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 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.