When Barack Obama was running for President one of his favorite sound bites was that any financial bailout should not just involve Wall Street, but Main Street, too – that the government’s responsibility was to help both bankers and homeowners. But now that the election is won and Obama is in office, the two streets are still being treated very differently, with Main Street getting a lot less help from Washington.
This is a HOUSING crisis, not a BANKING crisis, yet $700+ billion has gone to help bankers and only $75 billion to “help” homeowners. The banker’s money has mainly been spent and the homeowner money has hardly been touched. If this is a HOUSING crisis, why aren’t more resources being devoted to housing?
It comes down to an issue of morality, believe it or not, with homeowners expected to be moral and bankers not. Everybody blew it, but the homeowners are being disproportionately punished for their actions.
There is no morality issue in the bank bailout. Banks are having their capital boosted based not on whether they are well run or in some way “deserving,” but purely on the basis of whether they are viewed as being in three groups: 1) doomed; 2) capable of being saved through injecting government funds, or; 3) too big to be allowed to fail no matter how poorly run. This means the least-deserving banks tend to get the most help.
But the Obama Administration’s attempt to help mortgage holders is different. If you hope for government help in restructuring your mortgage you’d better not be behind in your payments. If you missed a mortgage payment months into this crisis, you are out of luck. If your mortgage isn’t guaranteed by Fannie Mae or Freddie Mac, you are out of luck. If your mortgage is jumbo you are out of luck. And if you owe more than 105 percent of the value of your home you are out of luck.
That’s a lot of homeowners out of luck. No wonder the Obama Administration thinks it needs only $75 billion to do the job, it is excluding so many people.
Let’s try applying the homeowner rules to the banks. If both played by the same rules, then banks with mortgage portfolios that have dropped by more than about 15 percent (are five percent or more underwater) would be ineligible for government assistance. Banks that MADE jumbo loans would be ineligible for assistance. Banks that made loans with private insurance or no insurance would be ineligible for assistance. Banks that had shown themselves unable to meet capital requirements (had effectively missed a payment) would be ineligible for assistance. In each case, these criteria define EVERY bank that has received assistance. They ALL have mortgage portfolios down in value by 15 percent or more, ALL made jumbo loans, ALL made uninsured loans, and ALL are under capitalized.
So if we apply to banks the same rules that are being applied to homeowners, then no banks deserve support and there should be no bank bailout. Well that can’t be, can it? So screw the rules, screw the idea of there being a moral issue with bankers, just start handing out cash without even requiring that they use any of it to make or restructure loans.
So that’s what the Treasury and the Fed have done – bailed out the bankers without regard to their past OR FUTURE behavior. And $700+ billion later do we really truly feel better as a result?
Hell no we don’t, because we still can’t pay our mortgages!
This bailout is broken, it is unfair, and it is incredibly inefficient as a result. The bank bailout is based entirely on providing INCENTIVES to the banks – bribing them to THINK ABOUT doing the right thing.The government won’t MAKE the banks do anything. They just ENCOURAGE the banks by giving money.
Where are the incentives in the much smaller housing bailout? There are incentives. THEY ARE ALL BEING GIVEN TO THE BANKS. It is very difficult to find in the new Federal mortgage modification rules much of anything that truly helps homeowners. Banks aren’t REQUIRED to do anything; they can reject any mortgage holder for any financial reason. The banks are PAID to restructure the mortgages and the way those mortgages are being restructured (primarily through increasing term and adding balloon payments) not only costs the banks nothing, it tends to make them MORE money over the life of the loan.
So that $75 billion allocated to modifying mortgages and keeping people in their homes, how much of that $75 billion will actually go to homeowners? About 25 percent, or $18 billion almost entirely in first-time buyer tax credits. This means the bank bailout isn’t $700+ billion, it is $758+ billion or FORTY-TWO TIMES the size of the housing bailout.
And why only first-time buyers? What makes them more deserving of help? The theory is that these are new homeowners so they’ll be buying-up excess inventory and helping to firm prices. They aren’t people selling one house to buy another. In another view they are virginal and uncorrupted by the housing bubble.It wasn’t their fault, so they are being rewarded. More morality, inequitably applied.
Main Street isn’t doing very well under this policy. Main Street is being cheated.
This is a bad plan, unfair and poorly executed. It places a moral burden on individuals and not on banks, yet there is no good explanation for why it has to be so.
What is it about banks that make them deserving of 42 times as much support as your Mom?
Nothing.
Like the Bush Administration before it, the Obama Administration has a bias for helping Wall Street. They couch this as a claimed inability to come up with any better ideas. Yet better ideas – ideas NOT couched in moral argument (or more appropriately couched in EQUAL moral justification) were presented right in this spot in the post titled The Not So Bad Bank. That’s a plan that helps banks and homeowners equally, doesn’t require incentives to work, acts faster, and costs a tenth as much.
What’s wrong with doing the job better, faster, and cheaper?
Jesus, Bob, how many self-serving columns in a row are you going to write? Your Google storage column about how Google won’t adopt your technology, this one about how the bailouts don’t help people in YOUR specific situation? Times must be tough in Cringely land.
Not just Bob’s, mine too… GRRR
Here is some advice for ya Neddy, change the channel! If you don’t like what your reading, read something else and keep your comments to yourself. No one gives a shite what you think anyway.
You just proved that you care, moron!
It’s just “business as usual”. The “Party of Wall St” which owns the two other parties is exerting its influence.
Wow Bob, you get a lot of vitriol in your comments.
Interesting post. I’m all for equal treatment.
The government shouldn’t be helping Wall Street. They shouldn’t be helping Main Street either.
They should be getting the hell out of the way and stop causing these problems in the first place.
Oh, for anyone considering spouting off a reply about how the “deregulated” “free market” got us in this mess, go strangle yourself with your Che Guevara t-shirt. The adults are talking.
Bingo P..you hit the nail on the head.
Your critics don’t have to be socialists. Congress deregulated the banking industry, letting them get involved with securities. The banks decided they’d make lots of money taking crap mortgages and slicing & dicing them into collateralized debt obligations. The unregulated rating agencies decided they were all AAA-rated, even though they stunk of manure. The rich guys are still getting big bonuses, but the people who bought houses are getting screwed. You do the math.
How are the people that bought houses getting screwed? All they have to do is make the payments they agreed to make when they bought the house. Oh I guess they got screwed because they speculated that the never ending upward spiral in housing prices was going to allow them to either flip the house and make a tidy profit or refinance to lower their payments and their right to ever increasing prices has been violated.
Or they got to the time of their life when most people buy houses, bought one and then housing prices fell and they happened to lose their job.
Or they were convince by a realtor or mortgage broker (shady salesman) that they could afford more house than they could.
