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Articles by Yosef Cohen
© Yosef Cohen 2008.   Used by permission.

As it appeared in The Post-Tribune
Thursday, July 24, 2008 - OPINION page A13

Caring banks could have prevented housing crisis

By Yosef Cohen
Post-Tribune guest columnist

"A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain." -- Robert Frost

In his book "Kennedy," Theodore C. Sorensen wrote "Few will forget the memorable moments of that solemn ceremony at twelve noon: Robert Frost with the glare of the sun and the snow making it impossible for his aging eyes to read a new dedication ... a Golden Age of poetry and power, of which this noonday's the beginning hour ... resolutely reciting his older poem from memory."

On Jan. 20, 1961, the nation and the world listened as the newly sworn-in president, John F. Kennedy, uttered these unforgettable words in his inaugural address: "If a free society cannot help the many who are poor, it cannot save the few who are rich."   (listen to mp3 audio)

Has anyone heard about the bank CEOs who, before cutting jobs, before considering reducing or cutting the dividend for shareholders, or before issuing new stock, first cut their own base pay?

These bank executives continue to pay themselves salaries in the millions while they fire staff by the thousands, thin out shareholders by issuing new stock, cut dividends, earn less and continue to write down bad debt in the billions.

The good conscience in people needs to be reawakened to our awareness that just because everyone is doing it does not make it right. Those who break into a business at night to take the money are called criminals and thieves. When someone does it during the daylight hours, it must be that it's a CEO who has the approval of a rubber-stamp board of directors. Is there really a difference between the two? Actually, there is. The robber still has a sense of decency to be called the thief that he knows he is.

The present-day mortgage and credit problems have wrongly been attributed by some in the media to very low interest rates that former Federal Reserve Chairman Alan Greenspan implemented to help the economy recover after the Sept. 11, 2001, terrorist attacks. Even when interest rates are very low, does it make sense that any lender would not first verify the information within an application for credit? When an applicant would seek an adjustable rate mortgage, would not a good lender consider that if interest rates were to go back up to historically normal levels, that the borrower, not having an adjustable rate income, may not be able to afford higher payments?

After these credit problems came to light, instead of people being forced to vacate their homes, leaving properties abandoned, unkept and further contributing to the real estate market decline, there was a more humane and sensible business approach that should have been implemented. It would have provided a solution for the borrower and lender and for the investors in bank stocks.

Lenders could have changed adjustable rate mortgages to fixed rate ones with longer than the normal 30-year period, perhaps for up to 40 or even 50 years. When the lenders who are stuck with these properties end up selling them at drastically reduced prices to get them off of their books, one has to ask, Where was the common sense in this for anyone and a sense of having a little bit of everyday common decency?

Some of the largest major money center banks offer interest-only mortgages where, for the first three to 10 years, the interest rate and payment stay the same and you pay just the interest each month, and you can use the savings for other immediate needs. So if the banks can come up with a ridiculous concept such as this, which assures that the buyer builds up no equity whatsoever in the home and can live in it, then how is it that the same banks cannot implement a plan to allow adjustable rate mortgages to be converted to fixed rate mortgages even beyond the normal 30-year period so that the buyer can afford the payments and remain in their homes? There's no way these banks can claim they care, because clearly they don't.

Caring is always good business, and people who care come home with more than just a paycheck. They come home with something that can never be spent -- honor and pride.

When these self-centered execs finally run things into the ground enough, they are often handed an even nicer parachute of a pay package before they "agree" to take permanent leave of the company. For my money, whether they agree or not, they should be shown the door without severance pay, and they can take their boards of directors with them so they don't get too lonely on the way back down to planet Earth.

* * * * *

Yosef Cohen is a Gary native who attended Horace Mann and Wirt high schools. He now is a resident of Israel.

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