Global Economy Melts & Takes Focus Away From Foreclosure Debacle


It’s soooooo old news, isn’t it? I mean, all that stuff about people not being able to pay their mortgages and the rising population of those facing foreclosure, is so old hat now.

What is really important, after all, is the survival of big banks! At least, it would seem that way from the news coverage of the last few days.

Asia stocks drop, says one headline. Britain to unveil major bank rescue package, says another. The U.S. stock market drops for 2nd, 3rd, 4th, 5th………day . Another bank wants to buy another bank. The Feds want to rescue another lending institution…..on and on it goes.

This is the big stuff. This is what the world really is all about.

But notice what is getting lost in the discussions: the homeowner and what will happen to him.

It’s not like they are not linked. We keep being told, in fact, that the world’s credit crunch will only be resolved when the housing market returns to normal, whatever the hell that means?


Then how is it that pretty much nothing is being done along those lines?

The much rushed socialized bailout to rescue big banks went out of its way to not include any language that would allow bankruptcy courts to change the terms of mortgages, something many experts say is vital to help the housing market recover.

The housing legislation that was passed earlier this year to help distressed homeowners is hardly off the ground, because it has no way to force banks to re-negotiate mortgages. In fact, with the government now waiting to buy these bum loans from the banks, why should they re-negotiate anything with homeowners? And, in point of fact, for the most part, they are not.

Backers of the bailout say that by buying up bad mortgages and mortgage related investments, the government itself will be able to change the terms of mortgages that are on the verge of default.

But anyone who understands anything at all about this crisis knows that a large part of the problem is, most mortgages are no longer owned by the bank that issued them…each mortgage has been divided and divided again and spread across many different investments owned by many different institutions. How can the government do anything with these mortgages when it is all but impossible to find out who exactly owns them?

Further, it is this very uncertainty that is fueling the crisis of confidence that is leading the world down the road to economic ruin.

And yet, I have zero doubt that things will improve…and sooner rather than later. This is NOT the 1930s when the government not only failed to act (before FDR anyway) but felt no need to do anything.

Unlike in the 30s, even the smallest country understands this is a credit-driven world. The system will be fixed to make credit flow again simply because there is no other choice and everyone understands this to be true.

Still, the $700 billion bailout is not the best way to do this. AIG already has reportedly zipped through lots of the taxpayer money pledged only a week or so ago. This will not ease the credit crisis for sure.

Those who say the economy will not recover till the housing market does are correct. But then the game plan needs to be focused directly and clearly on achieving that goal and not on helping one bank buy another.

About Author

Charles is currently reporting for KNX Radio in Los Angeles, is the co-author of the book No Time To Think, and can be found commenting about the news on his blog, The Feldman Blog, as well as on The Huffington Post.


  1. Pingback: Housing market is key to economic recovery | Perfect Florida Homes

  2. More I am going through your post I am being a fan of your writing. I have been reading few articles about foreclosure, bankruptcy ,credit card debt. I came to know that how fast credit card debt increases due to its high rate of interest. But if the debt is handle in a organized manner then not very hard to pay off.

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