Skylight: You seem to be making something of an apples and oranges comparison here.
Having a child run into a busy street is likely to result in something irreversible - death.
Death is a whole lot different from having the majority of housing speculators lose a chunk of change and smaller fraction of them lose their house. Would they be homeless? Sure. Is that a problem? Sure. Would we all find ways to work around it? I think so. And in time, housing prices would fall and people would be able to afford them again. If I were to warn others not to do something stupid, am I accountable by use of force for their ill fate? Likewise, how altruistic am I if I am forced to bail them out?
But attempting to prop up housing prices at the risk of great inflation and/or complete currency collapse is playing with fire. A complete and acute economic collapse will cause far more pain, suffering, and death than letting housing prices fall.
We have a choice to make, but we cannot avoid the place we have arrived at. This is the infamous "long run" spoken of by John Maynard Keynes. And now the twist: he is dead; we are not.
The concern on this thread for troubled mortgage-holders, and the subsequent desire to help them pay their mortgage either through Obama’s "plan" or something much worse, is ill-placed.
If we allow troubled mortgage-holders (I cannot for the life of me figure out why people keep referring to them as home-owners - if you have a mortgage, you do not own the house!!!) to default and be foreclosed on, banks of course will take the homes over.
This will supposedly lead to homeless people all over the place. This is incorrect. The banks will have to either sell those homes at much-reduced prices, or rent them. If investors buy them, they will have to rent them too. The people being foreclosed upon will be the new pool of renters.
Many of these people are not out of jobs, they’re just in jobs where their salaries have not kept up with increasing mortgage payments (mostly due to ARM made to sub-primer borrowers). As for people who are out of jobs, they should move in with family, co-rent with another family, etc. That’s what "tough" times are for crying out loud!! Since when is it that every single drop of suffering has to be soaked up with governmental spending? In the spirit of what I believe Chris said, "subsidize suffering and you will get more suffering."
Wake up America! Having a cozy, never-inconvenient, always rescuable way of life is NOT A RIGHT!!!
A very clear response Chris M. The following point was made in today’s NPR coverage, I think it an important one: some homeowners may be guilty of ignorance, making foolish decisions, being greedy BUT those selling mortgages and providing financing had not just a moral/ethical responsibility but a legal responsibility - both to the buyer and to their shareholder and institutional investors to do due diligence on the borrower’s ability to pay, the home’s value, and risk assesment of the loan based on the state of the market. It is/was their business, their area of expertise, and their legal responsibility to do this. Alan Greenspan had the honesty to say that he was opposed to popping the bubble because doing so would cause a recession. He was in a position to do something, understood the implications, and choose, so knowing, to do nothing. He should be condemned to spending the rest of his days working 40hrs a week for habitat for humanity- laboring.
That being said, your proposed solution sounds fair and reasonable - if rather unlikely to be imposed… too bad, in my opinion.
[quote=SkylightMT] Becoming homeless might be, for many, an awfully harsh consequence for a decision that was less than thoughtful at the time it was made.
[/quote]
Are we talking true homelessness here though? Losing a house is terrible, but if it happens one needs to move on and find an apartment that they can afford. And if they can’t afford a rental, then they certainly can’t afford to make payments on a house and this program would do them no good anyway. I’ve had to live on a shoestring college student budget in an apartment smaller than some folks’ bedrooms… wasn’t fun, but it certainly wasn’t being homeless.
To put it bluntly, yes. We are ALL ultimately responsible for our own actions, whether it was our own idea or someone convinced us to do it. Going along with the crowd doesn’t change that. (And if anyone’s wondering, yes I’m a parent)
There is plenty of fault to go around, and I’m all for finding suitable punishments (I don’t want to go into those gruesome details here) for those who created the environment for this disaster. But that doesn’t change personal responsibility. It was still their decision to go with the flow, and they have to accept those consequences and hopefully learn from them. It isn’t a fair situation, but this isn’t a fair world and a failure to realize that just brings more tragedy in the long term.
