Obama; If This Is True, then Shame on You

I can’t believe what I just read in the Washington Post.

Apparently,

The Obama administration plans to overhaul how it is tackling the foreclosure crisis.

And…

The first key element is that the government will provide financial incentives to lenders that cut the balance of a borrower’s mortgage. Banks and other lenders will be asked to reduce the principal owed on a loan if the amount is 15 percent more than their home is worth. The reduced amount would be set aside and forgiven by the lender over three years, as long as the homeowner remained current on the loan.

I own a little house in the ‘burbs of Phoenix, which I bought with a variable-rate mortgage at the end of 2004. It is now worth about half of what I paid for it.

A few months ago, the principal on my mortgage was comfortably more than the place was worth, and my low income was in decline. So I did the responsible thing, cut my expenses back to the bone, and raised and moved whatever money I could to cover it, and to try to pay it down. I wanted to deal with the fact that I was upside down on the mortgage and dangerously exposed to future rate increases; most of all, I wanted simply to reduce my monthly payments.

Why did I bother?

If I had not been so responsible, Obama’s plan (I still cannot quite believe it) would have given me (via my bank) YOUR money, humble tax-payer, as a gift to reduce my mortgage, and I would have gained to the tune of many thousands of dollars.

However, because I did the responsible thing, MY tax money will be going to help those who were in exactly the same situation as I, but weren’t responsible enough to live within their means and meet their obligations, perhaps because they bought a bigger car than they needed, were paying interest on credit cards they shouldn’t have been using, or whatever…

How dare the government do this? How dare they? This isn’t capitalism. It isn’t even communism. It is some upside down, messed-up mediocracy.

And it’s worth asking why I, with my low income, pay any taxes at all to reward the misfortune (at best) or irresponsibility (at worst) of others? 53% (last time I checked) of adult Americans pay no income tax. The overwhelming majority of them pay no tax because they have deductions for children. I am not one of them because I have no children. And I have no children because I cannot afford children. That too, I believe, is a responsible decision.

So now, not only will I be subsidizing the procreative choices of others that I, out of my own sense of basic responsibility (Thanks Mom) will not make, but also, my wealth will be transferred directly to a subset of them for the particular purpose of bailing them out of exactly the same situation that I had to bail myself out of – and was only able to do so precisely because I have been so careful to live within my means and save what I could for an emergency.

Libertarians like to say that “taxation is theft”. There are many good theoretical arguments for that, but somehow it just “feels” not quite right in practice. That word “theft” just feels too dramatic… and there is the (admittedly weak) argument that the theft is not quite theft because it is at least indirectly sanctioned by the majority (in theory).

But THIS does feel like theft. It feels personal. It feels like a violation. It feels like an element of society wants to exploit my carefulness and sense of responsibility to serve those who don’t live their life like me. I don’t feel like part of the investment class, barely even the middle class, but this feels like, if not a class battle, then at least a values battle – and one that I did not ask for. Are the new classes the responsible class and the irresponsible class? God knows.

For years, I have voluntarily sponsored children in the third world. I am happy to help those who are in greater difficulty than I, and I appreciate that many of them are victims of an economic system into which they are born and which is far from perfect. My neighbors in my Phoenix suburb are not those people. And even if they were, how dare you bring the force of law against me in this way when the only difference between me and those who will benefit from my money is my prudence?

When it comes to those who live in the richest country in the world, let us make our mistakes, and learn, and do better next time. Losing a house is horrible, but not the worst thing that can happen to a person. Denying the basic human right to learn from failure – think about it; it is a corollary of the right to the pursuit of happiness – and taking from those who try keep their failures from hurting others will be the death of us.

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Author: ROBIN KOERNER

Robin is the creator and publisher of WatchingAmerica.com, a website that translates foreign news about the U.S. from around the world. He is also a political and economic commentator for the Huffington Post, Ben Swann, the Daily Paul, and other sites. He is best known for coining the term “Blue Republican” to refer to liberals and independents who joined the GOP to support Ron Paul’s bid for the presidency. His article launched a movement, which now focuses on winning supporters for liberty, rather than arguments, focusing on finding common ground with those of various political persuasions, and especially people on the left.