Or they listed to the common wisdom to buy as much house as they could afford, because as you get older you will be making more money. Except the rich continue to refine sucking money out of the middle class and paying them less while getting bigger tax breaks.
That’s it Brett. Everybody wants to blame someone else for their problems.
These fools took the largest purchase of their lives with the same level of scrutiny as purchasing a stick of gum.
I shouldn’t have to pay a dime for these people’s stupidity.
Now go drive your SUV’s and pay for the gas with your maxed out credit cards.
It wasn’t the deregulation of the banks that was the problem. It was the government implicitly guaranteeing these loans through Fanny Mae and Freddy Mac. If the banks had thought for a moment that they would have to take the risk instead of the government, they would never have done this. Then there was the pressure the government put on the banks to make these bad loans in order to get more Americans into their own homes, especially minorities. It looked great politically and let the President brag about the numbers until it all hit the fan. If the government had get the heck out of the way in the first place, we wouldn’t be in this mess.
The “adults” are talking nonsense! The commercial world is our servant not our master. Let the government govern. That’s what it is for oh aged ones.
https://www.theatlantic.com/doc/200905/imf-advice
Professor Simon Johnson, currently a professor at MIT Sloan School of Management and formerly the Chief Economist of the International Monetary Fund, disagrees with your analysis:
QUOTE (page 3):
“Throughout the crisis, the government has taken extreme care not to upset the interests of the financial institutions, or to question the basic outlines of the system that got us here. In September 2008, Henry Paulson asked Congress for $700 billion to buy toxic assets from banks, with no strings attached and no judicial review of his purchase decisions. Many observers suspected that the purpose was to overpay for those assets and thereby take the problem off the banks’ hands—indeed, that is the only way that buying toxic assets would have helped anything. Perhaps because there was no way to make such a blatant subsidy politically acceptable, that plan was shelved.
Instead, the money was used to recapitalize banks, buying shares in them on terms that were grossly favorable to the banks themselves. As the crisis has deepened and financial institutions have needed more help, the government has gotten more and more creative in figuring out ways to provide banks with subsidies that are too complex for the general public to understand. The first AIG bailout, which was on relatively good terms for the taxpayer, was supplemented by three further bailouts whose terms were more AIG-friendly. The second Citigroup bailout and the Bank of America bailout included complex asset guarantees that provided the banks with insurance at below-market rates. The third Citigroup bailout, in late February, converted government-owned preferred stock to common stock at a price significantly higher than the market price—a subsidy that probably even most Wall Street Journal readers would miss on first reading. And the convertible preferred shares that the Treasury will buy under the new Financial Stability Plan give the conversion option (and thus the upside) to the banks, not the government.
This latest plan—which is likely to provide cheap loans to hedge funds and others so that they can buy distressed bank assets at relatively high prices—has been heavily influenced by the financial sector, and Treasury has made no secret of that. As Neel Kashkari, a senior Treasury official under both Henry Paulson and Tim Geithner (and a Goldman alum) told Congress in March, “We had received inbound unsolicited proposals from people in the private sector saying, ‘We have capital on the sidelines; we want to go after [distressed bank] assets.’” And the plan lets them do just that: “By marrying government capital—taxpayer capital—with private-sector capital and providing financing, you can enable those investors to then go after those assets at a price that makes sense for the investors and at a price that makes sense for the banks.” Kashkari didn’t mention anything about what makes sense for the third group involved: the taxpayers.
Even leaving aside fairness to taxpayers, the government’s velvet-glove approach with the banks is deeply troubling, for one simple reason: it is inadequate to change the behavior of a financial sector accustomed to doing business on its own terms, at a time when that behavior must change. As an unnamed senior bank official said to The New York Times last fall, “It doesn’t matter how much Hank Paulson gives us, no one is going to lend a nickel until the economy turns.” But there’s the rub: the economy can’t recover until the banks are healthy and willing to lend.”
UNQUOTE
You really should have posted this over at your mortgage blog, Bob.
You’re watering down the content here with this sort of ranting.
Agreed. No offense Bob, but I’m not really interested in your views on the housing crisis, hence why I come here and not your other blog.
The reason we’re doing a bank bailout is that financial systems are prone to systemic collapse, which would devastate the whole economy. Housing markets aren’t.
The fact that we built too many houses and a lot of people took out mortgages they can’t afford is sad for those people involved, and it’s not unreasonable to help them some, but re-inflating a housing bubble just sets us up for another fall.
After 2001’s tech bubble, I don’t recall people proposing zillion-dollar bailouts for the tech industry; we took our justified lumps, plus a few more, and learned something. Shouldn’t the same approach apply to the housing market?
Pardon, but the tech industry learned something in 2001? The largest start-ups since then are (a) Facebook (b) YouTube (c) Myspace (d) Digg and (e) Twitter.
(a) and (c) both make crappy money with a business plan based on advertising, even though anecodotal and now published evidence shows that click through rates on advertising on social networking sites is worse than PUNCH THE MONKEY LOL advertisements on Geocities or Angelfire. Needless to say, neither of these entities are making a profit.
(b) was purchased for gazillions and is a huge drag on Google’s bottom line. The most prosperous advertising agency in the world had no idea how to effective make money on it without getting sued. No profit so far.
(d)? No profit.
(e) Not only has no profit, but few ideas on how to get profitable.
The tech industry didn’t learn a damn thing. Actually, I take that back: they went from a business plan that consisted of building lots of traffic and going for an IPO to one that consisted of building lots of traffic and getting bought by Google. I don’t see much difference.
Bob, I love your site, but I can’t help but feel that you may be overstepping the boundaries of your expertise. Too many times have I been critical of the efforts someone is making, only to then wind up in their shoes and realize just how wrong I was.
The teleprompter wouldn’t lie to us. The economy will be portrayed as just dandy by early 2012. Until then, doom and gloom.
Isn’t Main Street where the shops are, not where people live?
So Obama’s soundbite indicates that he’s interested in helping banks and retailers, not taxpayers/regular people/homeowners…?
Yeah, none of them give a sh** about the homeowners or regular folks. This is the largest theft in history, and Obama doesn’t appear to be on our side.
The regular folks are the ones that did not purchase fake mortgages. Neither the fake home purchasers nor the banks should be bailed out. Both should rot.
You’ve argued that homeowners are at least as deserving as banks, and you’ve argued that the bank bailout has been both expensive and ineffective, but you haven’t given any argument for why the government should get further involved with mortgages, nor have you given any plan for what the government could do if it did. The logic seems to be: x is at least as important as y, and we’ve completely wasted $n on y, so we should spend a lot more on x. This is a non-sequitur.
