The Bailout

2008-09-23
By Brian Gilmore

On a cold January night months ago when the housing crisis worsened, I stood in a room in Silver Springs, Maryland with a handful of public interest lawyers and housing counselors and heard stories from dozens of residents in the Washington D.C. area who were in trouble with their mortgages. Most of those who spoke were African-American or Latino and almost all of them had a sub-prime loan that had re-set to a higher interest rate that was too expensive for them to pay anymore.

They had been told when they purchased the loan that they would be able to purchase a new loan later before the re-set, but now they had been told that deal was off. Some had applied for a “loan modification” with their loan companies but had been denied. No deal, they were told, a deal is a deal.

With that news, they had now come to the end of the road; either we could help them, or the keys would be dropped in the mailbox and they would clear out and let the bank have the bricks. This is what came to mind when the Bush administration announced another massive bailout for the financial firms of America who were in trouble.

“This is a big package,” Bush said in his conference.

Yes it is. The names read like the financial trading history of America. Merrill Lynch - sold. Lehman Brothers - bankrupt. Fannie Mae and Freddie Mac - under federal control. AIG – a bridge loan of $80+ billion.

But all it really means in the end is the moneychangers, the financial conglomerates of the United States, as usual, have been rescued again by their best friend in all of the world – Uncle Sam. And Uncle Sam, folks, is us, the taxpayer.

But what about us? What about the ordinary consumers of America who work hard, play by the rules but who only needed a little hand-up to put their own investment mistake behind them, the one involving some lousy sub-prime loans? Don’t they deserve a bailout as well to save their home? All I say is – treat us like you did Chrysler way back in 1979 when we the American taxpayer saved that company from ruin.

There are countless stories I have heard over the last two years or so involving people that could have used a rescue too:

The woman I met who was suspended from her job for a few months without pay, who missed a payment on her house and fell into debt. She refinanced the house and took on a lower rate, sub-prime loan so she could catch up on the debt. Promises were made; sure, she was told, you can get a fixed rate loan later, and all will be well. Then the market changed, credit standards were altered, her loan re-set and she was not approved for that new loan. She lost that house.

Another woman fell behind on payments when her co-purchaser had to leave the area and live elsewhere. The woman wanted to assume the loan but at a fixed rate and under her own name. The lender refused. The loan re-set, she fell behind, foreclosure proceedings were underway last I heard. Doesn’t she deserve a bailout?

I could go on and on with the stories but anyone reading this has heard a tale of woe since the housing crisis began. What we need to hear is that the bailout will also bailout everyday consumers, ordinary citizens, and help them even if they were careless or reckless like Bear Stearns and all the others.

Of course, we had to know that Uncle Sam would fly in like Superman to save the day for the financial kings. In 1979, Jimmy Carter and Congress saved Chrysler; in 1989, George H.W. Bush bailed out the entire savings and loan industry.

Not too many weeks ago, it was Bear Stearns; Fannie Mae followed, Freddie Mac, AIG last week, and now the rest of the moneychangers will get their “get out of jail free” cards, start over, and probably recover their opulent lives.

But the little guy, will he get a few crumbs in this deal?

All of this is especially horrific for Black America because Black Americans were disproportionately sold the toxic sub-prime loans that are the source of all of the trouble. Even in wealthy counties, like Prince George’s County of Maryland, blacks likely received a high cost, default prone product. Many are stuck with these loans unless the proposed bailout provides provisions to rescue consumers as well.

The loss of wealth (equity) that is occurring right now in Black America is being reported as estimated to be over $100 billion by some observers.

The bailout of the fat cats announced by President Bush is estimated at $700 billion.

The deal is going down quick too. A draft plan was already circulating by Saturday morning. Word is it will be done by next Friday. Just in time for Congress to adjourn, blow out of town, and try to get re-elected. Will it include something for the masses?

Presidential candidate Barack Obama thinks it should. Our President, George W. Bush just says we are interdependent so the bailout has to be done.

I have no problem with interdependency. Martin Luther King Jr. said that a long time ago. But this one should not be just for the fat cats but also for the people.

Buy some bad mortgages. Save some homes, families. Restore confidence.
Just treat us like, Chrysler, baby.

Brian Gilmore is a public interest lawyer and Washington D.C. based writer. He covers law and books for EbonyJet.com.