So, the fun continues and our President chooses volunteers most of us to help “people who bought more house than they could afford in the belief that prices would keep rising indefinitely and they would make big bucks. It was leveraged investing, just like a hedge fund, and often at the same kind of leverage ratios.” (from Megan McArdle)
The President said yesterday, “It begins with a young family - maybe in Mesa, or Glendale, or Tempe - or just as likely in suburban Las Vegas, Cleveland, or Miami. They save up. They search. They choose a home that feels like the perfect place to start a life. They secure a fixed-rate mortgage at a reasonable rate, make a down payment, and make their mortgage payments each month. They are as responsible as anyone could ask them to be.
But then they learn that acting responsibly often isn’t enough to escape this crisis. Perhaps someone loses a job in the latest round of layoffs, one of more than three and a half million jobs lost since this recession began - or maybe a child gets sick, or a spouse has his or her hours cut.”
So, my wife and I should have chosen “a home that feels like the perfect place to start a life,” perhaps one priced at two of three times what ours was, instead of choosing one we were able to afford even if things got financially rocky for us? An he calls this acting responsibly?
He went on to say, “In the end, all of us are paying a price for this home mortgage crisis. And all of us will pay an even steeper price if we allow this crisis to deepen - a crisis which is unraveling homeownership, the middle class, and the American Dream itself. But if we act boldly and swiftly to arrest this downward spiral, every American will benefit. And that’s what I want to talk about today.
The plan I’m announcing focuses on rescuing families who have played by the rules and acted responsibly: by refinancing loans for millions of families in traditional mortgages who are underwater or close to it; by modifying loans for families stuck in sub-prime mortgages they can’t afford as a result of skyrocketing interest rates or personal misfortune; and by taking broader steps to keep mortgage rates low so that families can secure loans with affordable monthly payments.”
Firstly, his plan will certainly guarantee that ”all of us are paying a price for this home mortgage crisis.” Secondly, I disagree that all of us will pay an even steeper price if this “crisis” (which it isn’t) continues. I think that the market is very effectively correcting the evidently unsustainable housing price points set over the last few years and that sanity is returning to the realty sector. Returning painfully, to be sure, but no one was complaining in the middle of the boom party, now were they? Hell no. So, welcome to the hangover. No amount of Government asprin is going to make it go away. So, let’s all grow a set and get on with it.
My view, and the view of many others, is that this plan will do nothing but keep prices artificially inflated and prolong the misery. This plan will allegedly “rescu(e) families who have played by the rules and acted responsibly.” How will they know the difference between someone who has played by the rules versus someone who has played a bit fast and loose? They won’t.
I think that each of us should be afforded as much freedom, financial or otherwise, as our responsibility earns us. That is how I was raised. And I find it interesting that the 95% of us who have acted responsibly by the actual definition, not that of our President, will be forced to pay the price, plus interest, for the 5% who gambled and lost in the real estate boom and all of the silliness that went along with it.
Millions of families are “stuck in sub-prime mortgages they can’t afford as a result of skyrocketing interest rates or personal misfortune?” Really? If that is the case, then maybe it is time to rethink the deal that the Government made with the banking industry when they gutted the bankruptcy laws a few years back, taking a significant amount of debtors’ protections away. Apparently that did not help things very much. Nor did looking the other way, as the supposed Governmental banking watchdogs did, when the ridiculous frauds were committed with the interest-only, no-qualifying-needed, here-is-the-mansion-you-want-but-really-can’t-afford loans were selling like McDonald’s hamburgers.
Jiminy. Ayn Rand wouldn’t have included this chapter in Atlas Shrugged because no one would have thought it credible enough.
A better articulated view here from Jonah Goldberg.
