Bailout Plan Lacks Much

After what passes for soul searching among Congress, the House now joins the Senate in passing what they are calling the Emergency Economic Stabilization Act (H.R. 1424).  The legislation passed by a vote of 263 - 171.  And Bush is excitedly expected to sign the legislation into law within the next few days.  One has to wonder if he will salivate... this is yet another in his tax payer funded 'give aways' to the wealthy.  Oh, can you hear the sighs of satisfaction among the wealthy wall-streeters?  No tough love for them.

But alas all is not right in Camelot.  This legislation (and eventual law) lacks support for many and helps out only a few, and therefore does not immediately halt the foreclosure crisis and its effects on so many Americans.  Yes, it does help shore up some banks and investment firms but what about additional help for the average American?

What is needed you say?

1. Stronger Loan Modification Language.  This is a must!  Any bailout legislation would need to provide a clear mechanism to systematically modify loans held in securitized pools and should provide guidance as to what loan modifications are reasonable.  The economy needs support and this would go quite far in establishing that.

2. Accounting Procedures Need to be Changed.  The legislation must address accounting rules or the tax implications that might accompany loan modifications and challenges presented with second mortgages.   This would help millions of American home owners and future home owners.

3. Anti-Predatory Lending Provisions must be Adopted.   Procedures and provisions would need to be added to ensure that unfair and deceptive lending practices (which created this crisis) not lead to another foreclosure crisis in six months or a year or two.  Action on this front would close several loop holes in which unscrupulous lenders created many of the problems by creating terribly unfair loans with extremely high interest rates and devastating balloon payments.  

4. Bankruptcy Protection Provisions for the Many.  Any so-called bailout legislation would need to amend bankruptcy laws to allow magistrates and judges to modify the terms of primary mortgages for home owners, as is currently allowed for investment properties but not for actual home owners.

And these four points are needed at a bare minimum in my humble opinion.  But none of these issues are addressed in the current effort for the rich.  Stay tuned for more roller coaster rides on the Bush mangled American economy.