If there was outright criminal deception and practices involved they should have some recourse for compensation from the lender, but not from anyone else. And if someone wants to help them out that is wonderful, and I wouldn’t discourage anyone from giving them a helping hand. But it should be voluntary, not mandatory.
Politicians like to think that they can "control" and "fix" the economy. The people who try to actively plan and manage the economy are called COMMUNIST CENTRAL PLANNERS.
Remember the Soviet politburo’s 5 year plans? They tried to control every aspect of the economy. From the tons of grains produced in Ukraine to the price of bread on the shelf in every market in Moscow.
They failed. A country’s economy is simply too big to be controlled.
Millions of people making individual decisions about buying and selling is what drives the economy. Any attempt at large scale "fixing" will fail. Unfortunately no politician can get elected by standing up and saying that he has no solution to people’s problems.
The average person want to vote for somebody who can "fix" their problems. They don’t want to hear that there are some things that the government cannot fix.
Reset the mortgage value of any mortgage written since the start of the bubble down to the value it was prior to the start of the bubble and force the writers of the loans to eat the difference. Maybe next time they'd be more diligent in their loaning practices.[/quote]
Absolutely! That's what I've been saying and I can't figure out why this idea doesn't get pushed in the mass media (except of course that the big bankers own controlling interests in media companies like Reuters). That's what needs to be done. Make the banks bite this by writing down the principal (actually it's the assetholders that would bite it...the investors/Wall St bankers/China who bought all the securitized loans from the loan writers). THEY are the ones that need to feel the market-driven pain because they own the assets, they drove the bubble, and because they're the ones that created the incentives for little banks to engage in poor loan writing, and that would accelerate the pace of banking evolution from big Wall St oligarchs to institutions that are more connected to local community.
[/quote]
Chris,
Re #1 above (Reset the mortgage value of any mortgage …). What specific time period do you consider "the start of the bubble"?
For those of us who bought a house brand new (built at my request), how do you compute its value based on your criteria?
Strabes,
I most definitely agree with your wanting to punish those at the top of this mess.
(… the investors/Wall St bankers/China who bought all the securitized loans from the loan writers).
They bought into the trash they were being sold and they should have known better. As Chris so aptly puts it, "Maybe next time they’d be more diligent …".
However, I don’t agree with your wanting to deflect blame from those at the bottom. "gregroberts", in posts #93 and #96, put it quite succinctly as regards his own brother’s choices. In previous posts, I have also stated that I expect people to be responsible for the consequences of their actions.
Let’s say that I come along and tell you I’ve got this great bridge in Brooklyn, NY in which I want to sell you a significant share. To persuade you, I tell you "don’t worry about debt dude, everybody does it, based on our numbers
(and we’re the banking experts) you can totally afford this, you
deserve it, this is what people do to be successful, this is standard
stuff, it’s the american dream man, you’re good to go, just sign right
here, …"
Are you going to sign up without due diligence? Are you going to make sure it’s a legitimate deal and that it is something you can truly afford? Or will you just "run with the pack" and blindly sign up since everybody else seems to be getting in on the deal and you sure don’t want to miss out?
I’m fond of "old sayings" - goes along with my age. This one goes, "It takes two to tango." Unless you sign on the dotted line, nothing is going to happen - no sale will be made, no contract will be put in force. If you do sign on the bottom line, you are now legally (and morally, I would claim) responsible for your choice.
