When 'Moral Hazard' applies to Wall Street, not the streeets of Elk Gove

For some time ElkGroveNew.net and it's predecessor, ElkGroveNews.org has warned about the impending mortgage mess brought on by the Fe...

For some time ElkGroveNew.net and it's predecessor, ElkGroveNews.org has warned about the impending mortgage mess brought on by the Federal Reserve and the loose-lending practices encouraged by the Bush administration in wake of the 9-11 and post internet bubble recession.

As recently as two weeks ago we urged Elk Grove political leaders to scream and holler, do something, anything, to help the hundreds of people in Elk Grove losing their homes to foreclosure. While we realize the Elk Grove City Council can't affect the prospects of most people in foreclosure (or for that matter give a damn about what this site says), there are things they could do. More on this later.

Meanwhile, the Federal Reserve has effectively bailed out Bear Sterns after a bank run with it's guarantee funneled through JP Morgan Chase. Of course this has been done after tens of thousands of hard-working American's have lost their homes and many thousand more face an uncertain future.

Elk Grove and the entire Sacramento region are at the forefront of this unfortunate trend. To bad Elk Grove Blvd. runs through town and not Wall Street.

One of the arguments against helping out homeowners is the so-called 'moral hazard' of bailing out homeowners from bad decision making. This is the same logic that Herbert Hoover applied at the onset of the Great Depression.

"It’s not government’s job to bail out ... those who made the decision to buy a home they knew they could not afford," President Bush has said.

Of course when the players involved in a bailout are well-heeled-fat-cat-cigar smoking-Gucci-shoe wearing investment bankers on Wall Street, the rules are different. The Fed and the Bush administration have justified this action based on a sort of domino-theory that if Bear Sterns collapsed it would lead to meltdown of the whole system.

Perhaps. But why has the Fed and Bush administration ignored the plight of average homeowners? If we applied the same logic to investment bankers that the government has applied foreclosed homeowners, there would be no Bear Sterns bailout.

The ghost of Herbert Hoover still haunts the government.

Let's get back to the political leadership of Elk Grove. So just what can they do?

With a general election just around the corner, why not pressure our member of congress, Dan Lungren, to support a government bailout of homeowners in the same magnitude of the Bear Sterns bailout.

They could present their concerns at Lungren's forthcoming town hall meeting in Elk Grove. Grandstanding? Yes, but if it is done to serve the needs of Elk Grove citizen's and not real estate developers what harm can it do but put the problem front and center.

I doubt any member of our city council has the courage to stand up and force at least one hard-boiled Bush loyalist, Lungren in this case, to insist on a government bailout. Gary Davis, where are those Democratic ideals (you know, fighting for the small guy and not Richistan real estate developers) of yours or are you more interested in preserving your butt for higher elected office?

Perhaps Katherine Maestas can 'Cowboy Up' and make this an issue in her bid for city council. Sophia Scherman is a firmly established Republican and by associating her with a group of know nothings in Washington DC who will bail out the big cats while regular folk flounder, particularly here in Elk Grove, she can win a seat on the city council and push our member of congress for some help. Heaven knows Sophia won't threaten her stature with the Republican establishment in seeking help for the 'little guys' in Elk Grove or for that matter the entire nation.

Whatever the outcome, let's hope somebody, anybody, on the city council can speak truth to power.

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Anonymous said...

The market is in free fall.

There were a group of families that walked away from their homes under the cloak of darkness.

"I don't think we are in a recession" Idiot in Chief.


Blogger Max said...

I'm starting to hear rumors of walk-aways in Elk Grove en masse. Reportedly, five families on one street bailed out in the under cover of darkness on various nights last week.

There are 4,000 homes that are either in pre foreclosure or already taken back by the banks.

The dollar is in a free fall.

Gasoline will hit $5 per gallon in a commuter bedroom community.

The CCSD is $50 million in the hole over the medium term future.

The City is at least $2 million in the hole for the upcoming year.

The School District has to lay off hundreds of employees.

Elk Grove is run by a Public Relations person.

Lack of planning and foresight.

Elk Grove Thriving.

Anonymous said...

I don't think the mortgage problem was caused by Bush. I think it was caused by Congress putting political pressure on loaning agencies to offer loans to those who could not afford loans. That is how no document no downpayment loans were offered. Then "clever" loan agents realized they could loan money get a commission and sell the loans to investors.

Anonymous said...

Reynen and Bardis default = potential foreclosure by the city and school district.

Now who will pay the taxes or make up for the multimillion dollar shortfall?


Beleaguered builders behind on Sacramento County property taxes
By Loretta Kalb - lkalb@sacbee.com

Published 12:00 am PDT Saturday, March 22, 2008
Story appeared in METRO section, Page B1

Print | E-Mail | Comments (21) |

Rancho Cordova-based home builder Reynen & Bardis Communities Inc. and a dozen related entities owe more than $1.9 million in late property taxes and penalties, Sacramento County property tax records show.

The taxes, which were due in December, are the latest fallout from the real estate downturn and one that has sent a ripple through the city of Elk Grove, where the unpaid taxes and penalties exceed $1.3 million.

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