Opinion from Guest Blogger Gregory Lobo Jost
How comforting to know that our government can act quickly to cut interest rates when things get bad. As markets tanked across the globe on Monday and Wall Street was spared thanks to the King Holiday, the Fed slashed the federal funds rate by 75 basis points or 3/4 of a percent this morning -- talk about fast action! And is anyone complaining about a bailout?
If such action could be taken on the hundreds of thousands of homeowners in danger of foreclosure (or already there), many Americans would be up in arms complaining about a bailout for their neighbors (even though it would help their own property values).
If you aren't convinced about how much better Wall Street bankers fare in hard times than our regular citizens, consider the huge bonuses given out this year. Despite huge losses for most of the corporations involved in the subprime lending debacle, bonuses are down only 4.7% from last year. This editorial on MarketWatch offers some interesting suggestions on what the bankers should do with their bonuses -- if they won't give them back, make them invest in the mortgage backed securities that are tanking! (Also, check out the section at the end of the article on the related protests against private equity firms.)
The Times' Vikas Bajaj has an interesting article today that gets to the root of the subprime fiasco. "Homeowners are suing mortgage lenders. Mortgage lenders are suing Wall Street banks. Wall Street banks are suing loan specialists. And investors are suing everyone." Why did lenders ever make loans that they knew borrowers couldn't repay? Because they were passing the responsibility and accountability on to others. The article doesn't mention the ratings agencies, however, who often rated securities much better than should have, partly because they were being paid by the banks issuing the securities. The New York Sun gives these ratings agencies a subpar rating.
Bringing things back closer to home, the Daily News has an article on how prevalent property flipping has been (and continues to be), and how it fed off subprime lending to inflate property values and push families into foreclosure.
On an unrelated note, the Daily News also reports that the Bronx had much fewer bedbug complaints to 311 than all the other boroughs (except Staten Island). While at first it felt great to think the Bronx finally ranks near the bottom in something bad, the numbers aren't quite as rosy for Bronxites once adjusted for population. In the 4 boroughs cited in the article, Queens had the lowest rate of complaints (1 per every 1,408 residents) and the Bronx came next at 1 per every 1,219 residents -- not too shabby, but not a first place finish like article mentions. Brooklyn (1 per 1,053) comes in slightly better than the most bed-buggy borough, Manhattan (1 per every 932 residents). The downside of looking at the absolute number of complaints instead of the rate of complaints is that none of the upcoming educational seminars on how to prevent bedbugs will be held in the Bronx.
Note: Population numbers come from the 2007 Population Estimates from the U.S. Census Bureau
Tuesday, January 22, 2008
Bailouts Come Easy for Wall Street, Not Homeowners
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