New Orleans Watching the banks back track and squirm in Spain over foreclosures that ended in several well-publicized suicides that are now roiling the political establishment in that country is a good lesson in how financial institutions can actually be moved when political will begins to coalesce. In the USA we certainly do not seek dramatic suicides, but it would be wonderful in the wake of the recent election if we could finally build the political weight to offset the banker’s financial interests, contributions, and army of Washington lobbyists.
The headline in the Wall Street Journal oversells the Spanish action (“Spanish Banks Freeze Foreclosures”), but still spoke eloquently to the Spanish banks’ recognition in their foreclosure crisis that they had to spin another way, rather than continue to flip off mortgage holders and foreclosure victims which has been the standard USA operation procedure. The banks there claim that they will “suspend” foreclosures for two years due to “humanitarian reasons” when homeowners are “in extreme financial need.”
They had little choice and this voluntary offer might not be enough to meet the political crisis in Spain over this issue. Both of the major political parties have come together, as we have noted elsewhere, to revise bankruptcy laws, which are the impediment in refinancing in Spain, just as they are for many here in the United States, to allow homeowners to reorganize to the market values, which is also a huge part of our crisis. Advocates there are arguing that “the government should implement a law halting all planned evictions of indebted families acting in good faith,” which also sound like a great step forward.
With Geithner finally on his way out at Treasury and the likelihood of removing some of the officials that are standing in the way of restating home values to market in the name of “moral hazard,” even though Wall Street and all banks have eternally sworn off moral hazard for their own accounts years ago, it is worth seeing the issue of housing being part of any agenda for potential bipartisan activity. It can’t be wrong to finally make bankers accountable to the government. It can’t be wrong to finally hold banks and mortgage holders accountable for wrecking the economy and setting back the prospects of “citizen wealth” for millions of families.
Spain is showing the way we need to move. Now is the time!