The Foreclosure Mess
None of the remedies are working. Foreclosure crisis continues to be a mess. Both the Bush and Obama governments toed the same line of throwing trillions of dollars to the banks and lenders. The financial tsars were thrilled to pocket $1.2 trillion from the toxic assets that the federal government covered. They pocketed billions more in direct handouts. None of the money is being used to advance loans and bring an end to the credit freeze.
On Tuesday 23rd June, Walls Street Journal noted, “The Mortgage Bankers Association cut its forecast of home-mortgage lending this year by 27% amid deflating hopes for a boom in refinancing.” This very same association had complained about the much hyped Home Affordable Refinance Program that the amount was “very low”.
The housing crisis has many facets. On the one hand the mortgage market is tight with loans not being advanced. This is leading to a dearth of buyers. Secondly people are losing their jobs and this makes it difficult for them to keep up with mortgage payments. The situation is potentially loaded with further foreclosures.
The Obama government is following the same lines of remedial measures as the Bush government and addressing the wrong side of the dilemma. Obama however was prudent to at least kick off a stimulus programme to address the unemployment problem. But the prime focus is on giving support in dollars to the lenders – the group that started this crisis.
The situation is so grim that the state and local governments have been compelled to make heavy budget cuts. Yet the federal government will not come forward with help for them and make up for the deficits. Workers are being fired – yet they were the most dependable when it came to mortgage payments.
California failed to get White House guarantee short-term notes worth $5.5 billion so as to avoid heavy cuts in state and local workforce. By it school teachers and prison guards are going to be severely affected. In glaring contrast Citigroup has been given a staggering $300 billion to guarantee the soured assets. The bank has benefited from the underlying principle that is being followed – these banks are “too big to fail”. Yet it is these banks that have perpetrated this crisis. The principle to be followed should be that they are too big to save.
As per the current findings of the Federal Reserve in seven consecutive quarters the household wealth of Americans has fallen by $14 trillion.