Bring It On!

Senate Steamrolls Measure To Assist Homeowners

April 4th, 2008 | by Daniel DiRito |

Most people understand the meaning of “the squeaky wheel gets the grease”. The government’s actions to bail out the big dogs in the subprime lending fiasco, in conjunction with the seeming disregard of the plight of the individual homeowner, are destined to rewrite the expression to read “the big wheel gets the grease”.

In light of today’s refusal by the Senate to modify bankruptcy laws to assist homeowners, it seems a further modification will be needed. I would suggest it be - “Once the big wheels get greased, the hosing of the homeowner can begin”.

The Senate on Thursday rejected a Democratic proposal that would have rewritten bankruptcy law to help struggling mortgage borrowers, while moving ahead with debate on a housing market rescue bill that includes a $6 billion tax break for home builders.

In a 58-36 vote, the Senate defeated an amendment offered by Assistant Senate Democratic Sen. Richard Durbin to empower bankruptcy judges to ease mortgage payment terms for distressed borrowers under strictly limited circumstances.

The Durbin amendment — which would have affected only mortgages already in place upon enactment — was opposed by the influential banking industry and Republicans, who were joined by 11 Democrats in voting to kill it.

“Unfortunately, my amendment was strenuously opposed by the banking lobby and their powerful friends in the Bush Administration and in the Senate,” he said.

Demands for action on behalf of average homeowners have grown since the Federal Reserve last month engineered a massive bailout of investment bank Bear Stearns.

The Senate bill, with lengthy debate still ahead of it, is estimated to cost $15 billion to $20 billion.

The bill’s tax break for home builders and other businesses involves extending a rule that allows businesses to count net operating losses against tax returns from prior profitable years. The rule, in place for 2008 and 2009 only, would allow carry-backs of four years instead of the current two years.

“This is a taxpayer-funded give-away for corporations that caused the housing and mortgage crisis. It doesn’t do enough to help struggling homeowners,” said Jacob Hay, spokesman for the Laborers International Union of North America.

While the actions to kill this measure are appalling, the severity of the crisis may soon force politicians to reconsider. As foreclosures rise, and more Americans are impacted by the economic downturn, the public outrage with the ongoing efforts to bail out the lenders who willingly participated in promoting the suspect practices is bound to explode. That may preclude politicians from pouring cash into the coffers of their brazen benefactors.

I keep referencing the Savings and Loan scandal of the late 80’s in order to explain the scope of the situation. While it provides a useful example, it fails to illustrate the fact that the current fiasco will not only cost the taxpayer in terms of the governments funds needed to underwrite the lending industry’s losses; it will result in an across the board decline in consumer wealth as a result of declining home values. At the same time, consumers will be forced to overcome the other obstacles that accompany periods of economic malaise.

In the end, this crisis will be far more injurious to the individual and far more insidious in revealing the complicity of our elected officials. Those who have built their political careers upon opposing the expansion of the nanny state are about to undertake one of the most egregious examples of corporate welfare we’ve ever witnessed.

If this alliance is allowed to exist, voters can expect the big wheel to become a steamroller aimed at flattening all that stands in the way of further capitulation to the almighty corporation. As of this moment, there are at least 58 senators who are willing to allow the crushing of their constituents.

It’s not only time to silence the squeaky wheels, it’s time to deny them access to the grease. More importantly, it’s time to send a much needed message to their hypocritical enablers. Unlike many Americans, I’m certain these pandering politicians will have homes to return to once they’ve been thrown out of the drivers seat.

Cross-posted at Thought Theater

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