  • StockBoySF

    I suppose the alternative is for people to continue losing their homes causing house values plummet.

    Thanks for being responsible.

  • JSpencer

    I've had to tighten up too, and I'm fortunate to have a home that is worth a lot more than I owe on it, but that came from work and discipline. I feel compassion for those who struggle and try to play by the rules, but the idea of giving a pass to people who have been irresponsible with their money and their choices grates. Sometimes tough lessons have to be learned.

  • Schadenfreude_lives

    And this additional shifting of wealth by the Obama administration surprises you exactly why?

    Hope and Change, i.e., you better hope the government lets you keep even your change. Oops, their change. All your monies belong to them.

  • ProfElwood

    You're just starting to wake up. Now, ponder that same logic with the “rescued” financial institutions. Oh, and don't forget the people that issued those loans when they knew that many of those people had little chance of paying them off. The people that made the loans often weren't bothered by such details, because someone else was going to deal with actually servicing the loans. Then you'll be on the right path to reality enlightenment.

    I wish you luck on your journey.

  • chipsilicon

    Today's SAT analogy:

    social justice:justice::

    (a) theft:charity
    (b) three-card monte:contract bridge
    (c) bologna:beef
    (d) Ike:Tina

  • JSpencer

    Not sure who you're referring to, but I've been “awake” for decades now. ;-) As for the financial institutions, nobody likes those wankers, including me. The bailouts were necessary to some degree but they were too generous and there should have been more conditions. And thanks for wishing me luck on my journey, but I'm staying right here tonight thanks – shooting for 7 hours of sleep in fact.

  • Dr J

    Nothing new to see here, folks. Punishing virtue and rewarding irresponsibility is the rule, not the exception.

  • imavettoo

    Excuse me? You are delusional if you ignore the fact that Dubya shifted so much wealth towards his country club buddies that any change happening now is simply a minor correction. Sorry, your monies belong to Halliburton & Blackwater (Xe?) , scum by any name.

  • imavettoo

    Oh yeah, the Cheney/Bush cabal was soo.. virtuous. They must have been libruls.

  • Schadenfreude_lives

    Obama has 'shifted' more wealth in one year than Clinton and Bush combined in 16 years.

  • kathykattenburg

    You are to be commended for being more responsible than other home-owners.

    I just wanted to point out, though, that some people have children when they are doing well financially, and then at some point after they have children, suffer reverses. It's hard to foresee that sort of thing sometimes.

    Just a thought.

  • Schadenfreude_lives

    The Obama administration plans to overhaul how it is tackling the foreclosure crisis, in part by requiring lenders to temporarily slash or eliminate monthly mortgage payments for many borrowers who are unemployed, senior officials said Thursday.

    Banks and other lenders would have to reduce the payments to no more than 31 percent of a borrower's income, which would typically be the amount of unemployment insurance, for three to six months. In some cases, administration officials said, a lender could allow a borrower to skip payments altogether.

    Under what authority, exactly, does the Obama administration feel it has the right to tell private lenders what they will or will not do with their loans?

    Please, all of you who are still in denial about the Socialist tendencies and desires of this administration explain this one away.

  • chipsilicon

    Yes, ants like Robin Koerner have got to have more sympathy for the grasshoppers of the world.

    Just one question: What will the grasshoppers do when the ants emulate them?

  • Dr J

    Oh yeah, the Cheney/Bush cabal was soo.. virtuous. They must have been libruls.

    Ah, the old “but they're even worse!” misdirection. Forget it, imavet, two wrongs don't make a right.

  • ashamedatamerica

    Just another entitlement for minorities – a gift from the great benefactor to all the deadbeats who got in over their heads but knew they were doing it. When they get put on the hot seat for ANY crap they scream “Dubya, Dubya, Dubya” They'll be blaming George Bush for anything Stymie does. And next presidential election when the Tea Partiers sabotage the republicans and split the vote – Stymie will get his 2nd term and have a whole bunch of new directives. Maybe a new 1 will be that If you are a tax payer and have some dough you will have to take in a minority family, maybe some illegal immigrants and share your home and surplus with them. If you complain Stymie will spank you, he he. Visions of a bright new America!!

