We are writing to voice our concern over the recent proposal by State Senator Craig M. Johnson and Deputy Senate Democratic Leader Jeff Klein, as outlined in the article, "Lawmakers Release 'Subprime Scrooges' List." The premise of the so-called "Subprime Scrooges List" and "Operation Protect Your Home" is that banks that elect to initiate foreclosure proceedings on delinquent borrowers are somehow behaving in a malicious or reprehensible fashion. This is both dangerously simplistic and highly misleading. It is crucial to note two very important points: first, that these "scrooges" did not extend loans to borrowers under the impression that these borrowers would default on their obligations. Second, that each foreclosure represents a loss to the bank and is obviously not an outcome that any bank desires.
A particularly glaring flaw in this proposal is that there seems to be no mention of the dramatic harm done by borrowers who bought houses that they could not afford. Unfortunately, as these borrowers can provide tragic and heart-wrenching tales of woe and exploitation (in stark contrast to the multi-billion-dollar faceless entities, which are the banks mentioned such as Wells Fargo and JP Morgan Chase), they are held blameless. In committing to an obligation that they could not fulfill, these borrowers acted irresponsibly, buying houses in the expectation that the seemingly inexorable rise in home prices would allow them to refinance at a lower rate. As this did not transpire, they found themselves unable to keep current on their mortgages. As dispiriting as this may be, responsible elected officers must ask themselves whether the vast majority of taxpayers who live within their means and act responsibly deserve to subsidize the irresponsible and speculative gambles of their neighbors.
Apparently, the bill's sponsors believe that the State of New York Mortgage Agency (SONYMA) is better equipped to provide home loans to consumers relative to these heartless "scrooges." However, the idea that an unaccountable bureaucracy funded by responsible taxpayers who would bear the brunt of any losses incurred by SONYMA would be more prudent in loan origination than multinational banks accountable to shareholders, regulators, and numerous oversight entities strikes most rational people as either naïve or entirely detached from economic reality. While nobody likes to see their neighbors forcibly ejected from their homes, one must question the state's role in unilaterally renegotiating private contracts. We must also question the motives for naming banks brought to their knees by this mortgage crisis as "scrooges," other than to score political points by demonizing "Wall Street." We are dismayed to see our elected officials engage in political grandstanding by introducing gimmicks like the "Scrooges List;" we are far more alarmed, however, by unjustifiable regulatory schemes that reward irresponsibility, stagnate growth, and set dangerous economic precedents.
Seniors at Paul D. Schreiber High School