News From Washington

May 9th, 2008 @ 3:58 PM by Alden Smith

The bill lawmakers built to try to stem the tide of home foreclosures due to the sub prime mortgage crisis has passed the US House of Representatives by a vote of vote of 266 to 154.  The bill, designed to create a 300-billion-dollar federal guarantee for new mortgages for people who may be at risk of losing their homes faces a sure veto by Bush.  According to Democratic majority leader Steny Hoyer, “This legislation, in short, will expand the FHA (Federal Housing Administration) program so that borrowers in danger of losing their homes can refinance into lower-cost, government-insured mortgages that they can afford to repay.”

Congressman John Boehner, Republican from Ohio, said “Let’s be clear: This is a dangerous approach and undermines the American dream of owning a home.”

Worries on the Hill seem to be that this will be looked at as a big bailout that will land in the laps of taxpayers.  In an election year, this is risky business, but Bush has nothing to lose.  His legacy to the American people will long be looked at in history books, I believe, and as sitting President, on the way out, there is nothing to be gained here for him.  In other words, it appears to be another round of bipartisan infighting.

Granted, something needs to be done, but no one has really presented a bill that is noteworthy, or does not reflect the stance of big business.  I watched on the NBC Nightly News last night as speculators stood on the courthouse steps and snatched up these foreclosed homes at pennies on the dollar, and it left me with a bad taste in my mouth.

On NPR this AM on my trip to Ann Arbor, the commentator said that the only way that any sense can be made of this would be to level out the loans so that they equal the actual value of the property, and then refinance at an affordable rate.  I tend to agree, but wonder how these mortgages will be picked out of the bundled securities that bind them, and work on getting things back on more of a normal road.

There is a lesson here.  We need to see that there is more transparency in both the market and in the industry, and there should be regulation that is beneficial to ALL concerned so that the playing field is leveled.  I don’t see that happening any time soon.