It's about time...

Citi to modify $20 billion in home loans

While the Bush Administration and Henry Paulson were chomping at the bit to spend billions of tax payer dollars bailing out banks and other financial companies, no one seemed to be talking about the most obvious solution to the problem facing banks and home owners close to foreclosure. If the homeowners can't make their current payments due to a hike in their adjustable rate or some other financial hardship, it means they will end up foreclosing on their house. If a large amount of homeowners foreclose on their houses, banks stand to lose a lot of money (as evidenced by the past couple of months). So it would seem to me that both the homeowners and the banks have a lot to gain by working together towards a solution. Rather than the banks carrying a ton of bad loans, they could rewrite a lot of these loans to make them more affordable for homeowners, meaning they would take a hit, but not nearly as bad as they would if all of these homeowners foreclosed.

I think this is the strategy the government should have been pushing from the beginning. This housing crisis is partly the fault of borrowers not knowing their own limits, and lenders preying on uninformed consumers. Why the taxpayers are getting the bill for this is beyond me. I really hope when the Obama administration enters office they turn this situation around by forcing more of these banks to adjust the mortgages of struggling homeowners, especially if they were seedy subprime loans. There is no reason we should bail out companies who don't know how to operate. If we're going to abide by the free market in good times (when these companies were making money hand over fist), we should abide by the free market in bad times too.