A great question and column
From
William Cohan at the New York Times
Why are banks willing to wipe out billions of dollars of the principal on loans made to corporations but — in most cases — give financially strapped homeowners the binary choice of either making the contractually agreed-upon monthly mortgage payments or face foreclosure and the loss of their home? Why do banks have a willingness to negotiate with corporate debtors but have shown only extreme reluctance to modify mortgages for struggling homeowners?
For example, when the executives of General Motors and Chrysler finally came to the realization two years ago that their companies had billions of dollars too much debt and other liabilities that they could never pay back or fulfill, they spent months negotiating with their creditors to restructure the debt and then filed for Chapter 11 bankruptcy protection to make final the agreements made with many of their creditors and to get the last, recalcitrant ones to go along.
...
Indeed, for corporations across the country, both big and small, using the bankruptcy process to eliminate unwanted debt and liabilities is such an accepted practice that we don’t really give it much thought anymore. That is the beauty of the corporate bankruptcy process (if you care to look at it that way): Creditors must acknowledge they made poor investments by taking a fraction of their original principal and companies get a second chance.
Why, then, can’t a similar process be put in place to help the millions of American homeowners who for whatever personal reasons — usually no less justifiable than those offered up by G.M. or Chrysler — are unable to make their monthly mortgage payments? Why do the corporate fat cats get a respected and legitimate way to flush their unwanted debts but individual Americans homeowners don’t? According to The Times’ Gretchen Morgenson, “Some analysts and leading economists have cited a failure by banks to provide loan modifications as a signal reason that the foreclosure crisis continues to drag on so ruinously, years after it began.” She noted that a recent report by the Congressional Oversight Panel found that some 250,000 new foreclosures are started each month, while 100,000 are completed.
No comments:
Post a Comment