America is Being Abandoned by Washington, D.C.
By Chip Parker, Jacksonville Bankruptcy Attorney on Sep 25, 2008 in Featured
Save Wall Street . . . Forget Main Street. That is basically what Republicans and Democrats are doing this week as they decide to provide the biggest bailout in the history of the world.
The problem with this economy started with the housing crisis and continues to be the housing crisis. In July, 2007, I wrote an article predicting subprime lenders would eventually crash the stock market, but there were plenty others predicting this long before I did. At the time, I was responding to the Dow Jones Industrial Average eclipsing 14,000. Ahhhh, the good old days.
More than one year ago, my colleagues and I proposed the perfect solution to stop the economy from heading into the freefall it is experiencing today: Allow the re-amortization of mortgages in bankruptcy.
On May 1, 2007, National Association of Consumer Bankruptcy Attorneys President Henry Sommer submitted a proposal to the House Judiciary Subcommittee on Commercial and Administrative Law recommending that the Bankruptcy Code be expanded to allow Chapter 13 debtors the ability to repay home lenders only the current fair market value of their primary residence and to allow the debtor to repay the loan at a fixed rate of interest.
This solution, if implemented in August last year, would have:
- stabilized the housing market by keeping inventory low
- virtually stopped all foreclosures, keeping Americans in their homes
- kept home values from sliding, allowing homeowners continued access to home equity loans in a time of need
- avoided a taxpayer bailout by limiting losses only to those parties involved in risky lending
Well, the Democratically controlled congress and the Republican administration did nothing, and millions of Americans, including plenty who did not participate in the risky lending or borrowing, lost their homes.
They have another shot to get it right, and the 18 month-old bankruptcy reform proposal has been part of the discussion in Washington this week. True to fashion, however, Democrat and Republican politicians will succumb to special interests and once again bail out big business and the foreign governments who invested in subprime mortgages without addressing the real problem: the housing market.
Bankruptcy reform with undoubtedly disappear from the legislation, and the bailout will NOT stem the tide of foreclosures in this country. Sadly, the result is easy to predict: millions more citizens will lose their homes. Dozens more houses in most every neighborhood will be vacated, reducing even further the equity for all homeowners.
Americans, you are on your own.
Sorry, comments for this entry are closed at this time.