  • redbus2

    I've never bought the idea that home ownership is somehow an inalienable “right,” despite that message from Jimmy Stewart's classic movie, “It's a wonderful life.” Sorry — Travel just a bit around our world. So many struggle to have the simplest roof over their heads, and most people rent. If someone loses their house, they should move into a rental they can afford.

  • superdestroyer

    What else would you expect from an administration who used a dead 27 year old woman who had her first child at 15 years of age and had three children by three men and had money to smoke and drink but did not have money for healthcare as the poster child for health care reform.

    What else would you expect from an administration that believes that U.S. can grow the welfare state while maintain open borders.

    Everyone should look at the per capita income numbers for the bluest part of the U.S. The mean income for whites in DC is $101K and $35K for blacks. There is no room for a responsible middle class in Obama's American. Whoare either rich and can avoid the parasite class or one gets pulled into the parasite class.

  • http://www.blogtalkradio.com/msr Jazz

    Dear Robin,
    Absolutely every thinking person in the United States who is eligible to vote should read this column.

  • superdestroyer

    Jazz,

    The Democrats have been quite open in the plans to tax the successful (read whites ) and give the money to the core Democrats groups. A big tent political party means a big spending party and that is why the U.S. will soon be a one party state. The easy road will be to have the Democrats take money away from others and it give it to a favored group.

  • shannonlee

    The problem is that we were pretending to be an unregulated free market economy when we were really working under corporate socialism policies (a tax payer backed financial system). This crisis is where theory and reality finally collided and now we have to find a fair way to get out of it.

    In theory, at least mine, we should have let the free market prevail and allow our financial industry to collapse. We couldn't because this most likely would have sent our country into another great depression….and not many wanted that. Now here we are on the other end with the people that took those terrible loans when they had no business acquiring a loan in the first place. Free market theory, and maybe morality, would say they should lose their homes, in the same way lenders should have lost their companies, for making irresponsible decisions. If we allow this to happen, we'll send thousands of families into bankruptcy and destroy homes values across the nation.

    It appears to me that we have the same dynamics going on here on both sides of the crisis….punishment of individuals for making irresponsible decisions vs the immediate effect of that punishment on society as a whole. (I think we can all agree that the long term precedent of tax payer funded bailouts is a bad thing)

    We decided to save the economy and only punish one company. Now we have to decide how much we want to save home owners and values…in the short term…and who should be punished. By bailing out these home owners, we are basically punishing people like the author (even though his home value might be helped by these bailouts).

    It is hard to say we should be tougher on these home owners, especially considering that we are talking about “main street” people, not wall street. But it is easier to be harder on them because the immediate effect on society from people losing their homes is not as dire.

    What is fair? It is hard to say…considering the place we started from was by no means theoretically consistent.

  • http://sovereignmind.wordpress.com/ adelinesdad

    I mostly agree with the post, except for the part about being surprised. This is hardly the first time this has happened:

    - home buyers tax credit (how would you have felt if you had just bought or sold a home when this was decided?)
    - cash-for-clunkers (I wrote about this here with similar sentiments to yours: http://sovereignmind.wordpress.com/2009/08/09/c…)

    The thing that makes this kind of “theft” more apparent is their sudden and temporary nature. In this respect, at least the child tax credit is somewhat predictable, so you can make decisions with the knowledge that it will be there.

    You might argue that this is worse because it is explicitly punishing those who were responsible at the expense of those who may not have been. I'd ask you to imagine if you were the owner of a small car dealership who was facing financial trouble and decided that the responsible thing would be to sell your dealership to cut your loses, and then you wake up the next day to read about the new cash-for-clunkers program. I agree with you that “tax as theft” is a stretch, but these sorts of things sure feel like it.