"Linda K" and "SkylightMT" seem to have fallen into the same trap that you have. Your mutual anger at TPTB (and sympathy for the little guy/down-trodden) seems to have blinded all of you to the fact that TPTB can’t force you to buy something that you don’t want to. TPTB are nothing more than con artists - and if you believe everything they say, well - here’s another old saying that was inaccurately attributed to P.T. Barnum, "There’s a sucker born every minute." (There's a sucker born every minute - Wikipedia)
[quote=Patrick]Wake up America! Having a cozy, never-inconvenient, always rescuable way of life is NOT A RIGHT!!![/quote]
Nobody said that at all. Sounds like you’re repeating conservative vitriol to fight the absurd leftism we’ve seen over the years that gets pumped to us in the media and gets stolen out of our wallets! That is not what people on this site are saying. Just because somebody questions an opinion that comes from the "right" doesn’t mean they’re a "bleeding heart leftist." We need to start looking beyond the left/right polar paradigm constructed for us by the media. There is a way to think that’s beyond the matrix.
The key is to stay focused on the system, the oligarchy, the Fed, etc while maintaining tenderness for "people." That’s what Jim Rogers does…follow his critique…it will keep us focused on the system and the idiots that don’t know what they’re doing in DC or on Wall St that are robbing us of everything and destroying the country. Once the argument becomes "hey, those freeloaders don’t deserve any money, I was responsible, so I don’t get any money, that’s not fair, screw my neighbor who’s getting some help!" then the media has won. They’ve sucked us into losing our human, relational core at that point…they’ve sucked us into envy. And that’s their goal…pit us against each other…breakdown community…create angst in order to create the desire for government control…more elitist bull.
[quote=Patrick]mostly due to ARM made to sub-primer borrowers[/quote]
Nope. Way more pain is coming. It really hasn’t even started yet. Commercial real estate is dying. All those retail employees will be out of work, and then downstream employees will be out, then infrastructure employees, then governments, etc etc, so a much larger wave of conforming loans will be foreclosing next. Plus the jumbo, alt-a, and standard ARM markets will be crashing later this year. Nobody is safe in what’s coming unless your balance sheet is sufficiently robust in terms of debt/assets. It’s not an issue of operating income anymore…income > costs…because income is a very risky/volatile in the coming collapse. And then we have the issue of double digit interest rates once the treasury market breaks down…now I’m depressed…
My personal feeling is that Greenspan should be condemned for the rest of his days making a living by working the 2am night shift (otherwise known as the hungry drunk shift) at Taco Bell… :^)
… better yet, as his manager get someone who lost his/her home in the housing/credit crash (heehee)
[quote=Sam]Re #1 above (Reset the mortgage value of any mortgage …). What specific time period do you consider "the start of the bubble"?[/quote]
It shouldn’t be determined by government. It should be done on individual basis between banker and borrower. In fact, that would probably be happening already if the government weren’t screwing things up so bad so everybody is waiting to see what they do before they do anything themselves. But bankers are looking at assets on their balance sheets valued at 50 cents on the dollar now, while they’re holding borrowers to loans at 100 cents on the dollar. That’s a gap that can’t be ignored. Government trying to fill it is stupid. Bankers doing nothing and ignoring borrowers is stupid. Bankers should be on the phone with borrowers determining where the doable middle ground is. If a bank can writedown the principal to 75 cents on the dollar and the borrower can pay it, then that’s WAY better than foreclosing on the borrower and selling the mortgage to an investor for 50 cents on the dollar.
So, this should be done in the marketplace, not via government fiat.
Sam, I agree with you re: con artists. It’s obvious when the con is obvious. But when the con is the system itself, including every government official, institution, media story, economist, banker, etc. then I’m sorry it’s just BS to claim it should’ve been seen as an obvious con. It’s BS to claim everybody should’ve seen this. Chris claims anybody with a reasonable education or sense of logic should’ve known. That’s just false…flat out false…that’s never been the case in any bubble throughout history…it’s good to know history. Economists with way more education said the system was doing just fine. Peter Schiff was the only guy on TV claiming the market was ridiculous and going to crash and he was laughed offstage for 3 years, until of course the crash of 08 and then he was treated as a genius. But people look for expert opinion on stuff, and it was pretty clear what the experts were saying all those years.
