Daily Flog: It’s so bad that capitalists plan to help proles


This is how bad the economy is: The government is finally thinking about bailing out U.S. homeowners.

Faced with a global recession of Wall Street’s own making, bankers are so desperate that even Mr. Potter is putting on a smiley face.

Even worse for them, this sudden benevolence (or least the mere thought of it) is sweeping across the globe (“West Is in Talks on Credit to Aid Poorer Nations,” New York Times).

You don’t have to be a Marxist, or even a respectful critic of some of Wall Street’s practices, to see that this new plan to help the little guy in the U.S. make his mortgage payment — to not foreclose on his house and not flip it for even more profit — is the bankers’ absolutely last option.

The only options Wall Street execs usually spend time on are the bundles of stock they hand out to one another.

Treasury Secretary Hank Paulson, for instance, didn’t leave his job as Goldman Sachs CEO for public service until he got $110 million just for stock options and restricted stock the company had given him. (That doesn’t count his bonuses, etc.)

Paulson bailed, then he bailed out his Wall Street pals, now he has to finally start bailing us out. As the Washington Post reports this morning, in “Treasury Considers Backing Mortgages”:

The federal government may start guaranteeing home mortgages to persuade lenders to ease the monthly financial burden on struggling homeowners, Federal Deposit Insurance Corp. Chairman Sheila Bair said yesterday.

The proposal, presented to the Senate Banking Committee, represents the most detailed idea yet on how the $700 billion federal rescue package might directly address the blight of foreclosures sweeping the nation.

While the federal government has adopted a series of unprecedented measures in recent months to guarantee the investments and transactions of financial firms, the FDIC’s proposal would vastly expand the role of the Treasury in standing behind the mortgages of struggling borrowers.

The plan, which won a warm reception from some senators, comes as demands grow on Capitol Hill for an ambitious initiative to help distressed homeowners, whose ailing mortgages are at the root of the financial crisis.

This follows yesterday’s shocker of Alan Greenspan admitting that some regulation of Wall Street may be necessary (“Greenspan deregulated,” Press Clips).

The plans to bail out the proles aren’t a complete surprise. It does mean that Bair has won her argument with Paulson.

The two have been at loggerheads since the beginning of the meltdown crisis. I noted October 16:

As Wall Street’s potholes widen into sinkholes, is it too late to replace Henry Paulson with Sheila Bair?

Bair, a Bush appointee who chairs the Federal Deposit Insurance Corp., has blasted the government for bailing out institutions instead of Americans in danger of losing their homes.

Remember what she said back then?

“Why there’s been such a political focus on making sure we’re not unduly helping borrowers but then we’re providing all this massive assistance at the institutional level, I don’t understand it. It’s been a frustration for me.”

Wall Street’s bankers haven’t cared much about the mortgages themselves; they’ve focused on bundling them into securities off which they’ve made astounding profits.

Now they finally have to roll up their sleeves, go down to the basement, and start shoring up the foundation — the little people strapped with big mortgages, many of those mortgages the result of the bankers’ predatory lending practices.

While they start digging us out . . .


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