This is an open letter to President Obama. We request that he modify the banking industry to protect the home mortgage system. Wall Street has masterminded much too much unnecessary speculation and commodity dealing that has undermined home ownership in America.
The current state of affairs in the housing market is unacceptable and unnecessary. I believe there is no question that the meltdown of the mortgage market and then of Wall Street can be blamed on the unsupervised and reckless use of Collateralized Debt Obligations (CDOs). Information on these peculiar devices can be found all over the Internet and we have discussed them in the past here at Zycon. It is quite apparent that the SEC and the Congress is unable or unwilling to regulate the unscrupulous financial gurus of Wall Street. If the Wall Street boys would play only with rich investor's money like Mr. Madoff, they could be left to the supervision of the SEC and Congress. They won’t though. Wall Street has manipulated American Home Ownership to the point that millions of Americans are in danger of becoming homeless, or of never being able to afford their own home. We recommend a fix that would end Wall Street’s uncontrolled play session with American home ownership.
The Government of President Obama should either, through legislation, or a Constitutional Amendment turn control of Mortgages to the States. The problem with home mortgages and the treatment that they have received on Wall Street is that home mortgages are looked upon as a commodity no different than corporate bonds or pork bellies. Homes are more important than pork bellies. Originally, home mortgages were exclusively handled by a local bank. That local bank had a real interest in the community. The banker lived in the same community as the home owner and cared if the home would go into foreclosure. A boarded up home in Detroit had an impact even on a banker living in the Detroit suburb of Grosse Pointe Farms.
With time, banks have consolidated and gotten bigger. Often today, banks are world order players with no local connection other than a vacuum to suck money away from the local community and concentrate it on the East or West coast or in Germany. Even worse mortgages are packaged and sold to wholesalers or to other banks that bundle them into CMOs. If you have ever tried to discuss a troubled mortgage with a Mortgage Service Company or a successor bank, you realize they have no interest in helping the home owner, only collecting a debt. You are more likely to have a positive result negotiating with a loan shark than a mortgage service company.
So why can’t mortgages be given back to the States and have control of home ownership made a local responsibility; the Commerce Clause. Any act of commerce that affects interstate trafficking is under the thumb of the Federal Government. Federal control as a theoretical proposition looks great. However, we have had a real time experiment the past fifteen years with the opportunity to measure the quality and care that Federal control puts into sensitive subjects like home ownership. No matter how honorably the Feds start out, with time the Feds always go with the smart money. They know who will and who won’t contribute to their election funds. They backed the largest banks and international money managers giving them everything they wanted and as icing on the cake they did away with all oversight and regulation. It is theory no longer. We know that Federal control has done very little beneficial for the home owner and many wonderful things for the boys on Wall Street. In the past fifteen years, we have seen Foreclosure rates soar to heights reminiscent of the Great Depression of 1929, while Wall Street profits and bonuses have soared much higher.
President Obama, you claim to represent the people and you want change. Please give power back to the people and change the control of home ownership away from the boys on Wall Street and back to local government. It certainly can’t be any worse than the results we have had the past fifteen years.