"Politics. Where greed wears the mask of morality." -Inspector Jacques Clouseau:
I have a friend who told me that he hasn't made a mortgage payment for three months. The bank called him for the first time this week. Instead of the hard sell, he got a simple request, " Can you pay anything ?"
Now before your let your heartstring get pulled I should give you a little more of the story. My friend no longer lives in the house. He now lives in an upscale condo, his 4th place in the last 6 years. He was one of the upwardly mobile suburban DC denizens who flipped houses every two years moving from a reasonable 400K place up to the 1.2 million mansion that he find himself upside down in. All along the way, he's made the move with little money down, ARMortgages, and using the proceeds to make the minimum down payment followed by purchases of sports cars, motorcycles, and Caribbean trips. Does that sound jealous ? Yeah, well that's probably because I am. During that same time period I've been cutting my lawn of the modest home and making the monthly nut on time as promised.
But that's besides the point. Whatever arrangements that exist between my friend and the bank are between those two. If they want to make a risky loan, fine. If he doesn't want to pay, what difference is it to me ? That's UNTIL I have to politicians bellyaching about poor Little Sally Johnson being evicted....or the " pain on Main Street". I have sympathy for working class people living from paycheck to paycheck, but I have little sympathy for people living above their means or for those people who got caught on the ground floor of a world-wide greed filled ponzi scheme they got caught up in.
Which brings us to my main point. The banks and policiticans would have us believe that they're being magnanimous by passing policies and legislation to limit the forecloseurs and by not evicting people from their homes for non-payment.
If the banks thought for a minute that they could sell those homes for a profit, they'd do it in a minute. If they could get another interest paying veal to pony up the minimum down payment, then the current residents would be out on the street by sunset. What it really comes down to is that in this housing market the banks aren't getting any money...but if they foreclose on those houses they start LOSING money. So long as people like my buddy own the house, then my buddy has to cut the lawn, my buddy has to insure it, my buddy is responsible for the taxes, and there's the off change that the bank can talk him into making some sort of payments..then eventually pick the mortgage back up when things turn around. And THAT is what banks want.
Credit is imaginary money. Its a promise on future labor. And seeing as its largely fabricated wealth then whatever return the banks make on it is profit. If the bank can get my buddy to pay even a portion of the interest he owns each month, the bank is happy to let the principal sit in the "owed" column and continue to the the vig run. Loanshaking 101.
Thats what this bailout is about. Its about helping keep the banks afloat and keeping the loansharks in business.