Bank Bailouts Continue

By Art Gallagher

The Chrisite Administration announced today that New Jersey will receive $112 million in federal funds  for anti-foreclosure assistance to help struggling homeowners.

Zero percent interest deferred payment loans of up to $48,000 will be made to unemployed and underemployed homeowners for up to 24 monthly payments on their homes while they seek re-employment or complete job training programs.

While I don’t want to discount the difference this program will make for some maybe even many honest homeowners, I believe the program is more of a bank bailout that it is a homeowner assistance program.

As of last month, banks had almost 9 years of foreclosed real estate inventory on their books, according to Jeff Harding, a real estate investor and former lawyer in Santa Barbara, California.

Under the guise of helping homeowners with “loans,” the Obama administration is bailing out banks by keeping loans that would naturally default “performing” unnaturally.

What is going to happen in two years when the program runs out and some homeowners still can’t pay the mortgage, or the loan that carried the mortgage for the previous 24 months?  The press release didn’t say.

The problem inherent in the parade of bailouts is that the federal government is removing the incentives for both banks and homeowners to to solve their own problems.  It is becoming “smart business” to take advantage of government programs, for both institutions and individuals.

The more paternalistic the government becomes, the more dependent the citizenry becomes on the government, the less free and less responsible we become.

Posted: September 23rd, 2010 | Author: Art Gallagher | Filed under: Bailouts | Tags: Bailouts | 1 Comment »

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