Obama Facing a Challenge from the Foreclosure Crisis
Obama is facing a peculiar challenge from the foreclosure crisis. Apart from the fact that it is the primary and root problem of the financial chaos now reigning in USA, it has to be tackled in such a way that the measures do not benefit neither the irresponsible borrowers nor the predatory lenders.The Obama government is bent on following an aggressive path against the surging menace of foreclosures but the leaders have yet to work out the details of the strategy to be put into force.
A six month moratorium is one of the steps being considered apart from reducing the mortgage interest by half and giving tax relief to those who purchase houses through federally sponsored programmes.
It is now two years that the foreclosure crisis made its presence felt and it continues to hold sway. The government and the financial body have not been able to come to a point of agreement largely because of the thorny issue of excluding from the benefits both the irresponsible borrowers and the predatory lenders.
Timothy Geithner (nominee for the post of Treasury Secretary) said that the proposals have yet to be finalized and it is doubtful if a concrete plan will take shape for quite some time. Meanwhile each interested group has been pushing forward its own suggestions.
In the previous week Lawrence Summers (Obama’s choice for directing the National Economic Council) suggested to the leaders of the Congress that the administration should give anything from $50 billion to $100 billion as a sweeping gesture “to address the foreclosure crisis.” His suggestion subtly hints that everyone crying “wolf” does not deserve help. Only “preventable foreclosures” and “economically stressed but responsible homeowners” will be targeted. Just how the grain will be separated from the chaff remains unclear.
Steve Adamske, spokesperson for the House Financial Services Committee said that it is as yet too early to predict when the foreclosure assistance measures will become law.
Kenneth Rosen, economist from Berkeley discussed with the Treasury Department and presented his view of the matter. He wanted a six-month hold on all foreclosures. This would give time to the interested parties to find out a way for sorting the mortgages and categorizing them into those that should and those that should not be saved. For the really needy borrowers the mortgage rate should be brought down to 4.5%. He also suggested tax credits for those buying foreclosed houses in the current year.
