While all the signs of a perfect economic storm are registering more and more clearly, Bush admin is waffling and barely waking up, while a single lone Republican senator is blocking even minimal intervention.
U.S. Treasury Secretary Henry Paulson expects the mortgage problems lenders face to be so great, that companies will be unable to process them all on a one-on-one basis. He told the Wall Street Jounal, in an interview,
"We're never going to be able to process the number of workouts and modifications that are going to be necessary doing it just sort of one-off," Mr. Paulson said. "I've talked to enough people now to know there's no way that's going to work."
In the next year, two million mortgage loans are due to drastically increase their interest rates, potentially leading to hundreds of thousands of defaults.
The momentum for a new approach received a boost yesterday when four major mortgage-loan servicers, including Countrywide Financial Corp., and California Gov. Arnold Schwarzenegger agreed to endorse a plan for temporarily freezing interest rates to help borrowers in good standing from facing foreclosure when their loans reset to higher interest rates.
Paulson has not yet come around to this approach, though he is warming up to it, as the WSJ reported,
While he stopped short of endorsing a proposal by Sheila Bair, chairwoman of the Federal Deposit Insurance Corp., to have mortgage companies freeze the interest rate on the two million mortgages due to reset to higher rates between now and the end of 2008, he said that's "one idea." Mr. Paulson said he supports finding some way to develop "standard criteria that's going to allow for modification and workouts."
Paulson has blamed congress for not moving on this, focusing on Republican senator Tom Coburn, who has blocked approval of fed sponsored entities, Freddie Mac and Fannie Mae, to start purchasing bigger "jumbo mortgages" bigger than $417,000.
Coburn has blocked a bill that addresses the mortgage crisis in the senate, arguing that it could cost the US as much as $1.6 billion over years to come. Considering that already, companies have registered losses of tens of billions of dollars, this has to be having people asking whether Coburn is being pennywise and pound foolish.
In the UK, the ravages of the collapse of the housing market are still very evident after four years. The US is in the early stages of an economic cataclysm that will get far worse. People like Coburn are dangerous, and WILL aggravate an already very bad situation.
Congress must take aggressive strong action to protect the middle class. Failure to do so will worsen the US economy, lower the value of the dollar and decrease other nations, particularly those holding trillions in US debt, trust in the US. Be assured, the mortgage and housing crisis will produce cataclysmic consequences that every household, even the most wealthy, will feel. Free trade policies applied by neocon sociopaths and the naive dupes who believed their fantasy fiction based on failed theories will, through Global piracy orgs like WTO, NAFTA, CAFTA and the like, continue to cannibalize American industries, jobs and economies.
Right wing policy has produced record debt that the US may never recover from. The Democrat led congress should be putting as much time into dealing with the developing economic disaster Bushco started, with his advisors neocon policies, as they've put into worthless, bogus end-the-Iraq-Occupation theatrical gestures. They need to go far beyond passing legislation, as the house has done, which stops lending that produces the situation we already have. It's like shutting the door on the cage after the lions has already escaped.
Now, we are experiencing the feeding frenzy. But no one is winning or enjoying this frenzy. That happened before, when all the loans were made. Now, we must face the indigestion of a national economy that has eaten poison. The congress, since Bushco is proving unable, must pass legislation that faces the reality that the US is at the brink of a disaster that could forever cast it into economic oblivion.
The Dem congress has been refusing to impeach and refusing to block funding of the military to end the war, claiming the need for the 60 votes in the senate. It is time for them to put everything ON the table, including taking dramatic action to rescue the US economy. The Dems should force the right winger impeders, like Coburn go out on the limb and hang themselves by blocking serious efforts to do something about this impending economic disaster.
