Getting the Rescue Right
Help has been way too slow in coming for the estimated 1.7 million people who will lose their homes to foreclosure this year and next. A modest bill to bolster funds for state, local and nonprofit agencies that help hard-pressed homeowners renegotiate their mortgages and restructure their debts has been slogging through the Senate since April, and it won’t be passed until October at the earliest — if ever. On the presidential campaign trail, Senator Hillary Clinton recently promised to introduce a similar relief measure — next month.
There has been far less procrastinating, however, when it comes to offering help to investors, bankers and other lenders who are feeling squeezed as the mortgage mess restricts their access to easy money. Yesterday’s smackdown in the stock market — like others this year tied to mortgage woes — will likely only intensify lawmakers’ desire to ride to the rescue of Wall Steet constituents.
Earlier this week, Senator Christopher Dodd, another Democratic presidential hopeful, and Senator Charles Schumer, called on federal regulators to ease restrictions so that Fannie Mae and Freddie Mac — the quasi-government mortgage agencies — can buy more mortgages and mortgage-related securities from lenders. That would grease the now creaky mortgage-lending process with fresh capital. The White House is considering their proposal.
What is absolutely crucial, however, is that Fannie Mae and Freddie Mac be required to use that enhanced capacity to help homeowners who are in distress.
Not true at all.
What is absolutely crucial is to leave the market to its own devices. The NYT would hardly come to the rescue of those who used junk loans to profit during the housing bubble, so why should it cry crocodile tears over those who got caught at high tide?
Riding to the rescue of anyone on either side of markets, distorts them. This market has already carried itself through a six year distortion, hence the current crisis. But loss is as essential as gain to free economic markets.
Dry your tears, guys and allow what must crash and burn to get on with it.