Here’s an example…the IEA is the "expert" on energy and oil reserves supposedly…Chris relies on that "expert" for the oil story (should others not rely on banking/realty "experts" for advice on debt financing?). Yet this website admits that IEA suddenly shifted their opinion from abundance to peak oil shortages recently. So that "expert" really didn’t know what it was talking about until very late in the cycle. And now there are a couple people claiming that peak oil was a ruse to drive the commodity bubble and the Bakken reserves prove it (I don’t know and I don’t really care at this point). So anytime we rely on data provided by "experts" we’re taking a risk.
Another: Chris stopped using a broker in 2002 according to his bio. Well, why didn’t he see the "obvious bubble" of the equity markets in 98-2000 and the con artists that equity brokers were? It took him a couple years to realize he shouldn’t rely on the "expert." Why do we so easily say borrowers shouldn’t rely on debt financing "experts?"
I know I know…the difference is Chris isn’t asking to be bailed out of his equity losses in the bear market. I agree. Government shouldn’t be bailing out borrowers. I’m with ya! But that’s because government is a joke and it only screws with the market…they’re the elite, and they’re the problem. Not because the people were stupid and should’ve known better not to rely on experts so it’s all their own fault…that is a bad argument to use because 1) it’s not true, and 2) it takes our eye off the ball of fighting the elite.
Wake up America! Having a cozy, never-inconvenient, always rescuable way of life is NOT A RIGHT!!!!!!!
Nobody
said that at all. Sounds like you’re repeating conservative vitriol to
fight the absurd leftism we’ve seen over the years that gets pumped to
us in the media and gets stolen out of our wallets! That is not what
people on this site are saying. Just because somebody questions an
opinion that comes from the "right" doesn’t mean they’re a "bleeding
heart leftist." We need to start looking beyond the left/right polar
paradigm constructed for us by the media. There is a way to think
that’s beyond the matrix.
The key is to stay focused on the
system, the oligarchy, the Fed, etc while maintaining tenderness for
"people." That’s what Jim Rogers does…follow his critique…it will
keep us focused on the system and the idiots that don’t know what
they’re doing in DC or on Wall St that are robbing us of everything and
destroying the country. Once the argument becomes "hey, those
freeloaders don’t deserve any money, I was responsible, so I don’t get
any money, that’s not fair, screw my neighbor who’s getting some help!"
then the media has won. They’ve sucked us into losing our human,
relational core at that point…they’ve sucked us into envy. And
that’s their goal…pit us against each other…breakdown
community…create angst in order to create the desire for government
control…more elitist bull.
Patrick wrote:
mostly due to ARM made to sub-primer borrowers
Nope.
Way more pain is coming. It really hasn’t even started yet.
Commercial real estate is dying. All those retail employees will be
out of work, and then downstream employees will be out, then
infrastructure employees, then governments, etc etc, so a much larger
wave of conforming loans will be foreclosing next. Plus the jumbo,
alt-a, and standard ARM markets will be crashing later this year.
Nobody is safe in what’s coming unless your balance sheet is
sufficiently robust in terms of debt/assets. It’s not an issue of
operating income anymore…income > costs…because income is a very
risky/volatile in the coming collapse. And then we have the issue of
double digit interest rates once the treasury market breaks
down…now I’m depressed… :([/quote]
My apologies if that sounded like right-wing vitriol. What I’m saying is that no amount of tinkering with either side of the bubble-sheet is going to amount to anything except prolong the amount of time it will take to work the excesses out of the system.
Those who disgaree with this assessment sometimes use (and they have on this thread) the tragic consequences that have been suffered by some to justify activities that will a) in the first place not help those who they are trying to help and b) make things worse for everyone, incuding those who they are trying to help.
I pointed out in my post (before my right-wing vitriolic moment) that reduced home prices is what the economy is telling us we need and is also what will help us, especially those that are currently being foreclosed on. What those people need is housing. It should not matter at this point if it is "owned" housing or rented housing. We cannot get them out of their upside-down-mortgage hole with a measly $75 billion, and the amount it would take to truly get them out of their hole would further collapse the economy by making dollar bills cheaper than TP.
