Lobbying and Our Financial Crisis

Bribe: noun. Anything given or serving to persuade or induce. Verb. To influence or corrupt by a bribe.

Lobby: n. A group of persons who work to conduct a campaign to influence members of a legislative body. V. To solicit or try to influence members of a legislature.

Lobbyist: A person who tries to influence legislation on behalf of a special interest.

If money is given to a political candidate or an office-holding politician before, during or after being contacted by a lobbyist for that organization, then the candidate or elected official has been bribed for services rendered or some service implied to be rendered in the future.

If an individual or organization gives money to both political parties or candidates running for the same office then they are, by caveat, guilty of bribery.

Since 2006 more than one million homes have fallen into foreclosure. Over the nest four years six million additional homes are expected to be foreclosed.

One reason that foreclosures have exploded is that banks and their advocates (to be read as lobbyists, bribers or political corrupters) have delayed, watered-down or obstructed attempts to resolve the problem.

Banks would have been better off if they had confronted this issue a year ago rather than put their heads in the sand and hope the housing market would improve.

Judges have been given new powers (known as “cramdown authority”) to modify loans and the terms of loans to keep mortgage holders in their homes. Any of these new powers that have been given to judges to modify bankruptcy proceedings are being assaulted in the privacy of our politicians chambers.

Banks may claim to be working with people to successfully modify their loans but 47% of these arrangements have resulted in higher payments than before. A full 53% of these homeowners were again delinquet on their mortgages after six months. Modifications had been made in such ways that lenders and loan servicers are tacking on missed payments, taxes, and big fees.

Banks argue that giving bankruptcy courts increased power rewards irresponsible borrowers. But who pushed these loans? Banks and the mortgage industry. Who received the huge tarp payments?

Senator Christopher Dodd (D-Conn), the chairman of the Senate Banking Committee, warned bankers on 4/18/2007 (22 months ago at the Homeownership Preservation Summit) that they needed to confront this “bankruptcy fiasco” they had created. The chief legal officer of Countrywide Financial at the time vowed to “keep making these loans (loans with teaser rates requiring minimal evidence of borrower’s income) until the last second they are legal.” He should have added ‘or we go under and have to be rescued by Bank of America’ who has also required serious tarp rescue money to rescue it in turn. Note that tarp money is tax-payers dollars going to shore up irresponsible corporations for irresponsible actions that have jeopardized our economy. Their ongoing negligence in resolving the issues will continue to cause distress in our economy until the cause of the problem is confronted.

One bad loan is a tragedy, seven million is a disaster of Biblical proportions.

The Hope Now Alliance, a government-endorsed private sector organization, has 500 counselors but 45% of the borrowers who go to them still wind up in foreclosure. Hope Now was established to prevent defaults but it is merely a public relations gesture. Of course, it does seem to provide jobs for 500 counselors.

The Hope for Homeowners government anti-foreclosure program has resulted in only 25 refinanced loans. Senator Richard Selby (R-Al) the ranking Republican on the Senate Banking Committee and other Republicans insisted on pro-industry aspects and the final bill was neutralized by including stiff up-front fees and a requirement that homeowners pay the government 50% of any future home value appreciation. To the satisfaction of bankers and banking lobbyists, the fine print in the program has limited its appeal.

Is it any wonder there is more and more public hostility and outrage directed toward banks?

Senator Richard Selby (R-Al) accepted $565,000 in contributions from the financial services industry (2007-2008).

Representative Barney Frank (D-Mass) accepted $948,000 over the same period from the financial-services industry.

Is it any wonder there is more and more public hostility and outrage directed toward our politicians?

If banks had understood and worked in advance to minimize foreclosures many of the complications our economy has faced would not have occurred or been ameliorated.

Foreclosure is bad for home owners. Foreclosure is bad for communities. Foreclosure is bad for our economy. Stop foreclosures now.

The solution is for the U.S. government to bypass the banking system. Do not give banks another penny of tax-payer dollars. Allow any U.S. citizen holding a mortgage within the United States to present it, sign a non-assumable 15 or 30 year note for their outstanding balance with a 3% interest rate.

A huge number of these outstanding balances will exceed the current value of the home. The homeowner is responsible for the balance due at an interest rate that will allow them to stay in their homes. It will take a responsible homeowner to stay and pay off a balance that exceeds the home’s value. In time, the value of homes will stabilize.