It’s official: small businesses, community banks, and most homeowners facing foreclosure are up against a wall with no place to turn. Throughout this entire credit meltdown, I have done my best to evaluate every event objectively, looking for positive paths to success for individuals and businesses in spite of the depressed economic environment. The latest pronouncement from Treasury Secretary Henry Paulson declares no community banks, no individuals in foreclosure, and no small businesses will be helped by the $700 billion that most of us thought was intended to right some of the wrongs caused by the mortgage meltdown.
Now I am officially torqued! Partly because I have found the deregulation-focused, mega-bank supporting, Main Street ignoring economic behavior of the Bush Administration to be unconscionable for a long time. Partly because I cannot understand why Congress continues to fall for the bogus promises coming from this White House. And partly because I wanted to write a positive, uplifting column this week.
By electing the first African-American president, we created a sociological milestone to be honored in our history for generations to come. This should be a time of wrapping up the old while celebrating the new. We chose a new president with a deep-seated understanding of the challenges that accompany diminished income, a person who comprehends survival struggles and is committed to helping those who have been dissed by Bush, Paulson, et al. This election was a clear vote to turn away from current economic policies.
As a political and credit wonk, I hoped the $700 billion capital infusion would provide enough crisis mitigating duct tape and baling wire to hold financial institutions together and re-structure a significant chunk of mortgages over the next few months.
Since the emergency bailout was not based on any considered economic theory, no one knew whether it would work. As with everything related to these bozos-in-charge, who have effectively destroyed our nation’s economic strength, they have failed to live up to promises of help for real Americans. The U.S. Treasury has only provided bailout funds to the nation’s largest financial institutions and, in typical Bush style, the Administration refuses to tell the American people which banks have received help or how our money is being spent.
Now that the country has elected a president who believes reform means helping real citizens throughout the whole real country, we see some major banks adopting plans to re-structure loans. However, the lack of requirement for lenders to take action to help mortgage holders on the verge of foreclosure seems painfully wrong. In addition, financial institutions are not required to use our taxpayers’ bailout funds to lend. Most banks continue to hoard the billions they’ve borrowed from Treasury while credit availability remains severely limited. As usual, there is precious little trickle-down trickling.
For anyone who is on the verge of foreclosure by a bank that refuses to re-work your loan, the situation is tragic. If you’ve exhausted all available foreclosure abatement options and you are able to hold onto your house for another three or four months, new standards might be enacted to stop the coast-to-coast foreclosure bedlam. By hanging on until after the Obama Administration takes office in late January, it’s probably safe to believe new policies will be instituted. However, new regulations do not usually activate instantly.
For small business owners, who have had your line of credit cancelled through no fault of yours, try every bank in your area – large and small – for a loan or new line of credit. Some banks are lending. Examine every resource. Simultaneously, know some of the country’s most stable corporations cannot secure credit now. If you have a clean credit history, please don’t think your inability to secure a loan reflects negative judgment about you or your business.
I understand that encouragement does nothing when you need to cover business expenses. If you own a successful enterprise and credit is not available in your area, it may be time to ask friends and family – rather than your bank – to be your investors. Pay them a reasonable interest rate to use their money and, in this troubled economy, you may be the best investment they make.
It was my plan to deliver an inspiring, forward-looking, happy-days-are-here-again piece this week. I regret that I could not write it. After many twists, turns, and fouled attempts, I accept there is not adequate substance to support a lighthearted tale. We have voted for change. Polls indicate most of us believe we will be better off after the Obama Administration takes office. Sitting here, mired in the economic morass, I realize we can only hope.