Put another way, Wall Street got a financial parachute for it's role in the creating the market crash. The homeowner, however, is told to pull himself up by his cement bootstraps.
But wait. It gets even worse. Check this out.
After stabilizing their financial position with a taxpayer funded bailout some of Wall Street's biggest financial institutions have created a new money-making scheme - they are now bidding on the tax debts of strruggling homeowners. If they win the bidding process they then turn around and sell the debt elsewhere.
Making money on homeowner debt is really pretty simple. Here's how it works.
1. Once a financial firm has purchased a tax lien debt of, say, $5,000 Wall Street's finest add interest charges and fees to the debt amount (just like they do with credit card debt).
2. If the homeowner can't pay the new debt amount (of say, $10,000), the financial institution forecloses on the home. This is done rather quickly, especially if the home has equity. This has become extremely easy now with our collapsing foreclosure standards.
3. Once foreclosure happens Wall Street's financial firms then bundle up and sell thousands of these tax debt contracts to investors (as securities), selling or extracting the equity from the house to pay 7-10% interest (and pocketing what remains).
You know, when people like me said we need to take over struggling banks (instead of stuffing them with trillions of bailout dollars) critics said that this couldn't be done because it was socialism. And besides, we needed to keep banks afloat or else the entire system would sink ...
Tell me, if taking over a troubled bank with mounting debts is called socialism, what should we call taking over a struggling debtor's home who had their tax debt sold out from under them? Lawful racketeering?
Just asking ...
- Mark
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