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Monday, April 14, 2008

Liberal Foreclosure Politics

Only a few days ago, I pointed out that I thought that most politicians were misreading the politics of mortgage bailouts. That's because most homeowners aren't in trouble. Most people in this country aren't in need of any bailout, and thus, the overwhelming majority of folks will be paying for the bailout of the overwhelming minority. The media and many politicians are trying to paint those in trouble as mislead and taken advantage of, however I think most of those that make their payments on time see those in trouble as irresponsible. I just don't see those that are responsible as taking too kindly to seeing their taxes pay for those that aren't responsible. Any bailout will be on the backs of those that make payments on time. Whether it is with tax money or simply higher rates, any bailout will be felt by those that were responsible. Of course, in the liberal world of the New York Times, all the current bailout plans don't go far enough. Politically, the New York Times wants to see political courage in bold and expansive bailouts.

With foreclosures running at about 20,000 per week, at least 100,000 more families are likely to lose their homes before Congress passes a relief bill. And even then, the measure may fail to stanch the problem unless Congress comes up with something that is significantly better than proposals currently in either chamber.

To produce a worthy relief package, lawmakers will first have to scrap most of the provisions in a bill passed last week by the Senate.


Lawmakers will also have to ditch an unhelpful item in a bill from the House Ways and Means Committee — a tax break for first-time home buyers. It makes no sense to encourage buyers to jump in when further price declines are likely. Scarce resources should be put toward preventing foreclosures.

There are parts of each of the bills that should be preserved, including money for foreclosure-prevention counseling, for issuing tax-exempt bonds to help refinance subprime mortgages and for local governments to buy up foreclosed properties. But that is only a start.


The plan for an F.H.A.-backed rescue also would rely on lenders to voluntarily reduce the loan balances to a level where the F.H.A. could take over. Volunteerism is not working. What’s needed is a stick like the bankruptcy amendment. Lenders will be more likely to modify a loan if they know the alternative is having a judge do it.

Lawmakers know what to do. They just need the political courage to confront the mortgage industry.

There are certain things that I agree with the New York Times on. For instance, they are absolutely correct when they say that moving these loans to FHA would put undo burden and risk to the tax payers. (not quoted but in the article) I also agree that the Senate bill is total garbage, though for many different reasons.

To me the only political courage expressed so far was expressed by John McCain when he first said that there would be no bailouts for anyone, borrowers included. Of course, after he was attacked, he immediately backed away to a much less political courageous position, and one that makes no policy sense whatsoever. There is, however, absolutely nothing politically courageous about providing a government handout to folks that are struggling.

In the view of the New York Times, real political courage is taking on the banks and forcing them to not only artificially reduce rates but to artificially reduce loan amounts in order to allow folks who can't afford their mortgage to afford it through artificial government action. To me, this is the least courageous thing to do. This is nothing short of vote buying. Yet, the New York Times sees anything that gives government handouts as "politically courageous".


Anonymous said...

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Anonymous said...

Before you publish something labeled 'liberal' or conservative, you must ask yourself one simple, normative question: do I know anyone who's not in debt in America?

I've asked this simple question over and over again to people such as yourself who firmly believe that America isn't suffering a financial crunch, who believe the overwhelming majority of Americans aren't in economic trouble, who see growth in GDP as total, unbiased truth that our economy isn't just doing well, it's better than it's ever been.

I have another simple question that I pose now: Are you on minimum wage, and if so, can you buy groceries? If you cannot respond 'yes' to this question, then you have absolutely no right to take this issue and present it the way you did. Your argument is irrelevant, political rhetoric, all too similar to the banter posted up on here bashing those 'elitist, liberal Democrats,' while lauding those 'pure, honest Republicans,' who have never done an honest day's work themselves, were Ivy-league educated, and make personal incomes that exceed the national median level one hundred times.

