Opinion » Ted Rall

Foreclose the Banks

How to give America its best Christmas ever


NEW YORK--Citibank is suspending foreclosures and evictions for 30 days.

Who knew bankers could be so amusing? In an interview, Citi mortgage czar Sanjiv Das acknowledged that "moratoriums are not permanent solutions" and said his company was looking for "long-term fundamental alternatives" to throwing people out of their homes.

There's one "long-term fundamental alternative" that is righteous, makes sense and legal: Let's foreclose on the banks.

First, let's go back to February. President Barack Obama's TARP program doled out hundreds of billions of federal tax dollars to gangster capitalists like Citibank and Bank of America, which charge $4 for using ATMs and 29.99 percent interest on credit cards.

The big banks were supposed to buy back "toxic assets" backed by home loans, thus loosening the mortgage credit market. In fact, the Los Angeles Times reported a few days ago, "The fund has done little to address that problem directly." Instead, the feds bought bank stock at over-market prices.

In exchange, the banks were expected to free up credit. They didn't. Instead, they gave raises to already overpaid executives. Now their loan officers are sitting on their hands, laughing all the way to their own banks.

Because the Obama administration didn't pressure them, the banks stonewalled the $75-billion loan modification program, which was supposed to help approximately 10 million Americans facing foreclosure. JPMorganChase rejected 85 percent of homeowners who asked for help. Citibank, which enrolled 100,000 homeowners in the program, only managed to modify 270 loans. Bank of America made 98 modifications out of 160,000 borrowers.

More lowlights: One of seven American homeowners will probably lose their homes by the end of 2010. Only 4.7 percent of homeowners who enrolled in the modification plan have gotten help. Out of Obama's $75-billion program, only $2.3 million has been spent.

No doubt recognizing political peril, Obama is now attempting to jawbone the banks into doing the right thing, even calling banking CEOs "fat cats" on 60 Minutes.

"Banks received extraordinary assistance from American taxpayers to rebuild their industry," Obama said. "Now that they're back on their feet, we expect an extraordinary commitment from them to help rebuild our economy." But there were no teeth in his demand. But that's his choice. If he wanted, he could foreclose on the banks and give desperate homeowners the best Christmas ever.

True, the Treasury Department didn't receive written assurances banks would start lending after the bailout. But it was widely understood that the government expected looser credit markets in exchange. The government could, and should, sue defaulting miscreants for breach of contract. Mercy, after all, wasn't something banks showed their victims.

Since damages would likely exceed the defendants' ability to pay, the United States could then seize the banks. The newly nationalized banks could reduce or cancel outstanding mortgages to the unemployed, sick and other worthies. They could increase credit lines and start making loans again. It wouldn't necessarily get us out of the depression, but it would be a beginning.