What’s Good for G.M. Is Good For Homeowners

By WILLIAM D. COHAN
NYT

We have been fully conditioned by now to expect that the rich and powerful will get the biggest slice of whatever pie is being served, while those less fortunate — and less well connected — will get the crumbs. But it still rankles when we witness time and time again how big corporations get deals the little guy can only dream about, especially when a little creative thinking could alter the status quo.

Take for instance the incongruity between what banks (and other creditors) are willing to do to allow troubled companies avoid paying back money that should never have been borrowed in the first place versus what banks are willing to do for distressed homeowners who can no longer afford to make their mortgage payments. Why are banks willing to wipe out billions of dollars of the principal on loans made to corporations but — in most cases — give financially strapped homeowners the binary choice of either making the contractually agreed-upon monthly mortgage payments or face foreclosure and the loss of their home? Why do banks have a willingness to negotiate with corporate debtors but have shown only extreme reluctance to modify mortgages for struggling homeowners?

For example, when the executives of General Motors and Chrysler finally came to the realization two years ago that their companies had billions of dollars too much debt and other liabilities that they could never pay back or fulfill, they spent months negotiating with their creditors to restructure the debt and then filed for Chapter 11 bankruptcy protection to make final the agreements made with many of their creditors and to get the last, recalcitrant ones to go along.

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