Bush lets banks write rules for mortgage relief

President George W. Bush and Treasury Secretary Henry Paulson have unveiled their subprime mortgage relief plan, which they call the “New Hope Alliance.” The corporate media coverage of Bush’s Dec. 6 announcement was massive. Sadly, the number of families whom this plan will help is miniscule.

Subprime mortgage loans are characterized by interest rates that start at 1 percent to 2 percent but soon “reset” to much higher rates. The Bush administration claims its plan will help families avoid foreclosure by freezing interest rates on some subprime loans for the next five years.

The administration has attempted to portray its mortgage relief plan as a lifeline for at-risk borrowers. But the plan is more akin to a wish list for the very same banks and mortgage lenders whose insatiable greed helped create the currently unfolding economic crisis.

The Bush-Paulson plan includes a maze of eligibility requirements that are designed to disqualify all but a handful of the more than 2 million households facing foreclosure. Housing advocacy groups estimate that less than 2 percent of subprime borrowers nationwide would qualify for a rate freeze under the administration’s plan. And it provides no help for the growing number of renters across the country who have been left homeless since their landlords entered foreclosure due to a subprime loan.

The Bush administration has ensured, however, that the plan is agreeable to mortgage lenders and Wall Street banks by making lender participation in the relief plan completely voluntary. In other words, the banks and mortgage lenders don’t have to freeze interest rates if they don’t want to. They are likely to do so only if they decide that the housing market is so glutted that going the foreclosure route could leave them stuck with property that can’t be sold.

This hollow “relief” plan stands in stark contrast to the hundreds of billions of dollars in bailout money that the Federal Reserve has handed the Wall Street banks and investment funds over the past few months.

These bailout funds have come in the form of massive liquidity infusions and central bank purchases of collateralized debt obligations. CDOs are asset-backed securities that are tied to mortgage loans. Banks such as Citigroup and Bank of America hold this now-worthless paper in massive quantities. The Federal Reserve has been attempting to bail the major banks out of their crisis by essentially taking the worthless paper off the banks’ balance sheets.

Working-class households are entering into foreclosure and bankruptcy at levels not seen since the Great Depression, yet it is the rich capitalist investors and bankers who are given hundreds of billions of dollars in rescue funds.

Across the country, once-vibrant working-class communities have turned into near ghost towns as “For Sale” signs and boarded-up windows have become ubiquitous. Workers are also suffering under the weight of rising food and energy costs at the same time that the economic downturn is intensifying the bosses’ drive to slash wages and cut jobs. Yet the only relief plan the president can conjure up is to tell workers to “hope” that banks will voluntarily freeze interest rates on some mortgages.

Recent polls suggest that the economy is fast becoming the number one issue on the minds of potential voters in the 2008 election. Eager to garner votes, the Democrats have also been outlining proposals for mortgage relief. It’s part of a debate within the ruling class over how to smooth over some of the massive fallout from the currently unfolding crisis.

“Relief” for the working class will not come through the empty proposals of ruling-class politicians. It takes the organized resistance of the multinational working class against the banks and swindlers on Wall Street who are robbing workers of their homes. Democrats and Republicans can debate back and forth endlessly over their mortgage plans, with little consequence. But millions of workers in the streets demanding a moratorium on foreclosures, layoffs and wage cuts would create the potential for truly lasting relief.