Maybe I am becoming more bleeding heart as I get older, or maybe it is just my sense of moral outrage is growing. Today's Cape Cod Times included a story, Foreclosures rising on Cape, that illustrates the problem with the current bank bailout plan.
GMAC Financial Services has received $16.3 billion in banking bailout financing. Essentially you and I paying them for their losses on loans. That funding has not trickled down in any fashion to the homeowners who have really suffered the losses. Losses in jobs and home value due to bank and speculator fraud. Bank fraud due to deceptive lending practices and predatory lending. Speculators, as they artificially drove up home values.
I cannot find any specific values related to GMAC's bad loans. One discussion suggests it is about 10% of its $189 billion in assets. If we took this $19 billion in bad assets and considered most of these, while losing value, still held some value (the foreclosure sale price), the government bailout money would seem capable of opening the door to mortgage re-writes and principal reductions. The end result is a program that supports the banks and the property owners. With the $16.3 billion government gift to GMAC being used to support the real estate market and not to reward business executives who managed to dump their bad business decisions onto all of our banks.
All good points Dan. Some of the blame should go on the banks because they tend to push people to get more home than they can really afford. We taught our sons not to use 2 incomes when they bought their homes. You never know if or when you may lose your job. The bank pushed our youngest to use his fiance's income so they could afford "more house". He refused and followed our advice. Our oldest didn't have this problem as he got a VA loan and they don't allow using income from a girlfriend or fiance. Some of the blame belongs to ACORN and other groups like that who used threats and other tactics to force some lending institutions into making bad loans to people who weren't working or knowingly falsified paperwork to get a loan. And sadly some belongs to the people buying the houses they knew they couldn't afford. We live in an age of entitlemnt mentality. David and I didn't buy a house until we had been married several years because we could not afford it. Our first house was a 3 family on Northampton St in Holyoke beacuse it was the only way we could get a loan. Now young people want a new house, 2 cars, a boat, vacations, new furniture, etc. No one wants to wait until they can afford it. Whatever happened to buying only what you can afford. Very sad what our country has become.
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