So what I’m saying is, let them be foreclosed on. Let the banks take the houses. Let the banks realize thast they either have to sell at investor-priced prices (who will then rent to our foreclosed friends) or that they themselves have to rent.
We certainly do not have a housing shortage. Let housing come down to the level where it will be supported by 3rd party investing activities, and there will be an ample supply of rentals available. If investors have been so hurt by the economy that they are out of the market, then banks will have no choice but to rent to their former mortgage-holders.
I do not know how to make it any simpler.
I’ve taken my meds and will not embark on anymore vitriolic rages for tonight ;
PS: I aree with your further analysis of the commercial market and other scary crap!
I don’t know whether Obama’s plan for mortgages is good or bad for the economy. I suspect its probably bad.
That is not the point I am arguing against. What I am arguing is whether I am being "punished" by having to pay for other homeowner’s getting into mortgages they couldn’t afford, and whether I should be righteously indignant about this or not.
I would much rather, a thousand times rather, pay for these poor schmucks who didn’t put a whole lot of thought into their decision and believed the propaganda that was being thrown at them by the banks and their neighbors, who were doing the same thing, than pay for the banks who had a much better understanding of what they were doing. I mean, seriously, why are we even talking about this??? Wouldn’t it be a far better use of our time, and much less embarrassing, to worry about the dealers making and selling the meth than the idiot invulnerable-feeling teenagers who made some stupid decisions?
I mentioned I work in a homeless shelter. Right now, we’ve got record numbers of people on the streets, under the overpasses, and hanging out by the access vent in the alley behind the Horseshoe Bar (because it blows out warm air from their grills). We’ve got record numbers of people homeless.
Why? Because people who are being foreclosed on, also in record numbers, and people who are unemployed, also in rather high numbers, are moving into the low-income housing that previously the poor could access. There is no housing left at the very-low-income level for our homeless folks. Section 8 housing currently has a five year wait for homeless people in our community. That’s a long time to be homeless. Many of those people will die on the streets before their Section 8 voucher comes up.
When you say that being foreclosed on doesn’t mean life or death, that is not true. It might not mean life and death for the same people being foreclosed on (although sometimes it does) but it means severe conditions for somebody because resources are being used by the previously middle class.
Patrick, I totally agree with that!
Though I don’t think banks need to foreclose as a first step. They have the option of negotiation with borrowers like every other business has to do. Banks are the only industry (because they’re in bed with government) that think they can treat customers like slaves and not negotiate during downcycles. They should be on the phone with borrowers and trying to find a middle ground between their asset valued at 50 cents on the dollar and borrowers liabilities at 100 cents on the dollar, i.e. writedown the principal to 75 cents. If middle ground can’t be found, then foreclosure is appropriate. The problem is, as long as government keeps intervening, banks won’t get on the phone with borrowers…it’s easier to wait for government money.
Not sure comparing children to adults is realistic, of course a parent should intervene if the child is going to harm himself in some way but what I’m understanding from your post is that when you leave home as an adult the govt is now to act as your parent and protect you from harming yourself? You’re right in that many people seem to never grow up and act like children their whole lives but the responsible people should be protected from those types of people.
George Orwell
"Remember the Soviet politburo’s 5 year plans? They tried to control every aspect of the economy. From the tons of grains produced in Ukraine to the price of bread on the shelf in every market in Moscow. "
You might find this humorous,
Putin Warns U.S. About Socialism,
Prime Minister Vladamir Putin has said the US should take a lesson from the pages of Russian history and not exercise “excessive intervention in economic activity and blind faith in the state’s omnipotence”.
