>As I’ve stated for almost two years now, the only way to deal with the ongoing housing crisis (and yes, there still is one) and banking crisis is a program to eliminate those mortgages that substantially underwater. While I might be biased as I am one of those people, the Obama administration may in fact be readying a plan to begin forgiving some principal (something that should have been done a long time ago) on some mortgages.
The issue I have with this is that it will cost taxpayers – though my position is also that it will cost taxpayers much more NOT to forgive some principal. I think the banks need to feel the pain of their mistakes in order not to make them again, but I also believe that Wall Street has received so much bailout money while Main Street has been stuck with the pain of this depression.
Had the government implemented this type of program initially it would have bailed out the banks by bailing out Main Street – thereby solving two issues at once. I am still not for a blanket bailout, I believe people should be held responsible for their decisions (including myself), but I also believe that the document mass fraud perpetrated on the American homeowner must be rectified. Housing has the potential to drag the economy into a Great Depression and the administration knows this.
Its too late for housing to solve our issues, but it could be a good step forward. I favor a program that John Hussman has put forward – essentially an equity sharing program where the government shares in any appreciation after forgiveness. The other option is simply let a massive number of homes foreclose and further drag down the balance sheets of the nation’s banks, making them more insolvent. Please understand – this is a BANK BAILOUT wrapped in the blanket of a Main Street bailout. Wall Street knows they won’t get any more help (even though they know in a crisis they will be bailed out again), this is there plan to remove bad assets from their balance sheets quickly and unload them onto the governments. The fact that they can help out Main Street is just icing – this is a last ditch effort by those who know the real issues that exist.
I want to make it clear that I am not endorsing this program, which doesn’t even exist yet. If it happens, I’ll review and let you know my opinions. I can tell you this, few Republicans would oppose (after all it was John McCain’s idea).
Scott Dauenhauer CFP, MSFP, AIF