To date, I’ve seen very few coherent suggestions for what the government could possibly do about the mortgage meltdown. One exception is the March 4 essay in the NYT by Geanakoplos and Koniak. Zingales has made a similar proposal: http://faculty.chicagobooth.edu/luigi.zingales/research/PSpapers/plan_b.pdf.
I have to disagree with the claim that we’re involved in a housing crisis.
I would think that at least one of the hallmarks of a housing crisis would be not having enough houses. But we have the exact opposite. We have a housing glut, caused by overbuilding during bubble times.
It’s absurd on its face to claim that more of a commodity sold cheaper than in the past constitutes a crisis. By that logic I guess you could claim that we’ve had an ongoing technology crisis since the industrial revolution.
No, what we have is a credit crisis. As in “not enough credit”. And the way you get more credit is by subsidizing the providers of credit: the banks.
You’re right that the housing glut is not a crisis. You should extend your logic to the credit market, as well. Artificial extension of credit is what got the banks into this mess in the first place. They loaned a whole lot of money to a whole lot of people, who bid up the proces of houses to unsustainable levels. Now, house prices are coming down, as they must. Extending more credit to raise them back up can only serve to prolong the market correction. The fastest (and only) way to return to economic normalcy is to let the correction happen.
It’s all in How Congress Makes Decisions:
http://usinghumor.com/2009/03/how-congress-makes-decisions/
I don’t think that homeowners are any more deserving than banks. Nor are they any less deserving. I doubt this is a situation where the government can simply step out of the way, however. Bernanke’s study of the Great Depression makes it pretty clear that action is better than inaction under such circumstances. Yet the decisions they make seem so one-sided, it’s no wonder most of the officials come from the financial industry and share its values.
My goal here is to encourage thinking and discussion. Yes, it is a change of pace somewhat and yes, I’m not the brightest guy when it comes to this stuff, but I don’t hear this specific discussion going on, well, anywhere, which is why I bring it up.
Bob
Here’s the kind of analysis I’m not seeing or hearing from anyone:
The root cause of the problem is a lack of demand in relationship to supply. This has very deep roots.
1) The median per hour wage in the United States is roughly the same as where it was in 1973.
(see: https://www.census.gov/hhes/www/income/histinc/h06ar.html)
2) However the GNP has gone up 150 %
(see: https://www.data360.org/dsg.aspx?Data_Set_Group_Id=231) .
That means, trillions and trillions of dollars flowing to the supply-side rich (i.e. the investing side of the economy) year-in and year-out for decades.
The results of this are predictable on a number of levels.
First the political:
Wealth has become highly concentrated, centerted around Wall Street, and with that, power. This became highly graphic when comparing how Wall Street executives have been treated to how Detroit executives have been treated in Washington. There is almost no comparison. Obama may (or may not) have a “Main Street” bias or frame of mind, but he has a reality that is dominated by Wall Street. Any change he introduces is going to have to be finessed with great choreographic skill.
Second, from politic to economic:
The way things are supposed to work is workers consume (generate demand) and investors in vest (generate ‘supply’). The Reagan revolution was a supply side revolution. They said – give the investors (the ‘supply-side rich’) more money and they’ll build more factories creating more jobs making more money for everyone. This was mostly carbon fiber, or salesmanship – the fact is, no one will build a factory if there is no demand for the products that come from that factory.
The Economic:
What you tax you get less of, what you subsidize you get more of. Economics is dominated by the law of supply and demand. In the real economy, consumption (demand) makes up 2/3rds of the activity and production (supply) makes up 1/3 of activity. Government has to choose a bias to support.
If you have too much demand and too little supply you get inflationary recessions (stagflation).
If you have too much supply and too little demand you get deflationary recessions. You also get other things, specifically, investment bubbles and deregulation of investment practices.
Investment bubbles are a symptom of excessive supply side bias policies. Here’s why: As more and more money flows to the supply-side of the ledger, demand remains soft relative to supply. The orthodox thing that the supply-side rich are supposed to do is to invest, to build factories, to enrich everyone. But the reason they invest is to generate a return on investment that will add to their own comfort. Because aggregate demand is soft, it becomes difficult to generate reasonable returns on orthodox investment. When a some sub-sector of the overall economy does generate reasonably good returns, such as a new technology which brings with it its own latent demand, the pool of investment dollars floods that sector creating a bubble. Otherwise, the investing side of the economy (the supply-side rich) start to demand access to investing in the non-orthodox parts of the economy that regulation has roped off from them: things like payday loans, credit card loans, subprime mortgages, etc… Because the investors are rich, powerful and incessant in their demands, government eventually relents.
During the last 8 years, median wages have actually fallen 5% or more (by now, much more). Mom and Dad borrow money as a bridge, to maintain family life styles. When the bridge fails to make it to the other shore, they default and bring down the entire financial sector with them.
In 1980 the economy could be said to be suffering from stagflation. In which case supply policies with a supply-side bias might have been warranted. But because it makes up only 1/3 of economic activity, such policies have highly limited leverage and as a result, limited efficacy.
Supply-side bias policies should probably have lasted no more than 6 years. Instead we got nearly 30 years of it. By 2001, the Bush administration was dealing with a deflationary recession that came on the heels of an investment bubble in tech stocks. Various forms of deregulation had already begun under Clinton, as we saw with the failure of MCI and Enron and the repeal of Glass-Steagall act. Faced with a deflationary recession and investment bubbles, all the signalls were there that the economy was well passed the ‘supply-side saturation’ point.
What did the Bush administration do?
They pored the coals on Supply-side bias policies. They were able to create the guise of inflationary pressure by devaluing the currency and they were able to create artificial demand by borrowing cheap money from China (the quid pro quo was China got a good chunk of our industrial base in exchange – further undemining the median wage of workers). People were able to refinance their houses, drastically reducing their payments releasing purchasing power into the economy creating demand. Other’s moved up market creating demand for construction. When the refinancing petered out, the second mortgage boom took its place. When that petered out, subprime loans took its place. An enormous percentage of the increase of GNP during the Bush years (perhaps even all of it) was due to cheap borrowed money from China (and other net exporting countries).
What is lacking was real demand based upon wage growth tied to growth in productivity.
From 1945 to 1973 wage growth in all segments of society, paralleled the growth in GNP. That stopped in 1973 and never resumed. Clearly by 2001 demand bias policies were long over due.
The GNP has gone up 150% since the median worker last got a raise. Imagine what would happen if the median worker (meaning you, me, your neighbor, and the guy down the street0 all got – say a mere 75% raise tomorrow? Demand would of course mushroom pushing up the asset values of everything, including many of those assets sitting on many bank’s balance sheets. And most of those toxic loans would no longer be so toxic.
