses go into foreclosure -- in the third quarter the number of foreclosures rose 71% to 765,558 -- the highest on record.

Hank Paulson said, "The government may buy home loans and related securities to help property owners struggling with monthly payments." It's nice of him to dangle that carrot in front of the three million people who have lost their homes to foreclosure. Obviously, it was much more urgent for him to secure the bonuses of his banker buddies with our tax dollars.

Meanwhile, it will take a new president to realize that the way to minimize the pain for citizens and banks may be to allow a bankruptcy judge to renegotiate mortgages so that people can stay in their houses and banks can avoid adding to their portfolio of empty houses they need to maintain and sell in a very slow market.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

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Last updated: November 27, 2009: 03:46 PM

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