This week, I joined a press conference with People Improving Communities through Organizing and the Center for Responsible Lending on the steps of the United States Treasury. The first three speakers were not the usual Washington talking heads. Instead, they were American homeowners who were losing their homes to foreclosure--a terrible thing that now happens to another American family every 13 seconds (6,600 per day). And a rapidly increasing number of them are now due, not to subprime mortgages, but to the loss of employment. That's what had happened to those who told their stories on Monday in Washington D.C. across from the White House and just down the street from the huge Bank of America and PNC Bank buildings.
Mercy Martinez began to cry as she spoke. She had saved for years and put $100,000 down to buy her first condo. Choking back tears, she recalled her meeting with the Countrywide Financial mortgage broker. "I had enough money for a traditional, 30-year fixed rate loan; but the loan servicer unethically tricked me into an adjustable rate loan that could put me in foreclosure at any moment." Now she waits for the "time bomb" of her loan to explode, and when it does she will join the millions of Americans facing foreclosure. Mercy is not alone: in 2006, 61 percent of subprime borrowers were forced into mortgages more expensive and riskier than what they qualified for.
Meanwhile, inside the White House, the heads of the nation's biggest banks and financial institutions were meeting with the president. They were told that since the American people had bailed them out, they now needed to do something for the American people by beginning to lend again and to agree to loan modification plans enabling homeowners not to lose everything. But so far, those admonitions are falling on deaf ears. Indeed, I learned this week that the bonuses and extra compensation paid to the executives at the big banks are on track to exceed the 2007 level of $162 billion (even after some banks, like Goldman Sachs, have switched compensation packages away from cash and into stock bonuses). At the same time, the Center for Responsible Lending estimates that the bonus pool of just one of these big banks would have been enough money to prevent or significantly delay foreclosure for all 2.3 million people who lost their homes last year. And what about loan modifications to help homeowners stay in their homes? To date, Bank of America has agreed to fewer than 100 permanent home loan modifications. Amazing.
At the press conference, I pointed out the fundamental moral contradiction of this situation: Those whose behavior is most responsible for causing this economic crisis are being saved from failure and suffering by the American taxpayers, while those least responsible for causing this recession are now losing both jobs and homes--with no bailouts for them on the horizon. My friend Rev. Derrick Harkins made a point about "grace." He suggested that in order to try to save the economy from a feared massive meltdown, some real grace was extended to the big banks; but they now seem unwilling to extend grace to anyone else. Does this sound like a gospel parable to you?
What it sounds like to me is a very bad morality play--one that I write about much more extensively in my new book Rediscovering Values: On Wall Street, Main Street, and Your Street--A Moral Compass for the New Economy. The book says we need a new national conversation about all this, a return to some basic values, and a moral recovery to accompany an economic recovery. We cannot go back to normal this time; we need a new normal. It's time to change the script of this play. That is the only way all this suffering and pain can be redeemed.