December 12, 2007 (LPAC)--Hispanic Caucus leader Rep. Joe Baca (D-CA) spoke in Washington this morning motivating his Family Foreclosure Rescue Corporation (FFRC), legislation Baca said he has modeled after President Franklin Roosevelt's Home Owners' Loan Corporation, created by the 1934 Homeowners Loan Act (HLA). This was the successful New Deal legislation that stopped mass foreclosures, created the Federal Housing Administration (FHA) and the 30-year fixed-rate mortgage. EIR and LaRouchePAC have circulated two major articles in Congress on the relevance of the HLA to the current foreclosures crisis.

Representative Baca's legislative initiative is thus unique among bills introduced to Congress in the current meltdown--it is aimed at actually stopping the current "tsunami" of foreclosures, including protecting homeowners who are shut out of refinancing or sale hopes because they have "negative equity" in their home, caused by declining prices.

Lyndon LaRouche's proposed Homeowners and Bank Protection Act (HBPA), as Representative Baca knows, would stop all the foreclosures by law, and protect chartered banks caught in the bank panic triggered by huge losses in the mortgage collapse, so that bank runs don't close down these economic institutions.

But Baca's legislation does not address this real mortgage meltdown, which is, in fact, a collapse of the U.S. and European banking systems. So his proposal of a Federal corporation to buy up defaulted mortgages before they foreclose, and replace them with government or government-backed new, fixed-rate mortgages, could turn into an attempted bailout (using up to $150 billion in new Federal bonds) of the superinflated mortgage values which are now collapsing. The Baca legislation allows high interest rates, 7.5%, on new replacement mortgages, and 5% interest on the bonds the Rescue Corporation will issue. The bill allows these government buyouts to be at some discount ("short sales"), but also allows very high-value buyouts, when mortgage values are, in fact, now collapsing in a crash into the trash.

"Today's collapse is not 1934 Depression United States," commented LaRouche on Baca's bill. "Today's bank blowout is July-August 1923 Germany. Hyperinflated values are collapsing. The U.S. dollar is nearly non-viable due to central bank money-printing. Don't bail out, don't buy into mortgages, freeze them. There's one solution, and I've proposed it."