Obviously, worker’s bargaining power has to be improved. Unions are one way of doing that, but there are others: granting tenure to employees and employee representation on the board of directors is always helpful (and employees tend to be better proxies for stockholders because they have similar interest in growing the companies long term viability) in this regard. Most forms of universal single payer health care are more efficient than our current system and that would release vast amounts of purchasing power creating more demand (and it doesn’t have to be government run, we used to have universal single payer telephone service and it wasn’t run by the government, merely regulated).
The problem is, the current political reality has far too much economic (and therefore political) power concentrated in Wall Street. Obama started off with the right rhetoric: change has to begin from the bottom up, not from the top down. Wall Street is savy enough to tolerate all manner of promises, so long as they aren’t delivered. Wall Street hates unions and doesn’t want universal health care. And while Wall Street types are smart enough to realize that a rising tide lifts all boats, especially their own, on an emotional level they are too selfish allow it, because, even though it might enhance their economic power, it would dilute their political power. Thus, if Obama really wants change, he has to finesse it – which means we might not see for a while, maybe not until a second term, if ever.
In the mean time, it becomes more and more likely that the United States will become the Brazil of the Northern Hemisphere. Things have gone horribly awry.
Trillions and trillions of dollars have been flowing to the supply-side of society’s ledger for decades. The money is all there. It just needs to be moved to the other side of the ledger. Something on the order of $14 to 25 trillion dollars needs to be moved back to the demand side of the ledger. This same sort of problem existed in 1929. It took 10 years of a great depression and a World War to create the political will to reverse things. I don’t see that kind of political will occurring anytime soon in this country – with or without another world war. So far the bailouts have actually moved even more trillions to the supply side of the ledger. Not only are we not solving the current economic problem, were adding to it.
I agree, these are among the fundamental causes. And one big question is whether the business leaders will see that it is in their interest to promote sustained, long-term demand.
“What is it about banks that make them deserving of 42 times as much support as your Mom?”
Banks have more customers, more jobs, more shareholders and usually create more value, economic and social than your Mom.
True, but if we let the bad ones fail the good ones–and there are plenty of banks that didn’t get buried in this mess–will take their place. That’s how the free market is supposed to work.
You are missing the point. The bank money gives the administration access to dictate terms to the banking industry. In short, President Obama does not need to negotiate with the banks and longer. He just tells them what to do. Having the government control the financial sector of the economy is vital if you have a liberal agenda to enact.
Please, Bob, stick to technology. You have wonderful insight and personal experience that is very valuable in that field. Politics is just too contentious because no one can agree on the goals we are working towards. In technology, you have considerable “value add.”
It all boils down to greed. The politicians were greedy taking the financial sector PAC money and deregulating the banks. The banks were greedy making risky loans to homeowners that were not qualified, The home owners were greedy paying too much for homes they could not afford thinking that they could always refinance or flip a house down the road. The builders and real estate agencies fueling the bubble with over supply and unrealistic home prices. All market bubbles eventually pop. The only difference with this one is the banks have paid for friends on both sides of the aisle that are helping them out, The individual home owners did not. They are just like the dot comers at the turn of the century. Friends help each other. Everyone else is a sucker.
So come the 2010 election its time to pay back these friends. Vote for a third party candidate of your choice. Kick the current bums out. Vote for anyone but the current DemReps (or is it RepDems?) Remember the foreclosure signs.
Bob, what you say is all BS.
The banks got bailed out because they were the problem – too much debt out of the eye of the regulators. The economy tipped over because the Fed could not adjust for what they could not see.
The fix needs the money supply multiplier furnished by banks, that is why the banks get fixed first. It is also a much faster solution than bailing every over-leveraged home owner.
And the taxpayer, if all works out correctly, will benefit when the Treasury buys low and sells high.
Here we are again. People arguing about how they would fix the economy. No one seems to recognize that the biggest part of the problem is people thinking that they can or should centrally plan or control the entire economy. NO ONE IS THAT SMART. Greenspan, Bernanke, Paulson, Geitner, Bush, Obama, Republican, Democrat. You give government the power they demand to provide the security of so called central planning, then you complain when they don’t do it your way or when they corrupt the system. Absolute power corrupts absolutely.
In the Old Testament, after Moses delivered the Israelites out of bondage in Egypt, they lived for many years without a king. Then towards the end of the prophet Samuel’s life, the Israelites asked for a king. God’s response to Samuel was as follows:
“Go ahead and do what they’re asking. They are not rejecting you. They’ve rejected me as their King. From the day I brought them out of Egypt until this very day they’ve been behaving like this, leaving me for other gods. And now they’re doing it to you. So let them have their own way. But warn them of what they’re in for. Tell them the way kings operate, just what they’re likely to get from a king.”
So Samuel told them, delivered God’s warning to the people who were asking him to give them a king. He said, “This is the way the kind of king you’re talking about operates. He’ll take your sons and make soldiers of them—chariotry, cavalry, infantry, regimented in battalions and squadrons. He’ll put some to forced labor on his farms, plowing and harvesting, and others to making either weapons of war or chariots in which he can ride in luxury. He’ll put your daughters to work as beauticians and waitresses and cooks. He’ll conscript your best fields, vineyards, and orchards and hand them over to his special friends. He’ll tax your harvests and vintage to support his extensive bureaucracy. Your prize workers and best animals he’ll take for his own use. He’ll lay a tax on your flocks and you’ll end up no better than slaves. The day will come when you will cry in desperation because of this king you so much want for yourselves. But don’t expect God to answer.”
That was written 931 and 722 B.C. Twenty-eight hundred years later and we still expect our kings to treat us fairly.
Totally irrelevant.
Nowadays, most places with Kings put them in a place where they can’t make decisions.
The US recognized Kings as a ‘bad thing’ around the time of the Boston Tea Party.
No, drewby’s comment is completely relevant. The word “king” is just as easily replaced with president or congress or parliament or government. It doesn’t matter what form of authority our leaders take. History has proved over and over again that people today are no different that people 3000 years ago. The same stuff happens now as it did then.
What, sadly, does not surprise me is that Obama is no different than Bush. Our leaders have to cater to the public during election time, but that’s as far as it goes. Once they’re elected, there’s nothing to prevent them from dumping our interests in the ditch on the way up the driveway and cater to the fancy pants with all the money from Wall Street waiting for them at the front door.
The thing to do is not get in this situation in the first place. Don’t buy a house you can’t afford. Don’t rack up credit debt you can’t cover. The wise person knows that behaving in that way will ALWAYS come back to bite you in the rear. No one deserves a bailout if they made the dumb decisions and are facing trouble. If we bail them out, how is that capitalism?
