No Bailouts for Jobless and Homeless

In the porkathon to pass the bailout bill, Republicans balked at two measures--to extend jobless benefits for the unemployed and allow bankruptcy judges to reduce penniless homeowners' mortgages.

So much for Main Street, where signs of a 1930s Depression are cropping up everywhere:

*New figures show 760,000 lost jobs this year. Of the 9.5 million Americans out of work, two million have been for more than six months. Nearly 6.1 million people are working part-time because worsening business conditions have led to fewer hours and less pay.

*With bank-account insurance increased from $100,000 to $250,000, the potential liability of the Federal Deposit Insurance Corporation for failing banks is now estimated to be $1.1 trillion. The FDIC's fund currently has about $45 billion, a five-year low.

*The number of Americans on food stamps, growing every month, was 28.6 million in June, according to latest government figures, reaching the level of late 2005, when Katrina and other hurricanes caused widespread suffering.

*Homeless families in Massachusetts motels have increased from 17 to 588 in the past year, with another 1,800 in shelters.

In my Depression childhood, everyone in our neighborhood was poor and many penniless until FDR and the New Deal began to bail us out with relief programs. In the 21st century, the government so far is concentrating on banks, investment houses and hedge funds.

We'll soon find out if the trickle-down theory works.

Home Wrecking: Victims and Walkaways

The housing crisis started out looking like a death in the family but is now resembling divorce as well. Added to the record numbers of Americans losing their homes because they can't make the mortgage payments are others who can afford to but decide to cut their losses and default voluntarily.

The category of walkaways is made up of speculators as well as new homeowners who were lured by introductory rates into buying bigger homes than they can afford.

"Some financial advisers," the Wall Street Journal reports, "are even encouraging homeowners who are upside down to consider foreclosure, which they see as a purely financial decision with limited negative consequences...(A) web site started in January that offers foreclosure counseling to homeowners advises that borrowers who default on one mortgage can typically get another mortgage between two and four years after a foreclosure. Then, 'before you know it, you will have this behind you and a fresh start!'"

As the politicians ponder ways to ease the crisis with rate freezes and subsidies, the emphasis is on the more than 900,000 households now in involuntary foreclosure, up 71% from a year ago, according to a survey by the Mortgage Bankers Association.

But as home prices continue in free fall, it will be necessary to separate the victims of predatory loan practices from those who saw a free lunch and are now walking out without paying the tab.

Fannie Mae, the government sponsor of loan guarantees, is working on harsher penalties for walking away, pursuing some borrowers in court and lengthening the time between when borrowers default and when they become eligible again for a Fannie Mae-backed loan.

"Of course, we will make exceptions for extenuating circumstances, like divorce or death," says a Fannie Mae executive. "But who we are trying to get are the people who can afford to make payments but have decided not to."