To heal, U.S. must stanch foreclosures

Stop the bleeding.

That’s the first rule of first aid, whether it’s your body or your business.

For months, we have watched the economy in freefall as our leaders flailed about in a free for all.

Not surprisingly, nothing seemed to be working.

Now, the national banks and mortgage holders have announced major initiatives to stop the bleeding —- foreclosures.

Maybe FDIC chairman Sheila Bair should be put in charge of the overall recovery. She suggested weeks ago that it was all well and good that the government buy stock in banks, bail out the mega-insurer AIG and take over Freddie Mac and Fannie Mae.

But she wanted the bleeding stopped.

The boys finally heard her.

J.P. Morgan Chase, the nation’s largest bank, last week and Citigroup this week announced plans to work out easier payments for homeowners. That’s about 2 million homeowners, when combined with Bank America and Countrywide’s programs.

And Tuesday, the government’s mortgage giants, Freddie Mac and Fannie Mae, announced similar programs.

This is good news for Atlanta, dependent as we are on the housing industry.

“The ability for housing to post a recovery in ‘09 depends on reducing our inventory,” said Mercer University economist Roger Tutterow.

And foreclosures add to that inventory. And an oversupply results in falling prices.

While Atlanta avoided the ridiculous run-up in home prices that is now killing California and Florida, Georgia ranked sixth in the country in foreclosure notices in August. We’ve also seen prices fall about 8 percent in the last year.

Builders have about stopped building —- not everywhere, but in general. That’s good in a perverse sense: they aren’t adding to inventory.

If these new programs can prevent preventable foreclosures that will keep more homes off the market.

“Atlanta is still blessed,” Tutterow said. “Our prices haven’t dropped nearly as much as some places,” and people (new buyers) still want to move here.

Foreclosures won’t stop altogether. Those who simply can’t afford a house and shouldn’t have bought one are still vulnerable to foreclosure. These new programs are designed to help those who need a little help, not a bailout, which we are reserving for gargantuan insurance companies and car manufacturers, apparently.

And that doesn’t please the FDIC’s Bair, according to reports of her response to Tuesday’s announcements. She wants some of the bailout money to go toward a loan modification plan that would guarantee some 3 million mortgages.

She seems to have gotten the attention of the men running this show.

Now if she can just get them to listen.

toliver@ajc.com