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In Congress, Help for Homeowners is Help for Banks
The Washington Post's lead article notes that bank losses are turning out to be even worse than the experts whom they rely upon had expected and therefore they will be needing the second half of the $700 billion provided under the TARP, and possibly even more money. The article then asserts:
"The problems are intensifying the pressure on the incoming Obama administration to allocate more of the $700 billion rescue program to financial firms even as Democratic leaders have urged more help for distressed homeowners, small businesses and municipalities."
Actually, there is no contradiction between helping banks and the way in which members of Congress have proposed using TARP money to help homeowners. The generally accepting mechanism involves having the government pay above market prices for existing mortgages. New mortgages are then issued, with a government guarantee, at a price close to the current market value of the home.
The "help" for the homeowners in this scenario is the excess price that the government pays the bank for the mortgage. If Congress insists on money being spent in this manner, it will mean more money for banks, not less.
--Dean Baker
COMMENTS (5)
BAILOUTS are NOT the answer. INVESTMENT in infrastructure and AMERICAN labor IS the answer, putting People back to work IN America, FOR America.
Posted by: Mike Meyer | January 15, 2009 1:47 PM
Oh, ferhevensakes, let's just nationalize the banks--it would be cheaper. And what do you want to bet that, after spending a trillion or so on these various schemes, that's exactly what happens?
Posted by: PeonInChief | January 15, 2009 1:59 PM
"Bank losses":does it means all the banks or just some banks?
Is it, again, the same banks that already received money from the government and the Fed?
Does it meansnetlosses?
Posted by: Gerry Flaychy | January 15, 2009 2:41 PM
The banks broke it, let them fix it. Bankers are still wearing their Armani suits and Gucci shoes. Cut their income first before giving them anything.
Help the homeowners now. There is a better plan. Allow special appointed judges from highly designated realtors and mortgage agents to modify loans so that the homeowners can afford to stay in their homes. Any losses can be shared equally by the government, banks, and investors. If the banks cannot keep their end of the bargain the let them fail. There are still plenty of community banks that are solvent to handle the needs of business and people locally.
If the bank sunofabitches cant survive on 30% interest then screw them.
The old system that benefited the rich exclusively needs to die anyway. The people have been suffering for twenty years now. It is nothing new for us. Let's get it over with. If the rich want to prop us the banks then let them do it with their own money, not taxpayer money.
Begezzus, this stuff isn't that hard. Let er' rip.
Posted by: Buzz | January 15, 2009 6:38 PM
Many banks refused the money from the TARP.
There are around 8 000 banks in the USA. There is only about 100 banks wich are in troubles.
Do we really need those 100 banks to make the banking system working?
Posted by: Gerry Flaychy | January 15, 2009 9:57 PM