We can either have a rational resolution to the foreclosure crisis or we can preserve the capital structure of the banks. We can’t do both.
With 2 weeks to go to the midterm elections, President Obama and the Republicans have found an issue they can agree on: if they just do nothing, the foreclosure scandal will go away.
They’re betting that the use of robo-signers to process foreclosure documents without actually reading them will just amount to a pile of sloppy paperwork.
They’re betting that blaming borrowers will trump public outrage over banks holding themselves above the rule of law that states they have to prove that they own a mortgage note before they can foreclose.
You can understand the Republicans’ position; they argue that the government has no responsibility and is only capable of making any problem worse.
President Obama’s approach can’t be much of a surprise either, after leaving his financial policy in the hands of Wall Street apologists, fighting the most robust financial reform, providing a failed foreclosure relief program and not raising a finger to help when banks opposed his own proposal and not using his bully pulpit to push it. The president, despite his occasional bursts of rhetoric, has never assumed the role of tough regulator and reformer he promised on the campaign trail, preferring to act as the big bank’s collaborator-in-chief.
The president’s name may not be on the ballot November 2. But many of the Democrats who are facing the voters advocate a more robust response: a foreclosure moratorium while the very real legal issues are sorted out.
The Obama administration has taken to sending signals to the voters, hoping that might allay their worries. The feds announced the formation of that entity designed to show concern while guaranteeing that no action will be taken for the foreseeable future: a task force.
A number of banks had started their own voluntary moratoriums on some foreclosures. But two of those banks, Ally and Bank of America, have already canceled them. Meanwhile all 50 state attorney generals have announced their own investigations into the mess.
Despite the efforts of bank apologists to minimize it, the foreclosure debacle continues to shape up as a series of nasty legal battles, with a dramatic, unsettling impact on the housing market.
Opponents of a foreclosure moratorium portray it as a way of giving homes to people who haven’t been making their mortgage payments. But that’s a phony argument. A moratorium will not end up causing anybody who hasn’t been paying their mortgage to own a house they didn’t pay for.
As far as borrowers living in their houses for free, let’s be clear: that’s happening now, and it’s not the fault of any moratorium. It’s happening as a result of the banks’ own chaotic approach to foreclosure, often not wanting to take possession of property that has lost its value or not hiring enough staff to manage the properties properly.
This is the terrible irony about the banks’ fear-mongering. While they’re always predicting awful consequences to any action that limits their own power, the banks create the consequences all by themselves, or with the help of their willing collaborators.