Jul 28, 2008
Politicians and the news media have justified the enormous housing bailout bill that is about to become law as a way to help homeowners threatened with foreclosure.
What they don’t say is that only a very small minority of the millions of homeowners at risk of foreclosure will get this mortgage relief. And whatever reduction they get will be so small, even the Congressional Budget Office estimates that 40% of those holding these new mortgages will still lose their homes.
In fact, the bill was really set up to funnel countless billions to the banks and Wall Street companies. It will allow them to unload hundreds of thousands of bad mortgages insured by the Federal Housing Administration. When those mortgages default, it will be the taxpayers who pay the tab.
President Bush had earlier threatened to veto the bill over one provision that provides grants of four billion dollars to local government to buy up vacant foreclosed homes. Certainly, this provision is nothing but a bailout of the banks that own the foreclosed property. But obviously Bush threatened a veto as a way of distancing himself a little from the bill, to blame the Democrats, especially if the cost of the bailout skyrockets, which is very likely given the collapse of the housing market.
The bill also gives the Treasury Department the authority to shore up two mortgage company giants, Fannie Mae and Freddie Mac. Today, over five trillion dollars of the nation’s 12 trillion dollars in mortgages are either owned or guaranteed by Fannie and Freddie.
Ever since the housing crisis broke open, a growing proportion of those mortgages have gone bad. Publicly, the politicians and government bureaucrats claim that it might cost 25 billion dollars to bail them out. That’s already a huge amount of money. But most believe that the real cost of the bailout will be in the hundreds of billions of dollars. This is confirmed by the new bailout bill itself, which gives the U.S. Treasury the authority to borrow up to 800 billion dollars to bail out Fannie Mae and Freddie Mac! That is bigger than the entire economy of most countries!
Thus, the very same banks and Wall Street financial companies that profited so much from the housing bubble are now bailed out by the taxpayer – first and foremost, by the working class.