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If US Treasury Secretary Paulson and President Bush have it their way, the world’s largest bail out will give the US Treasury what is essentially a blank check to do with it as they please. Meanwhile, the tax payers and the homeowners footing the bill will get nothing, nada, go straight to foreclosure because we’re too busy bailing out our buddies, the banks!
As of now, there is nothing in this proposed bill that will directly assist the people on Main Street that are suffering as a result of a recessive economy, inflated food, high gas prices and a toxic mortgage to go with their cancerous real estate in which they dwell. However, my favorite Washington outspoken financial power players on Capitol Hill, Senators Schumer, Dodd and Frank are making it known that they will not sign this bill without more provisions and help for the tax payer and the homeowner.
Senator and Banking Committee Chairman Christopher Dodd is demanding foreclosure assistance, bankruptcy reform to include loan modifications, limits on executive compensation and profit sharing for taxpayers if the Treasury begins to make money back on the bad debt it plans to purchase.
Dodd’s plan would give authority for bankruptcy judges to restructure mortgages for homeowners facing foreclosure. This was considered taboo by banking lobbyist in a housing bill that passed Congress earlier this summer, but it has gained much more momentum now that Washington wants to bail out Wall Street.
New York Senator Schumer is looking to dangle the billion dollar bailout carrot to the banks with conditions that they not fight legislation giving the powers to bankruptcy courts to perform loan modifications on primary residences.
Meanwhile Sen. Charles Schumer is urging Congress to offer a bailout to the banks, only if the banks are willing to renegotiate mortgages for distressed homeowners _ and warned against a competing plan to set up a new government agency to take over bad loans.
“Without a comprehensive solution that helps keep people in their homes, no amount of money advanced by Uncle Sam will restore the fundamental strengths of the American economy,” he said.
“Unless we also solve our financial problem the economy will not recover and the housing problem will get worse, so we need to do both.”
Under Schumer’s proposal, the government would give capital infusions or loans to banks in return for an equity stake, similar to the deal struck with insurance giant AIG earlier this week.
In return, the banks would lift objections to legislation allowing loan modification for homeowners in bankruptcy. Currently, a person in bankruptcy cannot renegotiate the terms of his mortgage, unlike other kinds of debt.
