Senate: Trillions for irresponsible banks: "Of course"; Banks sharing house value losses: "No way"

The Federal Government and Federal Reserve have given over $12.8 TRILLION dollars to banks that irresponsibly lent to people they knew could not afford their mortgages and would default once the housing bubble collapsed.

But the Senate can’t stomach the idea of forcing banks holding mortgages to share some of the house value losses with homeowners:

Legislation to give bankruptcy judges the power to reduce home mortgage debt–by “cramming down” the principal–doesn’t appear to have enough votes and will be stripped out of a broader housing bill in the Senate.

The cram-down effort is a major plank of President Barack Obama’s housing rescue, which also offers financial incentives to mortgage servicers to modify loans and allows some homeowners with little to no equity to refinance.

The cram-down measure already passed the House of Representatives as part of the housing rescue. But it faced heavy opposition from the banking industry.

This is insane pandering to rich corporations over ordinary Americans because the rationale for gifting the banks TRILLIONS in the first place is banks' large losses on mortgages. The Senate now says banks should keep the TRILLIONS without suffering any mortgage losses. Homeowners in cities where house prices have fallen 30% to 50% should bail themselves out.

In America, we don’t help hurricane victims (Katrina) or homeowners hit by massive losses, but we eagerly gift TRILLIONS to irresponsible banks that knowingly took excessive risks they should not have.

Posted by James on Tuesday, April 28, 2009