I look at the free market like this: do whatever you want, but be prepared to deal with the consequences. Sure, the smarter person that made wiser investments may not see the double and triple digit profits that the risky person saw during the good times, but they also aren’t seeing the same losses during the bad times either. Money is easy come and easy go. If you screw up, you deserve to pay for it. Capitalism works if the screw ups fall away and the smart ones rise to the top.
Duh, right? Or is capitalism more complicated than that?
I would prefer to live in a society with an overlay of democracy.
If you prefer raw Capitalism, then consider how things were when the railroads were setting prices in the 1800s, or AT&T in the time prior to the Carterphone decision.
You mean the 1800’s when the government basically gave land to the railroads and then paid them by the mile for the track that they laid? I hardly call that capitalism. And I’m sure that the lack of competition you refer to in the Telcom industry pre-Carter was exclusively due to AT&T. Governmental regulations and governmental control of the commons for distribution lines had no impact whatsoever on startups looking to compete with AT&T.
Unfortunately, government is a necessary evil. People should remember that government is kind of like fire. It can be used for useful purposes. However, if you feed that fire too much fuel (power, control) and then leave it unattended (re-electing the same incumbent bums from the same reprehensible parties), you will have a raging wildfire on your hands that destroys property and freedom.
Both the Republicans and Democrats are morally bankrupt and have been for some time. Check out the video at the followng link to see how both parties joined arms and circled the wagons to deny Ralph Nader not only a podium in the 2000 presidential debate, but they didn’t even let him into the venue as a spectator/commentator.
https://www.youtube.com/watch?v=S5ZRRimf3Ps
I’m no fan of Ralph Nader, but to deny him entrance to the hall as a spectator? This is what America has become? Is this the “society with an overlay of democracy” that you so herald?
I can tell you that I want no part of it.
Bob C. Your server clocks are set for some place out in the Pacific.. One hour west of Los Angeles.
Yes, the bank bailout is unfair BUT SO IS THE MORTGAGE BAILOUT!!!! It’s too bad that you got in over your head and now are underwater with your house. Don’t ask responsible renters like me who could have bought a house but didn’t to pay for your fuckup. Yes, the bank bailout is disgusting and far more egregious, but by whining that you’re not getting enough pork for your bad financial decisions you just prove that you’re just another pig like the banksters and would grab more pork for yourself if you had the political power to do so. Let the banks fail and let houses that people can’t afford go into foreclosure. It’s the fastest way out of this mess and the best way to get the economy back to equilibrium.
I agree with P 🙂 Government up until the early 1900s was hands-off when it came to banking, money supply and regulation. That’s why it’s called a Free Market, or it used to be thought of as one. If the government would get the he!! out of the way and allow the market to regulate and correct itself we wouldn’t have ANY of these problems.
Bob, have you not figured out that the bailout has nothing to do with the banks or our mortgages? It’s about control. This government wants absolute control over the media, the banks, the money supply, the political system, our morals, our labor, our capital and our children. The time is ripe and they are seizing their opportunity. Where have you been hiding?The days of freedom and an honest and just society are over. Don’t be surprised when China comes knocking on our door with 100 million men asking us to repay our loans to them. And they will have every right to. It’s over. The great experiment Alexis Tocqueville wrote of when visiting from France is over. Lights out. We will never recover from this. Never. I expect before 2012 Obama and the House democrats will be boarding a plane for Europe to spend the rest of their days just before the nukes start flying over us.
Have a nice day!
Which led to repeated boom/bust cycles brought about through speculative mal-investment, just as has happened today. Banking and investment house regulation existed to promote consistent and steady growth, which it succeeded in doing until Glass-Steagall was rescinded by congress in 1998.
What you propose is a so-called “free market” is really nothing more than an unelected form of corporate feudalism stealing sovereign authority from an elected and official government body. That those same corporate agents also bribe those same elected officials with campaign contributions to do their bidding against the interests of voting constituents does not change the situation in the slightest.
One does not solve the problem of a violent bully acting against the interests of society as a whole by dismantling the police department. Which appears to be your nutty solution.
And that’s why millions of people crossed the oceans to come to America. Because of government regulation? Hardly. Because we had real freedom up until the early 1900’s and the creation of federal taxation and removal of the Gold Standard. And I never mentioned anything about a police force.
I rest my case.
You rest your case with a nonsequitur?
What do the interests and desires of late nineteenth century European immigrants have to do with the rationale behind post-Great Depression twentieth century bank regulation?
I think the expectation that the Congress should be just and wise with spending is probably natural but one which can only lead to a large bill with a psychotherapist. You may as well flip a coin five times and expect all heads to come up.
The Current Mess is government-created, and as always it was created with the best of intentions. The irony is that the Mess After This One will also be government-created. The simple reason is that despite the history of Congress for making bad decisions, the voters have rarely learned from that history, and so it naturally perpetuates (and perhaps reinforces) itself.
Free market? What we’re seeing is a very successful effort to shield powerful players from a free market. For Wall Street, it’s as if you blew the rent money at the roulette table and the casino paid your bills. The free market where people enjoyed success and failure equally only existed for those without the wherewithal to bribe politicians and rig the game. President Obama has opened his administration to attack by his handling of the bailout, but the attacker would need to disavow Big Money.
And get off of my lawn!
How did we get into this mess? Previous administrations wanted a housing bubble to offset the natural economic down-cycle. How did they get their housing bubble? By telling the banks to make NINJA loans for mortgages. (NINJA = No Income, No Job or Assets). The result is that Golden1 took out Wachovia. After Wachovia acquired Golden1, Barney Frank made a personal visit to Wachovia and told them they had to protect the Golden1 NINJA loans at all cost, because they were great for the community. (Really, the promise of “easy home ownership” was a bribe to poor voters to keep people like Barney Frank in office).
You don’t think the banks would have made all those NINJA loans in an un-adulterated credit market, do you?
We’re seeing a bailout of the banks, because the banks held up their end of the deal. That, and/or they have some pretty dirty laundry that needs washing.
We’re not seeing a bailout of mortgage holders, because they were NINJA and a bailout would equate to huge grants of money to poor people, while Joe Shmo gets the bill. That would *really* tick off the tax payer. A grant for day-to-day food – not a big deal. But a whole brand new house? Don’t you dare.
Step away from the koolaid and look at the big picture, large portions of the economy have been collectivized under the control of the financially well endowed, and it’s working about as well as the soviet system. Well-paid people don’t miss mortgage payments, save and start small businesses.
Thank you, Drewby and kcrain! Couldn’t have said it better myself.
And people continue to think the Bible has no relevance for our “modern” times. They will never learn.
I would be less concerned about the bank bailout if it had the same level of scrutiny as the auto company bailout. Many of the financial institutions probably should go throuth bancruptcy either structured or otherwise.
