Tuesday, March 04, 2008
Geez, they should just get right to the chase and start cutting checks for tens of thousands or hundreds of thousands of dollars for each homeowner who now owes more than their house is worth.
And what about credit cards and auto loans? Why not get out ahead of the curve on those problems that are now starting to blossom?
Reduce my outstanding balance!
Gimme some free cheese!
While we're at it, let's make health care free for everybody without raising taxes and how about increasing the minimum wage to $100,000 per year.
Pass a law that stocks can never fall on a year-over-year basis and forbid the sellers of commodities from raising prices faster than the government's official rate of inflation, which will be required by law to never increase by more than three percent per year.
Reading this report from the Associated Press about Fed Chairman Ben Bernanke's speech this morning (the Fed website appears to be too busy right now to serve up the full speech), you'd think that's where we are all headed:
Federal Reserve Chairman Ben Bernanke called Tuesday for more action to prevent distressed homeowners from falling into foreclosure, including a suggestion for mortgage lenders to reduce loan amounts to provide relief to struggling homeowners.Oh yeah! That money I lost in the stock market crash eight years ago?
"This situation calls for a vigorous response," Bernanke said in a speech to a banking group in Florida.
On the idea of cutting mortgage values, Bernanke said, "Principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure. "
With low or negative equity in their home, a stressed borrower has less ability — because there is no home equity to tap — and less financial incentive to try to remain in the home, he said.
Bernanke acknowledged this idea might be a tough sell to lenders. Lenders, he said, are reluctant to write down principal. "They said that if they were to write down the principal and house prices were to fall further, they could feel pressured to write down principal again," Bernanke said.
Still, Bernanke suggested such longer-term permanent solutions may work better than shorter-term and temporary ones, where the distressed homeowner could find himself in trouble again. "When the mortgage is 'under water' a reduction in principal may increase the expected payoff by reducing the risk of default and foreclosure," he said.
I want it back.