‘Worst possible news’

Mary Bell
Lambertville
    To many the news that Bank of America will reduce home loans (or reduce principal balances) for more than 200,000 of its customers is good news. But for those of us who are the savers of the world, it is the worst possible news aside from the collapse of the European economies.
   Mortgage modifications will mean that those of us who are savers we will continue to be punished for the sins of those who over-indulged and got in over their heads.
   The 0-1 percent returns we have been realizing on our investments are directly tied to the bad loans the banks wrote. Low returns have been the silent tax the banks have imposed on savers to cover bad loans written during the housing bubble.
   The news about writing off principal balances means the savers of the world will need to suck it up for another five-eight years of low returns as the backs bail out the 11 million American households that are “underwater” on their mortgages — meaning they owe more than their homes are worth.
   For the steady Eddies of this world, we have paid for the sins of our neighbors already. With mortgage modifications, the unearned punishment will continue.
   This is exactly the wrong prescription for the United States and our economic future.