ALG Urges Congress to Vote against Bankruptcy-Mortgage Cram-down

March 2nd, 2009, Fairfax, VA—Americans for Limited Government President Bill Wilson today urged Congress to vote against H.R. 1106, a bill that gives bankruptcy judges the power to reduce mortgage principals and rates, “and as a result, have U.S. taxpayers pay.”

Wilson, in a letter to Congress last week, warned that the legislation would further weaken and distort the housing market.

In a comment on the impending vote in the U.S. House of Representatives, Wilson said, “It is downright obscene to force hardworking families who have paid their bills to now be forced to pay a part of a mortgage for someone who did not or would not pay their own way. By turning to bankruptcy judges, the politicians in Washington are hiding behind the judges’ gowns. They know this is wrong. They know the American people will not tolerate hyper-welfare of this sort. So, they have judges do the dirty work for them.”

“Members of Congress cannot hide. If they support this outright larceny, American for Limited Government intends to remind the public in their districts loudly and often of their betrayal,” Wilson added.

In his letter to Congress last week, Wilson wrote, “The change in law will also take negotiations over troubled mortgages out of the hands of lenders, reduce incentives for investors to back mortgages, and clog up bankruptcy courts. It will force banks to eat the costs of the cram-downs, who in turn will have to tap more of the taxpayer-funded TARP to recoup losses,” wrote Wilson in his letter.

Wilson also warned that the bankruptcy courts would become overwhelmed with a tremendous caseload if the legislation is enacted, “In 2008, approximately 2.3 million homes faced foreclosure, and now the Administration warns that as many as ‘6 million households [are] facing possible foreclosure.’ But, there are only 368 bankruptcy judges nationwide.”

Wilson explained, “These courts will likely be overwhelmed in short order with the housing market as weak as it is, and the introduction of bankruptcy proceedings into the mix will on further ‘toxify’ assets that cannot be valued.”

The letter, which is critical of President Obama’s overall $2.8 trillion financial plan, also criticizes his mortgage refinancing plan because “It remains unclear under the President’s $275 billion mortgage refinancing plan which homeowners will ultimately qualify for assistance, which homes will eventually be foreclosed upon, and therefore what the value of the mortgage-backed securities really are.”

Wilson believes that the problem of pricing securities will only be “compounded, in particular, by the legislation now being proposed—H.R. 1106…”

Last week, ALG launched StopBailouts.net, an online petition in response to the President’s financial plan and to urge Congress to halt what ALG President Bill Wilson termed the “greatest theft in human history.”

“Now, the Obama Administration wants the American taxpayer to once again take responsibility for the irresponsible by committing more than $2 trillion to keeping delinquent borrowers in homes they can’t afford and bailing out banks that were forced by government to make the bad loans in the first place,” Wilson added.

Several economists, financial analysts, and policy makers have noted that “easy money” from the Federal Reserve, coupled with excessive lending and a record expansion of credit, fueled the housing bubble.

Wilson believes that there is increasing frustration on the part of taxpayers and homeowners “who play by the rules and bear no responsibility for the errant government policies that fostered the financial meltdown.”

Wilson is urging angered citizens to take action in addition to signing the petition by contacting their Representatives and Senators.

“Congress can help put a stop to all of this nonsense, but members will only do so if their constituents keep up the pressure,” said Wilson.

“Ultimately, Congress needs to decide if it stands with the American people, or insists upon robbing them to pay off delinquent borrowers and irresponsible lenders,” Wilson concluded.

Interview Availability: Please contact Alex Rosenwald at (703)383-0880 or at arosenwald@getliberty.org to arrange an interview with ALG President Bill Wilson.

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