Thom Hartmann: Now Ireland is Nationalizing the Banks

[thomhartmann]

Ask any economist - and they will tell you that the housing crisis is still very real - and it's still one of the major headwinds for our economic recovery. Yet - in the last Presidential debate - there was virtually no attention paid to this crisis and the millions of Americans who are on the verge of losing their homes. Why is that? Well - it's because both candidates know that the one best solution to the mortgage crisis is to make the banksters take a hit. And - as anyone who's familiar with post-Citizens United politics knows - if you're in favor of a policy that's gonna hit Wall Street - and you want to be elected to political office - then you need to keep your mouth shut about it. And that's exactly what both men did.

But in Ireland - they're not afraid of the banksters. This year - the Irish government is expected to pass a law will force the banks to write down principal on their home loans, which will substantially lower monthly mortgage payments for struggling homeowners. Of all the nations hit by the global housing crisis - not a single one has taken bold steps to help homeowners at the expense of the banksters. But Ireland is trying to change that now. Here's what they're doing. They're changing their bankruptcy laws to make it easier for struggling homeowners to walk away from an underwater home mortgage. And when a homeowner declares bankruptcy this way, the bank gets nothing.

So, faced with the threat of bankruptcy - and getting nothing - banks will suddenly have a lot of incentive to lower principle owed and thus reduce the monthly mortgage payments for homeowners. That way - Irish people can stay in their homes - and the banks will get at least some money. As Ireland's Justice Minister said - "This legislation gives homeowners hope for their future."

Iceland has taken similar measures since the 2008 meltdown. After taking control of their banks - the Icelandic government has forgiven loans belonging to more than a quarter of the population - and today the Icelandic economy is expected to grow 2.4% this year - compared to just .2% in the rest of Europe. The proof is out there - helping homeowners instead of banksters is good for the economy.

So let's talk about the United States. Remember in 2008 - we were told by Bush and Treasury Secretary Hank Paulsen that everything was going to collapse unless we wrote a big fat, no-strings-attached bailout check to Wall Street? That we had to bail out Wall Street so that Wall Street could then turn around and bailout Main Street? They actually did it TWICE! And, we now know, that didn't work out too well for anybody except the banksters.

Wall Street took their bailout money, banksters paid each other massive bonuses, started gambling in the market again, and the homeowners were left out of the equation. When the Obama Administration pushed through legislation to give the states money to help their citizens write down the principle on their mortgages, virtually all of the Republican-controlled states used that money to pay for tax cuts for rich people, and average homeowners saw none of it. And when Democrats proposed legislation to stop that practice and really help homeowners, Republicans blocked it in both the House and the Senate, because helping out homeowners might have had a political benefit to President Obama.

So here we are today - Wall Street is doing better than ever and Main Street is still drowning in foreclosures. The problem is - we didn't do what Iceland did and what Ireland is about to do - and that's help homeowners. In fact - that's exactly what Franklin Roosevelt did in 1933 to deal with a very similar housing crash to the one we're dealing with today. During the housing bubble in the 1920's - banks handed out a bunch of three-year and five-year mortgages to Americans who were riding high on the bubble of the Roaring 20's. But after the housing market collapsed, forcing the nation into a Great Depression in the early 1930's - those three- and five-year mortgages suddenly came due and homeowners could no longer afford them. And, just like today - banks were unwilling to write new mortgages. So - also - just like today - foreclosures began skyrocketing across the nation.

That's when Roosevelt stepped in and created the Home Owners' Loan Corporation. The HOLC, as it was called - was given the power to issue new loans to homeowners on the verge of foreclosure. It took the existing three and five year mortgages - and radically lowered the monthly payments by turning them into 15-year mortgages. This HOLC program only issued new loans for 3 years between 1933 and 1936 before effectively being shut down. But that was all it took to stem the housing crisis back then - just three years.

Today - we're five years removed from the housing bubble bursting - and no one in Washington seems to have a damn clue about how to help homeowners. But history - and the examples of Iceland and Ireland - tell us exactly what we need to do. We know how to do this - but it means, in all cases, denying the banksters a few years of their billion-dollar bonuses. Wall Street’s gotten enough favors over the last 4 years - American homeowners need help now.

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