  • erichm

    Robin,
    I am glad you oppose but this is the Democrat philosophy for EVERYTHING!!!!, not just mortgages.

  • ProfElwood

    I was addressing Robin, who seems to be just waking up to the fact that bailing out failures is a way of encouraging them. Pavlov's theory is one of those that's so obvious, it takes a while to figure it out.

  • mariaycorazon

    The Moderate Voice, an internet site for moderates, centrists and independents. This article and some of the commentary sound more like right wing rhetoric to me. It is familiar voices from the entitled class that would say that it is only minorities who will benefit from this policy. Sounds like those of you who claim to be responsible have never had a catastrophe happen to them…and I hope it never does. There are all manner of life circumstances that can bring one down to your knees. The redistribution of wealth to the populace is a good thing. Capitalism has been an exclusionary and brutal way to keep the wealth with the top one percent making them the ruling class…does that sound like democracy? Hardly! By the way my blogging name means Mary with a Heart.

  • JSpencer

    The complaints seem to be that TMV is too right wing and also too left wing. I suppose that puts it somewhere around the middle on average, which is at least part of the objective eh?

  • JSpencer

    Excellent commentary Shannon.

  • steveinch

    Shannon, as I just posted in Jazz's new thread, the bank bailouts and the homeowner bailout are not comparable. The bank bailouts were loans where the total value of the loan was paid by the government (us) and transparent. They also were temporary because they were loans.

    While we don't know what this homeowner program is yet, it appears to be permanent, invisible, and accomplished via mandate within the private market. I'd be a lot more sympathetic if the government wanted to offer homeowners the same deal it offered the banks, e.g., here's an effectively zero interest loan to help you bridge and own up to what it's going to cost.

  • shannonlee

    This story seems pretty real to me. Not only is it real for the author, but you better bet there are people like him in every city in America. We have to be fair to these people too.

    Believe me, I get plenty of conservative bs email stories (spam) from my family. This isn't one of them.

  • steveinch

    Maria,

    I certainly hope that you redistribute all of your wealth to the populace; otherwise I might have to conclude that you only want to force others to redistribute your wealth or that you are only willing to redistribute yours if others do likewise. Remember, virtue does not require that others do the same ; ).

    Welcome to TMW

  • shannonlee

    The principle is the same. And lets not get into bailouts to companies that were bought buy bailed out companies. There are billions of missing dollars out there.

    And as you wrote, we don't even know what the program is yet.

  • Don Quijote

    Yeah, let's blame the Obama Administration for attempting to clean up the mess created under Clinton & Bush…

    Had Bankers done their jobs, maintained lending standards (20% Down, Monthly payments 30% or less of Gross Income), this housing bubble would have never occurred, all of these McMansions would not have been built and the consumer splurge of the last ten years on money they did not have would not have occurred…
    OTOH we would have noticed that the 00's were a decade of zero economic growth, before the Obama election…

  • steveinch

    I agree the principle is the same but the approach matters.

    If the approach is the same, I'll withdraw my critique but I'm pretty confident it won't be…

  • steveinch

    Oh good, let's blame Bush. Because he mandated lower standards for banks and fired all the regulators.

  • Bandit

    I've taken out a few mortgages and I can't remember any of the attorneys holding a gun to my head and making me sign – as I remember there is a big repayment agreement where I agreed to all the terms and conditions and signed my name. But I guess that didn't apply to other people. Like the sun rising in the East you can count on the libs saying it's someone elses fault.

  • DdW

    Forget it, imavet, two wrongs don't make a right.

    Good point, Dr. J.

    A point that needs to be made just about every time a Republican says, “well, Democrats did it too,” and vice versa,

    But then again it would get so repetitive and monotonous..

  • http://www.facebook.com/jared.littleton Jared Littleton

    I get this is a theological response to the article, but I thought I'd share anyway:

    At one level, I'm quite sympathetic to this blogger. She (he?) does appear to have tried to act responsibly and as such may not receive the direct benefit of those who have not been able to take the same actions as her. While she assumes that all had the ability to make these same decisions (I'm not sure how an unemployed person could have raised their mortgage payment), lets run with her assumption for the moment. What if irresponsibility is being rewarded here?

