"Homeowners: Drop Dead!" is a pretty apt summary of the message Hank Paulson and the Bush administration have sent to the American people this week.
Taxpayer purchases of "distressed assets," we'd been told by every administration figure still standing, was the only way to stabilize the nation's economy and help homeowners threatened by foreclosure keep their piece of the American Dream. And I believed them.
Absent consultation with Congress and without coordinating with the other 19 G-20 countries coming to Washington tomorrow for a conference on the global financial crisis, a brand new program is being rolled out -- one that has nothing to do with the problem that most believe created the current crisis.
Addressing homeowner woes is apparently too complicated, so Hank wants to move on to massive infusions for big banks and help for student loans and consumer credit.
Paulson's strategy is mystifying.
My constituents want to stay in their homes. There were 57,000 foreclosure filings last month in California, and 100,000 in August. (The only reason numbers have gone down is because of a wise state-imposed 30-day moratorium on foreclosures.) The recovery package I voted for twice was supposed to help homeowners, not fund a bank consolidation program.
Then there is the related Detroit auto bailout. Torrance, CA is North American headquarters of Toyota and Honda -- two automakers that are profitable, innovative and employ thousands of Americans. So as we talk about Detroit, let's remember that there are better business models that operate in America.
What to do? I think that Sheila Bair -- head of the FDIC -- has the best ideas (it usually takes a woman to figure these things out). For $40 billion, she would reach millions of homeowners by guaranteeing fifty percent of the loss on the mortgages being renegotiated. The funds would come out of the $700 billion already appropriated.
I remember Hank saying he knew how to do this. His team said toxic mortgages are like cancer. Once they were removed, the liquidity problem would be solved and banks would lend again.
Anxious homeowners are asking, "When is this $700 billion bailout going to reach us?" Fair question.
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