I was always told that the power in the constitution that gives congress the right to enact various welfare type programs comes from Article one section eight where the phrase, “provide for the common welfare” is written. With all the new government programs recently proposed I decided to look further into this and much to my surprise I came face to face with the semi colon. This rather innocuous punctuation mark is at the center of the debate over this constitutional clause. Recall that the founding fathers were well educated and considered grammarians and spent days arguing over little things like punctuation marks. They knew that marks like the semi colon could change the meanings of words.
It is in the opening sentence of section eight where the phrase, “provide for the general welfare” occurs and this sentence ends in a semi colon. The plot thickens. The use of the semi colon is used in this case to make a general statement followed by a more detailed understanding.
The general statement is
The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfareof the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

After that there follows 18 statements elaborating on the blue items but nothing more in the green (welfare).

Proponents of wealth redistribution often quote the sentence but not the semi colon but others point out the importance of the semi colon and one of these was Sam Adams who said,

The utopian schemes of leveling [wealth redistribution] and a community of goods, are as visionary and impractical as those which vest all property in the crown. These ideas are arbitrary, despotic, and, in our government, unconstitutional. Famous Quotes on Wealth Redistribution, Class Warfare and Envy Samuel Adams

bank loans

The governments program known as Home Affordable Modification Program was designed to help people whose homes were worth less than the outstanding mortgage, so called underwater mortgages. Of the 4 million homes in this category only 170,000 were helped and the question is why so few.
The reason it is so difficult to get a loan modification is that there is too much money to be made by short sales and foreclosures. How does this work?

Here is a typical example of what is going on.

One of the big banks that failed was Indybank and the FDIC closed it down in July of 2008. In March of 2009 FDIC sold it to One West Bank. Who owns One West Bank? Steven Munchen CEO of Goldmen Sacs, Billionaire George Soros and John Paulson both heads of large hedge funds. People from Goldman Sachs are in high positions throughout the government starting at the Secretary of Treasury.

The deal the FDIC gave to One West was that they could purchase all mortgages at 70% of value and all HELOC’s (home equity loans) were purchased at 58% of value. In addition the FDIC agreed to cover 80 to 95% of any losses due to short sales or foreclosures. Now the FDIC allows One West to calculate any loss using the original loan value not the value that One West paid for the mortgage. Here is a typical example.

One West purchased a home with an actual loan amount of $478,000 plus 6 months of back payments for a total of $485,200. One West paid $334,600 for that loan. The owner has an underwater all cash offer that nets $241,000 to One West Bank. According to the FDIC formula you take the original loan amount of $478,000 less the short sale offer of $241,000 and that leaves the adjusted loss of $244,200 to One West. Now the FDIC pays One West 80% of the loss or $195,360. This money comes from the taxpayers by way of the FDIC. Now add the $195,360 to the all cash offer of $241,000 and One West gets $436,360 on an investment of $334,600 and all they had to do is to sell if for whatever they wanted. They make over $100,000 on just this one deal and there is no risk.

As long as banks can make money like this they are not likely to loan money on regular mortgages and the government Affordable Loan Modification Program is not likely to attract any bankers. Why should they risk ordinary loans when they have guaranteed profit using the FDIC system?