It's clear that despite the mammoth economic crisis, Congressional leaders have very few ideas and are revising and clinging to shards of Paulson and Bernanke's "US homes are worthless - bail out Wall Street now" premise.
In fact US homes and real estate are still absurdly valuable - it's Wall Street's cockeyed financial instruments that are toxic. Before the deregulation and speculation began in the late '90s, US homes were already doubling in value every decade. But the wealthy folks set to benefit from this bailout don't want to remind you of that.
A real leader genuinely planning to help US homewners would tell them:
Congratulations. You own equity in the USA, the most valuable real estate on planet earth. A bunch of crooks and speculators have been messing with the value of your homes. But unless you're a crook or speculator, we're going to make sure you and your neighbors keep your homes, and can pay off any loans based on reasonable assessments at reasonable rates -- not usurious ones set back when your own credit was worse than the banks'.
Instead, Congress's Wall Street bailout proposal guarantees more foreclosures, kills real estate values, and impoverishes both homeowners and their lenders.
Pelosi (and unfortunately Obama) are vowing pass the legislation and not to use a penny of the $700 billion to stop foreclosures. Pelosi, in character, has no proposal but already says she wants you to blame the Republicans for the bill she will vote for.
The Fed's Bernanke actually says he wants us all to think of America's homes and real estate as having the value of a painting being auctioned at Sotheby's - maybe worth a lot, maybe worth less than the paint and canvas used to make it. The market will decide, he explains as he gets on his knees, reminds us to panic and offers to flush the property down the toilet.
That means under his plan, these homes will continue to foreclose, property values will still plummet, and the financial instruments based on those mortgages will fall with them. No one is pointing out that Paulson, Bernanke, the banks and Wall Street are still too reflexively greedy to suggest that with the government's help, people who can afford to pay a reasonable mortgage rate on their own home should be allowed to keep them. These are the same greedy reflexes that make banks so much more likely to foreclose than renegotiate rates in good faith - even though property values for their other loans will suffer more.
It's like a medic on his first day of Emergency Medical, slowing down the bleeding by applying a tourniquet to a patient's neck. It's what we'd expect from Paulson, who still won't say whether he was ignorant or lying when he claimed the financial system was in good shape this spring. It's what we'd expect from Pelosi, who will agree to anything if she thinks the Republicans can be blamed later.
Or maybe it's more like a Medic who you don't realize benefits from an insurance policy on the choked patient. After all, who will be able to afford to soak up billions in under-valued real estate starting next year? Who will have $700B more than it deserves in investment funds?
The lack of leadership among the Dems makes Hillary Clinton - who proposed a moratorium on foreclosures back in the primary season - look like a visionary and a great leader. Except now she's completely silent, in her new job of making the nominee look more presidential.
So maybe now it's for people like us -- you know, informed Democrats who aren't corrupt politicians -- to think through and improve on Hillary's plan. Here are some details that might help make it work:
- if it's your only home, your interest rate gets lowered to the rate the banks would pay - since their credit is now worse than yours. That's fair.
- the value of a financial instrument owned by a pension fund (instead of a crook or speculator) gets frozen - so the government's billions help rescue individuals' retirement nest eggs, but not professional financiers who were paid exhorbitantly because they were expected to know better. That way when speculating funds crash in horror over the lowered homeowner interest rates, middle class nest eggs don't suffer.
Who else should we protect?
I see every reason this approach could be much less expensive than a Wall Street bail out, because real estate values would stabilize immediately.
Can we discuss it?
Are we waiting for a Republican to propose something like this, and reclaim the mantle of economic leadership?
Are we waiting for Nader or McKinney to propose it, so we can attack them?
Are we waiting for Hillary to speak up again?
Go ahead and take this discussion seriously. Is there any doubt that whatever we come up with here will be better than Paulson's 3 pages, or 101 pages written this week that our illiterate Congress is eager to pass, like the Patriot Act, without reading?
By the way, this idea isn't just Hillary's, or mine -- Robert Scheer of TruthDig and Left, Right and Center has been saying it for weeks -- check out his recent appearance on Democracy Now!