What Does The Fed Bailout Of Bear Stears Mean To You?

Why is it that the Fed rushed to the aid of Bear Stearns, worked all weekend, and came up with a solution to the problem. Yet they cannot come up with a solution to solve the mortgage crisis. It seems to me that several million homeowners facing foreclosure and several million more in dire financial straits is quite a bit more compelling that one investment bank.

Although the number vary, between 2 and4 million Americans are expected to enter into foreclosure in the next 2 years. If that were the only problem, it could probably be handled. However, that is not the only problem. What about the neighborhoods located near these homes? What about the values of the homes of people living nearby? Who will maintain these homes? Who will make sure they are not vandalized? Who will pay the taxes on these homes?

Recently, Congress promoted a bill to allow bankruptcy courts to modify home mortgages on debtor’s primary residences. This bill was shot down while in the Senate. Additionally, President Bush stated that even if it came to him in the form of a bill, he would veto it. Even more recently, Congressman Barney Frank from Massachusetts developed a plan to stem the wave of foreclosures. Last night, I heard the political pundits bashing this plan while I was driving home, it seems that they have a real hard time letting anyone deal with a foreclosure problem other than the mortgage company.

This idea of letting the government and the mortgage companies handle matters is getting out of hand. Our once thriving neighborhoods in Southwest Florida are disappearing. Now, we are living in a sea of for sale signs. On the commercial side of the coin, we have over-built by a factor of 20. Although this issue hasn’t been dealt with yet, I anticipate that we will see our commercial real estate values drop as well.

So what happens if the Fed continues to bail out the big investment banks and forgets about the little homeowners. Well, I predict that Southwest Florida will suffer tough economic times for much longer than we should have. The President and Congress can take a bold stroke and allow the Bankruptcy Courts the ability to level the playing field for the homeowners. With one stroke of the President’s pen, we can do more for more homeowners than a 1-800 number can do.