Banks, Builders, the Economic Mess, and how taxpayers are footing the bill

Update on housing and mortgage industry's role in the economic mess, and how industry lobbying for more dangerous new laws aimed at benefitting the industry could make things worse for the rest of us.

See also earlier week's news posts about builders wanting an even bigger--$25,000--home buyers tax credit. Some news articles stop short of reporting the whole truth, implying builders are actually against extending the already unpopular, failed, expensive $8000 tax credit. The other half of the story is that the industry is not against the tax credit, but just isn't spending its lobbying money on mere extension of it, unless it will be even BIGGER.

Today, an update about HR 5409, the home building industry's legislation to get the government--i.e. taxpayers--to back builders' construction loans, when many such loans have defaulted, contributing to the economic problems.

BACKGROUND ABOUT HR 5409 FROM THE NATIONAL ASSOCIATION OF HOME BUILDERS WEBSITE:

"Legislation Addresses Housing Production Credit Crisis"
May 27, 2010
QUOTE: "H.R. 5409, the Residential Construction Lending Act, would create a new residential construction loan guarantee program within the Department of Treasury to provide loans to builders with viable construction projects." Full article: http://www.nahb.org/news_details.aspx?newsID=10826

CURRENT: (This is one of many articles that have been in the news noting that failed loans to developers have taken out banks and played a role in the economic crash. With the government backing the loans, banks would have LESS incentive to worry about likelihood of ability to repay it.)

Sep. 8, 2010:

"Federal commission hears Bakersfield's woes"

QUOTE:

When asked about mortgage fraud in the local market, Cattani said what was going on here was "pure lunacy."

"I think the lunacy created the fraud," he told them, adding: "The system was screwed up."

The local market was being driven by "extreme speculation," Cattani said. Bakersfield had lots of raw, cheap land and builders could get approvals here quickly.

And, he said, "foolish banks (gave) builders the money to do it."

Full article: http://www.bakersfield.com/news/local/x632655763/Federal-commission-hear...

HOW YOU CAN TAKE ACTION:

CONTACT YOUR CONGRESSMEN ABOUT HR 5409: Link has info to contact your U.S. Senators and Representatives: http://www.usa.gov/Contact/Elected.shtml

Don't let an industry that helped create a housing bubble and economic bust tell you that what's good for the industry is good for America. Haven't we already seen enough of the perpetrators bailed out at taxpayer expense?