Causes Of The Foreclosure Crisis And Possible Solutions

1345 words - 5 pages

In addressing the national foreclosure crisis that which we are currently enduring, we must first acknowledge the reason(s) this crisis derived in the first place. In May of 1998, a Washington Post article cites: “Over objections of other financial regulators, [Greenspan, [Rubin and Levitt]] question[ed] sic whether unregulated derivatives contracts should get government oversight like exchange-traded futures contracts do.” 1 It is an economic philosophy, according to the Post article, that [Greenspan] who left the Fed job in 2006 after an unprecedented three terms that insists that regulating derivatives would not have averted the present crisis. In private meetings and public speeches, Greenspan argued a free-market view. Self-regulation, he asserted, would work better than the heavy hand of government: Investors had a natural desire to avoid self-destruction, and that served as the logical and best limit to excessive risk. Besides, derivatives had become a huge U.S. business, and burdensome rules would drive the market overseas.2 Therein lies the problem with this notion: this philosophical, divine right of ‘the free market’ regulating itself. But is the free market truly self-regulating? (Why would one argue with an ivy-educated “expert” on free enterprise?)

Suffice to say that it is the opinion of this essayist that the market’s deregulation is precisely what brought this crisis to its apex. And which puts millions of Americans out of work and out of their homes. It should be that people are protected from the whims of experts when the risks of their espoused philosophies outweigh the proverbial payoffs. So the question remains, what do we do in the interim to keep Americans in their homes whilst they are struggling with mortgage payments due to lay-off, unemployment, or under-employment?

My solution is two-fold. First of all, I believe that banks that have received TARP funds should be required to surrender a percentage of their individual executive bonuses. A Forbes article states that 317 financial firms have received $194.2 billion in TARP funds from the U.S. Department of the Treasury since October of 2008, but only two of them—Citigroup and Bank of America were required to say what they would do with it the money.3 What exactly was done with the money?

Nine Wall Street banks doled out a combined $33 billion in 2008 bonuses to employees despite losing billions of dollars and receiving an unprecedented government bailout, New York Attorney General Andrew Cuomo said. 4 Bank executive bonuses at this crucial time need to be suspended. Theoretically, a bonus is an incentive for going above and beyond the so-called call of duty. And until Main Street and Wall Street are on more of a level-playing-field, above and beyond the call of duty is pacing executive kick backs and permitting people to stay home-bound. The monies secured from not paying out bonuses should then be flushed back into the respective bank treasury. And bank...

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