The Spark

“The emancipation of the working class will only be achieved by the working class itself.” — Karl Marx

Pretending to Fight Foreclosures While Helping the Banks

Jun 8, 2009

Barack Obama signed into law the “Helping Families Save Their Homes Act” on May 20. By the time Obama signed the bill, Congress had stripped it of the provision that would have helped families “save their homes.”

Obama had promised during his election campaign to fight to let bankruptcy judges modify terms of mortgage loans, saying, “We should also change the unfair bankruptcy laws that allow judges to write down your mortgage if you own six or seven homes, but not if you have only one.” Strangely enough, Congress as far back as 1978 gave bankruptcy judges the power to modify mortgages, but only on loans for things like vacation homes and luxury yachts, not for primary residences of people who owned only one home.

Democrats, with their 60-vote majority in the Senate, could easily have insisted the bankruptcy provision remain in the bill. On the contrary, 12 Democrats sided with 39 Republicans to keep it out.

And Obama could have campaigned for it – he didn’t. His advisers didn’t think it was “worth the cost” to lead a fight against the banking industry. “The fact that Obama effectively sat it out helped us out a great deal.” – that was the opinion of Camden Fine, the head of the Independent Community Bankers of America.

The bill that remained gives money to banks that modify mortgages, but leaves it to them to do so on a purely voluntary basis. Obviously, they will do so only if there’s a profit in it for them. The bill also provides even more bailout money to the banks. It saves banks and credit unions at least 13 billion dollars in special fees they would have otherwise been required to pay into shrinking deposit insurance funds.

Its name to the contrary, this bill provides little relief at a time when the number of homeowners facing foreclosure is growing.

A record 800,000 homes received a default or auction notice in the first quarter of this year. And foreclosures are by no means limited to people with subprime adjustable-rate mortgages. Homeowners with fixed-rate mortgages made up a greaterpercentage of foreclosures than those with subprime loans in the first quarter of this year. As job cuts and layoffs increase, many more people are finding it impossible to pay their mortgages.

The foreclosure crisis is growing – and thanks to politicians, Democrat and Republican, the banks are benefitting from it.