| Despite the massive foreclosure meltdown, Wall Street and Treasury Secretary Paulson continue to believe a top-down solution of injecting taxpayer bailout money to private Wall Street companies will somehow help our economy. How does giving hundreds of billions of dollars to large banks so that they can gobble up other smaller banks help homeowners? How does injecting AIG with $150 billion of taxpayer funds help keep distressed homeowners in their homes? The answer is those solutions do nothing to address the core problem of unmitigated foreclosures.
It is precisely the record number of home loan defaults that is causing the current credit and liquidity crisis. AIG and numerous other Wall Street institutions collapsed because of rising home loan defaults, not the other way around. It is insane to keep pouring federal taxpayer money down the Wall Street sinkhole while doing nothing to help reduce foreclosures. None of Treasury Paulson's solutions to benefit Wall Street have helped the problem; his solutions have only made our economy worse off. We cannot keep doing the same thing expecting a different result.
It is time for Treasury Secretary Paulson to listen to Federal Reserve Chair Ben Bernanke and FDIC Chairwoman Sheila Bair, both of whom are calling for loan modifications to keep people in their homes. Bernanke and Bair have been far more prescient, insightful, and rational than Paulson has been. Until we change our policies, home foreclosures will continue to rise, Wall Street firms will continue to collapse, and our economy will continue to suffer.
Wall Street banks should also be ashamed of themselves for not only opposing past attempts to reform the mortgage market, but also current attempts to help alleviate the foreclosure crisis. The California Foreclosure Prevention Act sets a 90 day foreclosure moratorium unless the lender has a comprehensive loan modification program designed to keep people in their homes. Wall Street should not only stop opposing this bill, they should embrace it because this is one of the solutions that might actually keep them from going out of business.
Ted W. Lieu is Chair of the Assembly Rules Committee and author of the California Foreclosure Prevention Act |