Also, it's perfectly clear that the blog posters here have very little insight into frictional unemployment and its impact on the national unemployment rate. As an armchair economist, I'm very concerned about this misleading statistic myself. The national rate, as far as I can tell, has not fluctuated very much over the past few years, yet if one does a bit of research, they will find out that people who either go to school for an education or aren't actively pursuing jobs are not included into unemployment statistics. It could very well be that if you include these people into the unemployment rate, the percentage might be double or TRIPLE what it is now. So, before someone runs off on how great the economy is and how low unemployment is, they must really examine the statistics they are looking at.

Finally, as someone making below the median national income, I am quite frankly shocked at the insensitivity of this post. You claim that the economy is better than it has ever been, yet my grocery purchasing power right now is LITERALLY half what it was five years ago, and I have yet to receive one single cost of living adjustment. In fact, if I remember correctly, the dollar's inflation is exceeding the increase of wages in this country. Consider that before you run off these great numbers.

mike volpe said...

As Delroy Lindo said to John Travolta in Get Shorty

"You don't know me, you only think you do"

I am in the mortgage business and we are all struggling. Yet, no one is suggesting a handout to mortgage brokers. That's because that sort of proposal isn't politically viable.

As to your post, it is totally irrelevant to anything I wrote. I never said the economy was doing well. I said the right way to move forward on mortgages is to let the market run its course. That's because there many folks in mortgages that shouldn't be in them. They need to be removed before the market can move forward.

You had a long rant about people on minimum wage. That is totally irrelevant. If you are on minimum wage, you shouldn't buy a property at all.

You go into some rant about the way in which unemployment is figured. Yes, if you are going to school you aren't going to be counted in unemployment and that is how it was figured ten, fifteen, and fifty years ago. That's because you aren't trying to work.

I have no idea the point of your rant.

Anonymous said...

And I have no clue how to handle any of your 'truths.' The housing market is steady? You admit right here that it is shaky at best.

As someone directly involved in economic issues, maybe you should figure out that everything pointed out here is relevant. If someone on minimum wage can't buy bread, they can't buy luxury items, they can't buy other commodities, and they can't buy a house. So, before you toss it off to irrelevance, maybe you ought to defend your points.

Or, maybe, instead of lining up another bit of fluff about how the housing market is a lot more stable than everyone thinks, how about you examine the big picture: if people can't buy bread, they, sure as the sun rises, won't buy a house.

It's so funny arguing with extremes on both sides of the political spectrum. They never tackle questions pointed to them, or arguments against them, when they are deemed as 'outside the realm of my point of view.' You just admitted your ignorance. And, ignorance is bliss, especially when you present one side of the problem to further your agenda. I'm extremely hopeful I NEVER get a mortgage lender such as yourself, because it seems that you are completely clueless when it comes to macroeconomic issues, which, by the way, are pretty important issues when one chooses to buy a house.

mike volpe said...

I am defending my position. I never said the housing market has steadied out. I said the only way to steady it is to let the market do its work and stay out of the way. A mortgage broker more than most knows all too well that the housing market hasn't steadied out yet.

The problem for someone making minimum wage is that they are making minimum wage, not that food prices are too high. All prices are too high if someone is making minimum wage. Furthermore, the fact that someone making minimum wage can't buy a property is not a new condition. They simply don't earn enough.

Furthermore, your entire rant has nothing to do with my piece. My piece focused on the NY Times article which said that political courage is for politicians to give people handouts on their mortgage.

I said real political courage is to let the market do what it will. You then attacked my piece by talking about people making minimum wage.

I am plenty aware of macroeconomic issues, however when choosing a mortgage the issues that are important are not macro but micro. That means what is going on specifically in the person's life that is getting the mortgage. What is happening around them in the country at large is largely irrelelvant. The important things to getting a mortgage are how long someone plans on staying in the property, and what their goals are with regards to the mortgage. Are they trying to get the lowest payment, the lowest rate, the security of a fixed rate, etc.

That said, that is rather irrelevant to my piece as well. Again, my piece attacked the assertion that it is politically courageous to give people free handouts on their mortgage. That isn't courageous at all. What is courageous is to let everyone know that the only way to move forward is to let the market run its course.