More people every day seem to be confused about the foreclosure help programs being proposed by politicians in Washington. Any economic help provided to homeowners will not be able to keep up with the subsidies being provided right now to the banks without increasing the problem of inflation. But the propaganda has been effective thus far in tricking most of the public into believing that a solution is just around the corner and the people suffering from foreclosure will benefit. This line of thinking confuses families in foreclosure with the banks who took advantage of these people.

The government, through the Federal Reserve (or is it the Federal Reserve, with the blessing of the government), is helping the banking system by giving financial institutions below-market interest rates loans. Just last week, another $200 billion was made available to banks so that they can trade in bad mortgage debt in return for US Treasury securities. With increased reserves and fewer bad debts dragging down the banks' balance sheets, they can keep lending money out of thin air.

Making Treasury securities available in exchange for defaulted mortgage loans effectively means that the banks have absolutely no reason to work with homeowners to put together options to stop foreclosure. The lenders know they can just hide the foreclosing loans later on and get free money to bail them out from the government. So there is no reason for the banks to spend any of that free money on helping homeowners save their homes from foreclosure, and there is no reason to make any better decisions in lending policies.

There has been a lot of talk in the media and from politicians about helping the homeowners, but nothing substantial has been done in over half a year of discussions. The HOPE NOW and Project Lifeline programs involve only a handful of the largest lenders in the country, and the programs are voluntary for the banks to participate in. Also, they do not offer any solutions that banks could not offer in the first place, making them completely public relations schemes.

So, the banks have all the low and no interest rate loans they can handle, which came care of the Federal Reserve and US Treasury Department. Another related issue not being discussed is that easy credit and low interest rates created the housing bubble in the first place. More low rates and easy credit will only exacerbate the problem. Thus, the Fed is just doing whatever it can to create another bubble somewhere in the economy to bail the banks out of this current bubble's collapse.

Homeowners seeking help to stop foreclosure on their homes should not look to what the politicians in Washington are talking about. Far more enlightening (and disturbing) is to look at what they do. They talk about helping families in foreclosure (even proposing funds of $30 billion), while freely giving out hundreds of billions of dollars directly to the banks. Maybe $30 billion for 300 million Americans; over $200 billion and counting for a handful of the largest banks. Who benefits from this?

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