Dean Baker writes:
Progressives usually fight for the interests of those at the middle and bottom at the expense of those on top. However, during this period of unprecedented financial crisis, when the Wall Street rich are begging for the helping hand of the government, most progressives appear to be on the sidelines. Rather than taking advantage of this extraordinary opportunity to reduce inequality and educate the public about how the economy really works, progressive voices have been unusually quiet.
While the basic story on the economic crisis should be well known, it is nonetheless worth repeating. The Federal Reserve Board allowed the growth of an $8 trillion housing bubble ($110,000 of housing bubble wealth for every homeowner) in the years from 1996 to 2006. While this bubble was easily recognizable to competent economists, the entire political and financial establishments managed to ignore the housing bubble until it began to burst last year.
As an alternative to bailing out the banks, we can temporarily change the rules on foreclosure to give homeowners the right to rent at the fair market rate. This would provide them with security in their home. More importantly, it would likely create a situation where most homeowners stay in their house as owners, since banks would rather renegotiate mortgage terms than end up as landlords.
The Wall Street boys got themselves in a huge mess through their own greed and stupidity. Now is the time to make sure they enjoy the fruits of their labor. These are the same people who don’t think they should have to pay higher taxes so kids can get health care and childcare. There is no reason the rest of us should pay higher taxes so they can keep their mansions in the Hamptons, their private jets and retinue of personal services. Let’s leave this one to the market.