Beneficiaries for Bail-out Package Unclear: Foreclosures or Banks?

by on Foreclosure Crisis

The $700 billion bailout funds, named the Troubled Asset Relief Program (TARP), was promulgated by Congress a few months back in an attempt to lift the country out of its current predicament brought about by the financial crisis. Experts have reported that the root cause of the financial crisis was the increasing foreclosures that resulted from defaults on subprime mortgages.

Logically, people were thinking that the bailout package was intended to “bail out” homeowners in trouble of losing their homes to foreclosures. Treasury Secretary Paulson proved these people wrong.

The first announcement from the Treasury Department was that the fund will be used to purchase securities that are backed by mortgages which basically placed banks in the rut due to the increase in foreclosures. Only a few people supported this decision. The majority, however, was right and Secretary Paulson backed out from this initial decision.
The second announcement, barely a week after the first one, told people that the fund will be used to buy investments from banks and stabilize the financial market. Congress questioned this move, and was expecting that part of the fund will be used to help homeowners prevent foreclosures.

However, Secretary Paulson, with a White House go signal, announced that the fund will not be used as an “expense” and buy-out troubled loans to stop foreclosures. He said that the fund should be used to “invest” instead and defended the administration’s stand in using $290 billion from the TARP fund to purchase no-vote assets from banks. Another $40 billion was already used to salvage the insurance giant AIG. Zero dollars went to homeowners desperate for help on foreclosures.

Several communities, sectors and even legislators criticized the government for their lack of support in providing a direct assistance to homeowners in trouble. Various groups have already approached Capitol Hill and the White House in a bid to urge the government to make use of taxpayer’s money to help these troubled homeowners. All these homeowners can do right now is wait and hope for the best.