I’m getting sick of hearing people parrot something along the lines of “You shouldn’t have bought a house that you couldn’t afford…”
A lot of us bought houses we could afford, and that we make payments on. The problem is that the values have tanked, making it impossible to refinance or sell. You put 20% down? A lot of areas have seen larger craches.
Buying anything is a risk, I just can;t stand to see that the risk wasn’t “the market” or “they built a nuclear power plant in my back yard.” The risk was that Wall Street would buy out the government. And the government paid them to do it.
20% down is great, good job! That’s what people should do. It’s not easy, I know. But, if you do scrape together 20%, that means you’re probably careful with your money or you would never have been able to save 20%. Besides, even for those unfortunate few that you describe, you don’t lose anything unless you sell. I know people in that situation who are going to ride it out. They’ll keep making their payments, and eventually, the market will rise again (hopefully under real circumstances, not bubble-inflated ones).
My problem with people that “buy houses they couldn’t afford” are the ones who are NINJA as DavidG describes. They didn’t bother to scrimp and save, put down 20%, or understand that to afford a house without handouts, they need to have a job. It’s really fairly simple, it just requires people to make decisions for their long term good, not rush into that new car purchase or three Starbucks trips a day if they can’t truly pay for it.
Credit card debt in this contry is ridiculous. I can’t understand how people think they can carry $20k on their credit cards, only pay the minumum $100 balance every month, continue to buy 10 pairs of shoes a day, and think that’s ok! That’s the same mentality as buying a $600k house with no money down. It’s happened, and THOSE are the people that I’m talking about. Not the ones who are really struggling but are trying their best to make things work, make the hard choices, and get their spending under control. It is possible, but it means denying our selfish wants for what we truly need.
How do we fit into that profile? We bought a 3 bedroom condo for $370K about a year and a half before the bubble burst. We were just moving out of a 2 bedroom apt and had our third child on the way so we needed the room. We decided to buy because the prices were going up fast and we’d soon be priced out of the region where all our family is.
We pay off all our credit cards every month except the two that have zero percent interest and we have enough in savings to entirely pay those off if we had to (just collecting the interest on the savings until the zero percent term is done). Our cable bill is $11/month, phone is $25/month, cell is $12/month, food budget is $450/month (6 mouths to feed), car payment is $250/month .. where’s the extra spending? No starbucks, no land rover, no satellite tv, no going out to mcdonalds once a week.
I was making a decent salary at the time and even better now. Apparently the only thing we did wrong was not have $74K in savings to put as a down payment. If we had, our original loan would have been for $296K, but the value is currently just over $200K, so how would the 20% have helped?
Luckily we did a 7 yr arm so we still have a couple years to either pay the mortgage down by half or hope the values go back up before our rate adjusts. Think there is a chance of either of those happening in the next 2-3 yrs?
We’re not in danger of defaulting now, but a rate adjustment could make things dicey.
My point being that this (pick your adjective) crisis has hurt more than those who were irresponsible with their finances.
You shouldn’t have purchased a house you could not afford. Plain and simple you are a fool if you did.
I shouldn’t have to pay for your house, your SUV or the crappy bank that gave a fool the money.
You deserve what you get and the other idiots do also.
Buying anything is a risk? No, borrowing more than you can afford to pay back is a risk, especially when you assume that your property value will never go down. You placed a bet and lost. Now suck it up and stop blaming other people and stop asking for financially responsible people to clean up your mess, you loser.
The only way to solve the ‘housing crisis’ is to share losses between banks and homeowners. Cramdown restructuring of the loans works: all loans would be re-valued at 60% of current amounts, and changed into fixed-rate 30-year mortgages at current rates.
This puts most of the upside-down, underwater homeowners rightside-up, above water, so if they can’t make payments, they can at least sell their homes and get out of the mortgages without still owing. Banks would immediately see a big hit in their claimed mortgage portfolios, but 60% of something is better than 100% of a foreclosed and unsaleable derelict property falling into ruin — isn’t it?
The banks still want to get all their phony profits. Thanks to very generous campaign contributions and a lot of razzle-dazzle statistics, they still think they will. They won’t of course, nothing can stop the losses. But in the meantime the bankers will grab all the borrowed tax dollars they can get their hands on.
Those campaign contributions are looking like the best investments big banks have made in years. And they made them on both sides of the political aisle.
You’re reasoning from a false premise, the objective is not to help the economy, nor to help homeowners, but to control the financial industry. That’s why they arm twisted banks that didn’t need addition capital into accepting government money, and why they’re resisting accelerated repayment.
Oh, and the housing bubble has nothing to do with the repeal of Glass-Steagall, the problem starts with the Community Reinvestment Act, which is where all these bad loans are coming from.
@LarryD
The Community Reinvestment Act was repealed in 1977. Will you please explain to us all how a law repealed thirty-two years prior to the current financial crisis has any bearing whatsoever?
http://en.wikipedia.org/wiki/Community_Reinvestment_Act
Why not ask yourself instead about the Garn-St. Germain Act of 1982, a repeal of S&L regulations that led straight to the S&L crisis of 1987-89 and hundreds of billions of losses through fraudulent loans.
http://en.wikipedia.org/wiki/Garn_-_St_Germain_Depository_Institutions_Act
The precedent whereby the government stepped in with a bail-out of the S&L industry using tax dollars only set us up for yet another more serious fleecing by the same banking industry twenty years later by following the same game: push deregulation – in this case repealing the Glass-Steagal act of 1933 – and then reap fraudulent profits as soon as official oversight has been blinded.
The Community Reinvestment Act had absolutely nothing to do with our current debt crisis.
“The Community Reinvestment Act was repealed in 1977.”
That should be “…passed in 1977.” My apologies for the error.
One of my best friends was a broker for Countrywide Home Loans. They weren’t writing these loans because the government was twisting their arms. They did it because it was very, very profitable.
Hear hear. It freaked me out how many genuinely nice but utterly irresponsible friends and acquaintances I knew working in the mortgage lending industry a few years ago. One of them was my former partner in a publishing venture who smashed 15 years of profitability in like 18 months after he inherited money and bought me out. I’m talking about smoldering ruins attacked by Viking hordes here — advertisers’ checks cashed but their ads never appear, about 50% fulfillment of subscribers, tens of thousands of uncirculated copies in his garage. After hiding for a couple of years, he sent out a mass email talking about the awesome new job he had “connecting people with their dreams”. He was in charge of millions of dollars per month and had nothing but a string of unmitigated disasters behind him.
Again, he wasn’t a bad person, just not a good businessman (and pretty lazy). It was sort of like Lawrence, the next-door neighbor in Office Space, giving up drywalling the new Mac-donalds and being handed a portfolio that represented millions and millions of dollars exchanging hands. And I knew about 5 people — usually artist-types who would otherwise be working dead-end jobs to pay the rent in the service or clerical industry — in exactly the same spot.
