Most Americans confused at the utter failure of the Wall Street bailout package to address directly the problem of the foreclosure crisis seem to be missing the fact that the bill is specifically designed to bail out financial investment firms and banks — not actually provide help to the people who are unable to pay their mortgages. In fact, helping people modify mortgages or work out other solutions to foreclosure is being left to previous failed government programs which were voluntary for banks to participate in, while the current $700 billion legislation is simply an excuse to stick the American people with the effects of the subprime lending explosion.
The politicians realize that, because of decades of government policies and corporate subsidies, it is doubtful that many of the people who received subprime mortgages will ever be able to pay them back. Manufacturing jobs have been shipped overseas with white collar jobs beginning to follow, and the negative savings rate of most Americans guarantees that they will have no financial resources with which to pay their debts during a personal financial emergency. In effect, most of the country’s homeowners have been written off as a losing investment who can be counted on not to oppose losing a bit of what little they have left.
Thus, the only option the politicians are considering now is stealing the last little bit of disposable income middle and lower class America still retains and handing it over to the banks. Obviously, with so few Americans having any savings plan, the government does not even have actual dollar savings investments it can count on to finance this bailout. Instead, it will be financed through inflation and borrowing. The Federal Reserve will print up the money required to buy “troubled assets,” and the value of the dollar will continue to be debased.
Also, many of these bad mortgage securities were sold to hedge funds, pension funds, and other investors around the world. These countries heavily invested in American mortgage markets are not happy our banks sold them a bunch of garbage and they are demanding Americans buy the worthless securities back from the foreign banks. Part of the $700 billion is going to be used for this purpose, especially since America still needs to borrow several billion dollars every day just to run the government and the economy. If foreign nations do not trust the dollar anymore, they will be less enthusiastic about buying our Treasury securities and investing in our companies; thus, the government wants to keep up the trust charade and is willing to steal money from ordinary families to give to foreign nations unhappy with their American investments.
Providing help to borrowers to save their homes from foreclosure? That would require politicians who care about their constituents, rather than the banks and foreign donors who really finance their election campaigns. People can always just be tricked into voting for someone over and over again based on party identification and attack commercials on television. But if the Chinese stop lending money to the government, buying up our Treasury securities, and investing excess profits in American banks and corporations, then the country will face a real credit crisis and a potential collapse of the dollar.
Any proposal to assist foreclosure victims, whether based on free market ideas or communistic ones, entails a radically optimistic belief in the beneficence of politicians. Plans to work with banks voluntarily, or freeze interest rates, or reset mortgage balances only make sense from the perspective of the American economy and homeowners. In order to understand the motivation of Congress in voting for the monstrous $700 billion bailout, it is necessary to look at it from the perspective of the richest banks and foreign investors currently losing money on their investments in the American housing market. Then it will be quite easy to see that stealing $700 billion from families is necessary to keep the charade going a little longer (until the next bailout is required).