To prevent 1.5 million U.S. homes from facing foreclosure, the Federal Deposit Insurance Corp. made a proposal Friday for lenders, backed by the government, to modify struggling borrowers' loans. A New York Times reporter discusses the agency's plan plus resistance from banks and the Treasury.
Read the Full Transcript
Help for homeowners in trouble was also the focus of a new proposal from the FDIC today. Margaret Warner has that story.
The proposal, laid out on the FDIC's Web site today, would modify more than 2 million at-risk mortgages. Lenders would agree to modify the terms of loans for struggling borrowers to reduce their monthly payments.
In exchange, the government would guarantee to cover half of the lender's loss on homeowners who defaulted eventually anyway. The proposal would cost roughly $24 billion.
It's being promoted by FDIC Chairman Sheila Bair over the opposition of Treasury Secretary Paulson.
Here to tell us more about the idea and its prospects, we turn to Charles Duhigg, who has been covering the housing crisis for the New York Times.
And, Charles, welcome.
You heard — I think you could hear that tape, the Treasury official, Kashkari, saying they're doing all they can for homeowners. What's the essential difference you take away from the approach that Sheila Bair is advocating versus what Treasury and Fannie and Freddie have been doing?
CHARLES DUHIGG, New York Times:
There's a basic debate going on right now in Washington, D.C., between whether Wall Street should be helped or homeowners should be helped.
The truth is that Wall Street has been very easy to demonize. They made a lot of money over the last decade. But there's a general agreement that Wall Street, the health of Wall Street and the health of banks, is essential in repairing the economy.
On the other hand, homeowners are very easy to sympathize with. A number of people are being foreclosed on. They're being kicked out of their homes. But it's less clear that any individual homeowner or even large groups of homeowners are essential to the nation's economic health.
And so there's a debate going on right now about whether the U.S. government should be using taxpayer dollars to help banks and Wall Street or whether we should be helping homeowners stay in their homes.