These greedy “non homeowners” deserve what they get. Most were speculators.. all were greedy SUV driving fools
The one thing that you fail to put into this equation is that the money paid to the banks will be returned. They are already trying to pay some of it back because they don’t want the government telling them what to do. Money paid to homeowners will never be returned.
Wow Bob!
I love your perspectives; they require you to THINK. They are so often about Vision.
Some of the responses to your “columns,” not so much thinking going on in some of them thus far…..
(I have learned that few have Vision and even fewer can recognize it…..) You both have it and can recognize/analyze others vision.
Simply stated, the problem with this whole housing/banking problem is that there hasn’t been a strong effort to:
1. Identify the REAL source of the problem
Then
2. Hold PEOPLE responsible for the problem (NOT TAXPAYER PEOPLE; Business/Government People; Leaders who should be responsible and accountable for both themselves and subordinates for screwing up!) Fire them, charge them, humiliate them.
3. Address Solutions AT the problem instead of Crazy, Expensive Distractions FROM identifying the problem.
IMHO This Bail Out Mania is a cover/distraction for those who are responsible. Because of this, our US Govt. is responsible for: 1. a Cover Up of the true source of this problem and/or 2. the true source of this problem.
Only in America can one group of people screw something up so royally and then be given the opportunity to “fix it” with a blank check of so many’s money to avoid being held responsible….
It isn’t easy for the first time buyer either. I have a decent line of credit, the bank is happy to lend me the money, but no one will sell unless I go through their lender and take out an ARM that is guaranteed to fail. In this round we are only setting up more people for the firing squad and any other action is considered unconscionable.
I’m guessing the good times will come when we bulldoze half of the houses in America.
We are actually in the process of buying a home right now. The inspection is tomorrow. When we started this process we were interested in foreclosure or distressed mortgage homes. We were surprised how few there were. One of the big lenders in town told us “you can probably count all the foreclosures we’ve had on one hand.” It seems the good folks in Boone County Missouri did not mess with subprime loans and other non-standard financial trickery. All loan applications were checked and they made sure folks could afford the payments.
The lenders in Boone County had a lot to say on this subject. It was bad enough people sold those dangerous (subprime) loans, but the big problem is the original purchase price of the property. They paid too much and the appraisals were wrong. Property values have now returned to fair market levels and that means there is now a big paper loss for a lot of homes. Lenders are willing to refinance mortgages but the problem is they can only loan up to about 90-95% of the real value of the property. The difference has to be borne by someone. Do the tax payers eat this loss? Do the banks eat this loss? Do the homeowners eat this loss?
What is needed I think, is a separate way to handle the lost value of the home. To start I think the banks and lenders need to eat 1/2 of the that cost. Their greed and recklessness contributed to the problem and they need to be responsible for the consequences. I would propose the other 1/2 of the loss be assigned to the homeowner and be covered by a special second loan on the property. This second loan would be a zero-interest loan — that will be the government and tax-payer’s contribution to the mess. With the bank’s write-off and the special loan, it will then be possible for people to refinance their homes at fair market values. The special loan will be paid off by the homeowner, or would be repaid out of the proceeds of the future sale of the home. To help things a little more, I would make payments towards the special loan tax deductible — another contribution from the government and tax payers.
That is my solution to the mess. If you can separate the fair market value of the home from the inflated previous paper value, then you have a chance to refinance and correct this problem. The other problem is some people do not have or never had the income to make a house payment, they need to move to housing they can afford.
The Boone County lenders told me — because they avoided the subprime money like the plague, there was not a big run on their housing market. Property values increased at normal historic levels. Now in the middle of a financial crisis, they are seeing a decline in property values — but not by much. It is not a big problem and it won’t take long for values to return to previous levels.
Most of the lenders who pushed the dangerous loans are gone and/or out of business. Most of those loans have been packaged into securities and sold as investments. If they were forced to simply eat their losses, the economic damage will be very bad and it will hurt everyone. We need to reinstate the rules that governed the operation of the home mortgage industry for decades. In many parts of the country, eg Boone County MO, they continued to operate their business using the old rules. Their home market is still stable, money is available, foreclosures are few and far between — even in the middle of a horrible economic crisis. The rules work, our congress were idiots to have trashed them.
My solution is simple and it will work. The problem is we could never get it through congress. If the President submitted a bill to do exactly what I propose, I have no doubt the congress would morph it into a horrible mess before passing it. Personally I think the administration (both Bush’s and Obama’s) and the Federal Reserve are doing everything THEY can do to correct this problem. Changing the tax code and changing the laws to allow a special, second loan require the congress. That is the real reason we have not seen more relief for the foreclosure problem. The people who were idiots and led us into the crisis, are too stupid to lead us out of it.
The banks and lenders in the midwest HAVE money and are approving mortgages. We found a nice home. We didn’t get it at a bargain basement price. We did get it at a reasonable price that does not harm the previous owner or lender, or us.
Rules and laws were created for the normal conduct of business. Over the last 10 years or so the congress has trashed 50 years of best practices.
Why are we not in a full depression right now? The answer is very simple, information technology. In the 1920’s the federal government and big banks did not have access to the information that showed the economy was failing. Their corrective action was slow and ineffective. For the last year or so our government experts have been watching the problem unfold with real time data. They have been able to make quick and decisive corrective actions. In a few years from now when someone writes the good historical account of these times we will see how close we were to catastrophe and how effective a number of agencies were in preventing it.
Where went computer column? I got a condo..mortgage paid. I want computer content.
Wow, who knew there were so many ‘Tech Teabaggers’ lurking here?
Since when did anyone say that “life is fair”? It isn’t.
However, as you so pointed out – the bailout just isn’t working. It never will, because its only creating more debt when the whole issue (including the housing crisis, but also going beyond it) is about debt.
Sadly, you probably won’t ever hear Congress or the President say or do what is really necessary so solve this problem. And it can be solved via the following:
1) Balance the budget starting this year.
2) Use any surplus in the budget to pay down gov’t debt (e.g. buying back the various bonds and t-bill issued by the federal government and the treasury).
3) Help the states do the same.
This will, indirectly, push more money into the ecomony (both in the US and worldwide) than any bailout plan could ever do as it will do the following:
a) lower the national debt
b) increase the valuation of the dollar
c) combat inflation
We will likely have some deflationary pressure – but in a good way. Overall, we’ll strengthen the economy and the nation. Inflation is primarily required to pay for the interest in the accrued national debt. Lower the interest needed, and you’ll lower problems with inflation. Any deflation that occurs will be controlled as the valuation of the dollar increases – so it won’t really be deflation.
