The current $700 billion bailout plan presented by the Bush administrations provides no concessions to help homeowners facing foreclosure or anyone on main street who’s experiencing a hardship. In fact, it will probably accelerate foreclosures. This is because banks would now have those losses insured by the feds and then when default occurs it will not effect any financial institutions bottom line after they’ve taken the loss write-offs from the sale of the mortgage backed securities. The institutions will no longer have any reason to work to modify sketchy loans they made FULLY KNOWING THE RISK.
This is exactly what the banks are counting on: indemnification for their bad lending practices. The call is to protect the markets, again. You can substitute the word markets with wealthy with any time during any discussion of this bailout. They’re interchangeable. Meanwhile, the guy who’s lost his job and is getting a re-trained or has transitioned into a lesser paying job and our property values will continue to be hurt. Property values will experience and even greater descent because the Bush administration’s bill is forgetting the reason peoples credit went bad in the first place. Foreclosures and property value declines are not the cause of this crisis, they are another symptom.
Stagnant wages, outsourced jobs, companies closing, inflation, sketchy bank tactics to increase revenue; these are the things that caused people to stop paying bills, using credit and caused a tight credit market. Until you take care of the problem at the source it will not really be solved. The current bill will only provide temporary relief in the markets and provide no relief to the underlying problems. It would be a $700 billion dollar farce that will stimulate our economy only for those on the top of the financial totem pole. It will do nothing to stimulate job growth, technical innovation, or most importantly stop foreclosures.
The Democrats are calling for these provisions as part of the bailout. They are interested more in helping the man on the street and not the CEO’s who’s employment contracts state they get a $10 million severance package if they’ve utterly failed. Is it possible they know this will also strengthen the US economy to a much greater extent than just protecting bad lenders? Of course, the Republican’s have responded with a typical partisan tactic stressing “urgency” and that there’s no time for pandering with the proposal they’ve laid out. Once again Bush pushes forward and it’s his way or no way. How is that a bi-partisan solution to the problem other than to say “we’re glad they saw it our way”?
Bush and crew are the same people who were on guard through this whole mess. Yet they think we should sign their first copy of a bailout proposal without scrutiny, without review and without modification. I really think their motivation is two fold: They’re being pressured to save the wealth of their constituency, the US Aristocracy, and to make sure foreign investors holding mortgage backed securities don’t call the notes due. I could care less if either one of these end up being a by-product of the proposed bailout but it must first and foremost stimulate the US economy and bring rise to the dollar. From what I currently understand of this initial proposal it will not drive prices down, wages up, create jobs or stem coming foreclosures. If it succeeds, in it’s current form, banks may lend to banks but they will not lend to consumers in the end.