30 Sep It’s The Foreclosures, Stupid!
During the campaign of Bill Clinton in 1992, it was said that a sign hung in his headquarters stating, “It’s the Economy, Stupid!”. It was there to remind everyone to focus on the problems of the domestic economy and not so much foreign diplomacy. Today’s economic issues can be reduced to one word: foreclosure. Wall Street’s problems are not due to difficulties of small business on Main Street, they are directly related to problems in mortgages on Euclid Avenue. Loose lending standards led to dangerous loans to home buyers on the bet of continued increases in real estate values. Every bubble is destined to burst eventually, just ask anyone who invested in the dot com boom of the 1990’s.
Home values are continuing to decline, now fueled mostly by foreclosures. In Connecticut, a traditionally stable state, home values have declined another 8% while foreclosures have increased another 24% from June to July. Defaults in unaffordable mortgages have led to a glut of real estate for sale. Homeowners have left their houses. A single vacant foreclosed home on a residential street will reduce the value of all homes on that street by as much as 15%. In some towns, residents are choosing to leave their homes instead of fighting for their rights in foreclosure.
Congress is working on a bailout plan for Wall Street and the spin doctors are calling it relief for Main Street. But our elected representatives have forgotten the real cause of the problem on Euclid Avenue. A simple provision to allow a modification of a residential mortgage in a Chapter 13 case has been eliminated from the bailout package. It would allow homeowners to keep their homes and it wouldn’t involve a single dime of government money. No taxpayers would be harmed in the filming of this episode of American history.
Don’t let Congress forget Euclid Avenue.