Though
I don’t think banks need to foreclose as a first step. They have the
option of negotiation with borrowers like every other business has to
do. Banks are the only industry (because they’re in bed with
government) that think they can treat customers like slaves and not
negotiate during downcycles. They should be on the phone with
borrowers and trying to find a middle ground between their asset valued
at 50 cents on the dollar and borrowers liabilities at 100 cents on the
dollar, i.e. writedown the principal to 75 cents. If middle ground
can’t be found, then foreclosure is appropriate. The problem is, as
long as government keeps intervening, banks won’t get on the phone with
borrowers…it’s easier to wait for government money.[/quote]
Strabes,
Isn’t there another reason why banks do not want to negotiate besides the point you made about them preferring to wait for government money? Isn’t it also true that if the bank forecloses, they get to put the house on their books for whatever the value of the mortgage was, whereas if they renegotiate, they have to write-down the mortgage and thereby further deteriorate the leverage of assets/liabilities on their balance sheet?
I am no expert of fiat money, fractional-reserve fraud standards, and would love for someone who is to answer this.
[quote=Patrick]Isn’t it also true that if the bank forecloses, they get to put the house on their books for whatever the value of the mortgage was, [/quote]
No. They would have to put it on their balance sheet for whatever it sells for. If the investor pays 50 cents on the dollar, then the bank’s asset is now half what it was previously recorded as. So if they could negotiate with the borrower down to 75 cents, the bank would be better off than going into foreclosure. Plus they lose massive processing costs in foreclosure.
Skylight, thanks for bringing into our dialogue the marginalized parts of our community. You are right.
The beauty of Chris’ initiatives and people on this site desiring sustainable community is that that’s the type of society that can hold the marginalized together in community with others. Our current national empire society run by banking oligarchs based on efficiency doesn’t hold them…liberal government claims it does, but it’s a horrific failure.
But that’s an accounting fiction. It’s already on their books at full value. The economic reality is that their asset is 50 cents if they sell it. If they could negotiate down to 75, that’s good for them.
Unless I’m missing something behind your question.
From your last post #109 and Patrick’s last post #110, I think all of us are in relatively close agreement in a macro sense. However, Patrick and I expect people to be responsible for their actions. This is not "right-wing vitriol" because I don’t care what your political affiliation is. I suspect the $75 billion bail-out bill is also non-partisan.
(/getting on soap-box now/)
What Patrick and I keep hammering on are concepts left over from my youth that seem to have been lost along the way in this country. Here’s a very short refresher course (not directed at any one in particular):
Get educated
Study political science - in school or later (we used to call it Social Studies when I was but a lad)
The old saying, "If it sounds to good to be true, it is." was always very accurate and continues to be
Always read everything that you are asked to sign. If they try to rush you or state, "Oh, it’s just boiler plate - you don’t have to read everything." they may be trying to pull the wool over your eyes. Take your time and read carefully. If they won’t let you, walk away - it’s a scam of one sort or another. If you don’t understand everything you are reading, DO NOT SIGN until you have it explained to you at a level that you do understand by someone you trust. Go find a lawyer if necessary. A few hundred dollars up front is a lot cheaper than a multi-hundred thousand dollar mistake.
Take responsibility for your actions. Own the problem. If you don’t like what you’ve gotten yourself into, try to extricate yourself (Legally!). If you can’t, suck it up and accept what is until you can change the situation.
DO NOT look to your government at any level to bail you out of a mess you’ve managed to get into all by yourself. There are legitimate legal avenues you can take where you can reasonably expect your government to support you if you are the victim of criminal or civil misdeeds. However, looking for a bail-out (read "handout") is not ok.
BTW, I’m a firm believer in helping my fellow human if they are in dire straits through no fault of their own. Sometimes life can be randomly cruel and good people suffer the vagaries of fate. There is nothing wrong with folks looking for support until they can get back on their feet again. I contribute to the Oregon Food Bank as much as I am able as there are so many innocents who aren’t sure where their next meal is coming from. The children especially break my heart as they are truly innocent victims.
However, if you’re down and out because of drugs and/or booze, don’t look to me for help. I’ll support taking your children away from you as they don’t deserve to suffer from your stupidity.
