Pretending to Protect Citizens from Banks

Last year, Congress passed a bill which, in the best tradition of the Bush Administration, bore an opposite title: the Hope for Homeowners bill, and appropriated $300mn to back it up. It was, of course, a total failure. Exactly 1 home was “saved” by the bill. The concept of the bill was that lenders would cut the principal due on the mortgage to 90% of the current value, and the FHA would insure the new mortgage. Lenders don’t want to do that because it would require them to take an immediate loss, and since the program was voluntary, they didn’t.

This week the Money Party decided it needed to have something to show they were helping homeowners, so they gave us the Helping Families Save Their Homes Act. The Banks didn’t care enough to stop this silly statute. All they wanted was to strip the effective part out of it: the bankruptcy cramdown. Once that was done, they released their servants to pretend they were helping homeowners. Our congressionals are congratulating themselves on this worthless piece of legislation. From Nancy Pelosi: “The Helping Families Save Their Homes Act will help strengthen the housing market, our economy, and help restore the American Dream of homeownership.” No it won’t. Everyone, including CNN Money, knows that.

"Writing down principal is the last thing you want to do because you have to realize the loss immediately," said Paul Leonard, a spokesman for the Housing Policy Council, a coalition of mortgage lenders.

But, it fits in well with the equally pointless legislation the banks allowed Congress to pass on credit cards. That one might reduce costs to consumers by a few dollars. But not to worry, banks are quickly raising interest rates on the customers in hock. The Fed tells us the average credit card rate went from 12.03% to 13.08% in the first quarter. Oh, and banks are raising fees on their good customers, so we all get to pay.

Elizabeth Warren of the Congressional Oversight Panel offered a detailed explanation (pdf) of the causes of home foreclosure, and ideas for dealing with the actual problem. Congress had no trouble ignoring her group, with its politically incomprehensible emphasis on actually helping homeowners: a quick snap on the leash by their Financial Masters was enough to make them remember their real loyalties.

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