Obama Has To Shake The Money Tree

On Wednesday, 30 days since he took office, Obama finally acknowledged the root cause of the financial and global economic crisis: America’s foundering real estate market.

The new president revealed his latest bailout plan in Phoenix, Arizona, former rival John McCain’s hometown, where many homes have lost nearly half their value and hundreds of thousands of them have already been repossessed.

Obama wants to make $75 billion in tax money available to enable cash-strapped homeowners to refinance their mortgages and ensure that interest rates remain low, thereby saving threatened borrowers from eviction via repossession.

It’s a risky step and one not particularly popular with many Americans, namely those who have been honestly and valiantly paying their bills and now can’t understand why their tax money should be used to help those who bought houses they couldn’t afford and lived beyond their means.

Many are asking why they should be responsible for the mistakes and recklessness of others – and whom they’ll be asked to bail out next. There appears to be a money tree right next to the Oval Office on which an endless crop of dollars grows, dollars for Wall Street gamblers, for poverty-stricken banks, for states going broke, for rotting infrastructure, for the automobile industry, and now for the home owner, too.

As soon as anyone packs his suitcase full of greenbacks and takes them home, he’s back again the next day asking for more because he didn’t get enough the first time around.

But Obama seemingly has no other choice. If he wants to get the economy moving again he first has to get control of the real estate crisis. Because the housing market has collapsed, the banks are sitting on a pile of worthless securities.

That’s why entrepreneurs and others can’t get loans, can’t invest, can’t pay wages, can’t buy automobiles on credit and can’t afford to send their children to college.

Everything is interconnected – and people’s homes, the centerpiece of the American dream, have been at the center of the catastrophe right from the start. The dream has evaporated because their homes have sunk so drastically in value.

But homes and their increasing value have been America’s life insurance. When the home decreases in value, a new car, a vacation, a larger house, a child’s education can no longer be financed. In the past, when a homeowner got into financial difficulty for whatever reason, he was able to sell his house and buy a smaller, cheaper one or perhaps negotiate a new, more affordable mortgage with his bank.

That’s not the case today because, in many cases, the mortgage is higher than the market value of the house. Beyond this, if you haven’t sworn an oath of disclosure, your bank won’t even talk to you. It turns a deaf ear toward anyone able to scrape together the money for a loan no matter what difficulties they’ve gone through.

The real estate crisis has a broad ripple effect. Wherever properties have been repossessed, the value of neighboring properties suffers as well. Where houses stand empty, they’re broken into and are taken over by drug users. The fear of eviction damages families and divorce rates climb, as do rates of alcoholism and substance abuse.

In such emergency conditions, Obama has to shake the money tree – even if some find that unfair.