All the bailout does is steal from tomorrow to pay for today – that’s simply the nature of debt. And if it’s not controlled, even the US Gov’t will have to declare bankruptcy. Sadly, Congress does not seem to have any intention on controlling the deficit.
That’s what Hoover did. Worked really well, didn’t it? What you propose is an idea so old and tired, it’s actually laughable. It’s also what the Chinese government wants us to do. Somehow, I don’t think the leaders of China have our best interests at heart.
Hoover did several things (https://www.whitehouse.gov/about/presidents/herberthoover/) – one of which was balance the budget, but another two of which were (a) kept spending on social programs, and (b) lowered taxes. It is the combination that deepened the problem at that time; however, the situation Hoover was presented with then is not really that much different from what we are facing today – only different catalysts and different solutions will be needed.
The one solution that will not work is spending more money. One of the major catalysts now is debt – at all levels, from Federal gov’t to personal; and the only way to resolve it is to lower it – pay it down.
Hoover’s problem was not deflation due to paying down debt.
So, no – you can’t really even begin to compare what I saying to what has been done in the past. Why? Because no one has every really done it – and no one has even bothered to try since the rise of Keynesian economics – especially since most now believe that debt is infinitely expandable (at least for the Federal gov’t – it is not for anyone).
Ultimately we have the choice – pay down the debt (which we have to do regardless) and lift the burden on future generations for paying it back or suffering a fully collapsed economy (which will happen if it doesn’t get paid back or we start/continue to take debt to pay back debt – something we’re probably already doing) OR let it ride out until the Federal Gov’t has to declare bankruptcy and the USD is worthless. If you thought the Great Depression was bad, look at what will happen if the US Federal Gov’t has to declare bankruptcy. (And yes, it CAN happen.)
I never thought I would see the bible used in a discussion on economics in the year 2009 but I guess if you really think about it it makes sense.
According to mythology Jesus came in once and paid the tab for all mankind, past, present, and future. Perhaps the second coming will be when he returns and bails out all the struggling banks and home owners.
If Jesus paid off my mortgage it might even make me believe in him.
can you blame wall street? They should take all they can get, forget the future or concerns for anything else other than maximize revenues through whatever means possible. Unless they are allowed to crash (which is the best option), they are being trained to behave this way.
Um… Okay, I’ve commented a few times, but Bob, I seriously want you to look at the comments here. About 20% are seriously Green Inkers, crackpots and other psychos. Anything having to do with financing or housing right now is like that, with their 5000 word summaries, lists of hundreds of links of essential reading and ODD capitalization of WORDS in some POSTS. Hopefully they click more on ads, cuz I can’t imagine that this is otherwise the audience you wanted for this blog. Normal people will argue with lunatics for awhile but are usually content permitting them the final word.
You nailed it Bob, and I appreciate it.
To answer your question, the government, as a whole, is unblushingly ready to consider YOUR money as THEIR money, and THEY want to spend it for you, instead of allowing you to spend as you see fit. By putting the nation into terrific, horrific debt, taxes will be increased, reducing the amount the individual citizen is allowed to keep, and THEY can spend those tax dollars for you. That means THEY decide if you need a new home, another bailout for their cousin, or yet another bureaucracy to stick yet more fingers into our individual lives, to be paid for with YOUR money.
I added up all the taxes and government authorized fees I paid with my income last year, from income tax, capital gain tax, sales tax, franchise tax, utility tax, internet access tax, 911 services, property tax, etc., and found that almost 60% of MY income was spent on these taxes. I could do without internet or telephone or power and avoid some of these taxes, but what’s life without video, talking to my mom, or air conditioning?
Now, having bailed out these banks who basically have bought “junk” mortgages, THEY can raise taxes yet again because THEY had decided how to spend MY money!
Can we spell “socialism?”
People already have a reasonable bailout plan: Bankruptcy.
Please return to tech blogging, so we can get back to geeky techno arguments in these forums. This bank-bailout essay is just another piece of red meat that attracts the usual flies:
1) Screw homeowners! They get what they deserve!
2) Hang Wall Street! They’re corrupt!
3) Socialism! Socialism! Live Free Market or Die!
4) Obama’s fault! Minority loans! Rush says so!
5) Bush’s fault! But Obama’s the same!
6) Gold Standard! Fractional reserve banking is evil! Ron Paul 2012!
7) My mortgage is ok, so you’re all losers!
8) I am writing this from an underground bunker wearing a tin-foil hat and holding a shotgun, sitting atop a pile of silver barter coins and a decade’s worth of Hustler magazines!
Call me nostalgic, but I much prefer the days when engineers argued over the effects of barometric pressure on a wireless router signal and the maximum thickness of drywall it could penetrate. You know, arguments where I could learn useful things.
[…] I, Cringely » Wall Street and Main Street Don’t Cross. While I don’t agree with his solution, I do agree with his assessment. […]
“Wall Street and Main Street Don’t Cross
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When Barack Obama was running for President one of his favorite sound bites was that any financial bailout should not just involve Wall Street, but Main Street, too – that the government’s responsibility was to help both bankers and homeowners. But now that the election is won and Obama is in office, the two streets are still being treated very differently, with Main Street getting a lot less help from Washington.
This is a HOUSING crisis, not a BANKING crisis, yet $700+ billion has gone to help bankers and only $75 billion to “help” homeowners. The banker’s money has mainly been spent and the homeowner money has hardly been touched. If this is a HOUSING crisis, why aren’t more resources being devoted to housing?
It comes down to an issue of morality, believe it or not, with homeowners expected to be moral and bankers not. Everybody blew it, but the homeowners are being disproportionately punished for their actions.
There is no morality issue in the bank bailout. Banks are having their capital boosted based not on whether they are well run or in some way “deserving,” but purely on the basis of whether they are viewed as being in three groups: 1) doomed; 2) capable of being saved through injecting government funds, or; 3) too big to be allowed to fail no matter how poorly run. This means the least-deserving banks tend to get the most help.
But the Obama Administration’s attempt to help mortgage holders is different. If you hope for government help in restructuring your mortgage you’d better not be behind in your payments. If you missed a mortgage payment months into this crisis, you are out of luck. If your mortgage isn’t guaranteed by Fannie Mae or Freddie Mac, you are out of luck. If your mortgage is jumbo you are out of luck. And if you owe more than 105 percent of the value of your home you are out of luck.”
Wrong, as usual, Bob. These people ARE THE LUCKY ONES. Anybody “helped” to stay in an under water mortgage is being turned into a debt slave for the rest of their lives. Think about it.
This petty Robert Mugabe African style dictatorship of Obama’s is not going to help anyone!
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