Every monumental change in a nation’s future must have a name to allow the citizens to rally, make placards and chant. We had The New Deal, The Great Society, and as the mortgage bailout was unveiled on the 4th of March, I vote for naming it The March Forth. A friend urged me to use The Great Leap Forward but research revealed that slogan had been put to better use elsewhere.
The blame game for our faltering economy is reaching a fever pitch with Republicans blaming Democrats (and vice versa) and the public blaming the bankers, Wall Street, the regulatory agencies, mortgage brokers and Congress. Everyone is at fault, but let’s not forget the actuaries. In spite of lower credit standards, no one foresaw the possibility of a burgeoning default rate resulting from less credit-worthy mortgage holders. Today, no one can pinpoint whether the excessive default rate caused the housing market bubble to burst, or if the bubble burst first causing the subsequent delinquency rate to explode.
Currently, more than 90 percent of Americans are meeting their mortgage obligations, while more than 10 million homes are in default, arrears or foreclosure. No matter how Congress may spin it, those homeowners who have been prudent with their finances, and often made many sacrifices, will be paying for the mistakes of others through higher taxes. If this is the American way, then we should all be prepared to take The March Forth.
An alternative might be to start thinking out of the box. Suppose the government enacted a one-time program allowing home purchases by foreign nationals able to pass a security investigation in exchange for permanent American residency. Only cash buyers would be eligible for this program with a floor of $400,000 and even those in America illegally could be candidates.
Or suppose the government gave returning service personnel the option for a subsidized home purchase instead of the college tuition assistance program offered by the military. The government could take an amount equal to the estimated college tuition and provide that as a lump sum down payment then finance the balance through Fannie Mae at the current low interest rates. This would allow home ownership to responsible veterans and create an opportunity that may have never been possible for them.
Finally, many individuals, some of whom have made billions of dollars through fraud and transgressions, should have a greater role in the bailout. Recently a number of Countrywide executives, who profited enormously throughout this financial calamity, have established a fund aimed at maximizing investments on foreclosed properties, often the same properties that were financed through their company’s sub-prime lending. Maybe some windfall or extraordinary tax should be levied on those funds?
It is time the lending institutions begin to bundle these foreclosed properties and selling them as packages to private investors. It would be efficient and it is the same template used during the Savings and Loan crisis. The housing market cannot recover until the overhanging malignancy of too many homes are removed from the marketplace and the banking industry cannot recover until value for these properties are established.
As we collectively march forth attempting to rectify many failings in our government’s regulatory incompetence, I doubt the correct path is for government to right previous wrongs through greater largess at the expense of the taxpayers.
