Finally, more direct steps should be made to help forestall foreclosures and insure that housing prices don't simply collapse. The Paulson bill did instruct the Secretary to take steps to renegotiate mortgages on the paper that Treasury purchases. But with many of the mortgages sliced and diced into securities, Treasury will still have difficulty getting much done. And, the bill, in a testament to Wall Street's clout, omits the fairest way to sort out the victims from the bounders: empowering bankruptcy courts to renegotiate mortgages to keep deserving homeowners in their homes and reduce the flood of foreclosures across the country.
The turmoil in Europe and the decline in the markets are being read as warning signs that delay will be costly. And Congress is likely to try to pass a version of it with cosmetic changes once more, lipstick on pigs being in vogue. But in fact, the Paulson plan deserved to fail. It exemplifies the philosophy that got us in this mess -- the assumption, as Barack Obama noted, "if we give more and more to those with the most, prosperity will trickle down to everyone else," while ignoring the reality that the pain is shooting up.
We need real investment to kick start the economy. We need an independent agency with greater power to take over and sort out the financial community. And we need greater focus on staunching the hemorrhaging of housing values on Main Street, not the value of securitized exotica in Wall Street's basements. Let's start with a bold plan that can work and negotiate from there.
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