I had remembered a story from a few months ago, in which Sen. Schumer proposed a bill that would provide federal relief to those mortgage owners straddled with an ever-growing ARM. Every 6 months when there was a reset, we were reminded of the "credit crunch" facing Americans.
This proposal, made in April of 2007 was of course pooh-poohed and derided by the Right and of course by those greedy bankers over at National Association of for Business Economics for its exceedingly large pricetag of ..... wait for it ..... $120 Billion.
::chris-cross is gonna make ya jump-jump::
From Stephen Gandel, Money Magazine senior writer:
Christopher Cagan, director of research at First American CoreLogic, says rising mortgage payments on adjustable rate loans will force 1.1 million homeowners into foreclosure over the next 6 years. He estimates the cost of paying off the debt for those borrowers would be $120 billion.
The spokesperson says Schumer believes a mixture of counseling and restructuring of the loans would bring down the costs of the program considerably. He says Schumer hasn't finalized a plan, and that Schumer has said banks and lenders should foot part of the bill.
(emphasis mine)
Of course, there was a huge outcry when it was expected that those responsible for dubious lending practices might be, you know, like accountable, or something. But now, with a price tag that is 6x larger, and all responsibility pushed on to the suckers, er uh, taxpayers, the bankers are behind the plan, full-tilt boogie.
So, as an editorial aside, I think its absolutely nutty that the current Paulson Plan advocates a top-down approach. Now correct me if I'm wrong, but the crux of the plan hinges on the notion that banks simply cannot keep their books straight because the devaluing mortgage-backed securities. Assistance is given to the banks who sell MBSs to the government that are crappy because many will default (and default is a euphemism for "tons of people losing their homes"). Why would the government not spend money to assist the HOMEOWNERS, fewer of whom will default, thus making the MSBs more stable? Wouldn't that be a win-win instead of a win-lose situation?