    From an economic standpoint, this may well be problematic. The administration is at some level providing a disincentive for responsible decision-making. However, I think an economic case can be made for proceeding anyway due to the harm it causes to those who live around the potentially foreclosed home.

    However, it is from a theological perspective where this really gets murky. There is no doubt that much of the Bible operates from an action-reward ethic. The prophets, whose texts I do love dearly, clearly indicate that God is punishing Israel (or one of the nations) because of the actions they have taken. Thus, any punishment they receive is God's just reward.

    However, Jesus presents a different perspective- one many of us might call Kingdom Economics:

    ‘For the kingdom of heaven is like a landowner who went out early in the morning to hire labourers for his vineyard. After agreeing with the labourers for the usual daily wage, he sent them into his vineyard. When he went out about nine o’clock, he saw others standing idle in the market-place; and he said to them, “You also go into the vineyard, and I will pay you whatever is right.” So they went. When he went out again about noon and about three o’clock, he did the same. And about five o’clock he went out and found others standing around; and he said to them, “Why are you standing here idle all day?” They said to him, “Because no one has hired us.” He said to them, “You also go into the vineyard.” When evening came, the owner of the vineyard said to his manager, “Call the labourers and give them their pay, beginning with the last and then going to the first.” When those hired about five o’clock came, each of them received the usual daily wage. Now when the first came, they thought they would receive more; but each of them also received the usual daily wage. And when they received it, they grumbled against the landowner, saying, “These last worked only one hour, and you have made them equal to us who have borne the burden of the day and the scorching heat.” But he replied to one of them, “Friend, I am doing you no wrong; did you not agree with me for the usual daily wage? Take what belongs to you and go; I choose to give to this last the same as I give to you. Am I not allowed to do what I choose with what belongs to me? Or are you envious because I am generous?” So the last will be first, and the first will be last.’
    By any contemporary measure, the landowner is not treating his workers fairly. Those who worked all day certainly would seem to have a reason to gripe. But Jesus tells us that the kingdom of God works differently. Indeed, it is an economy based on grace and not worth. Thus, God freely gives to those who may not “deserve it.”

    So why continue to honor God? Why seek to follow God's ways if there isn't a reward in it for us? It is because we recognize that we are made in God's image. We know that there is no one else that we would choose to follow. We honor and obey God not because of the reward, but because we trust that in so doing we might be just this much closer to bringing about the kingdom of God here and now.

    I don't claim that the government should make all economic decisions based on my theology. But I do claim that we as Christians should celebrate, rather than be resentful, when we see God's grace lived out in the world. It may not be fair. It may not even seem logical at times. But I'm content to trust that the God who created all knew what s/he was doing. Thank God it's not up to me.

    http://openforministry.blogspot.com/

  • http://twitter.com/david_shane David Shane

    What a mess we've made. Once a government starts messing with an economy, it can never STOP messing – it creates too many new problems that it then feels obligated to fix. A big reason that so many people are “under water” in the first place is because of government's role in driving up the cost of housing. It would be better in the long run for all if they would just back off those programs and let housing costs continue to fall. There will be some short term pain for some but that's the price we have to pay for pumping up the prices in the first place. Otherwise we'll be applying band-aids forever – band-aids that, as the author points out, reward irresponsibility.

  • Dr J

    But then again it would get so repetitive and monotonous..

    As indeed it does.

    But I'm puzzled that “cost” simply doesn't seem to be part of the liberal vocabulary. I say “mortgage bailouts impose a cost by rewarding failure and punishing success.” The response isn't “yes, that's part of the cost, and it's worth it.” It's instead “Oh yeah? Well, George Bush sucked!” They sound like eight-year-olds. What are these people thinking?

  • Don Quijote

    Oh good, let's blame Bush. Because he mandated lower standards for banks and fired all the regulators.

    Don't forget Clinton, Bush Sr and St Ronnie…

  • LRafi

    But I'm puzzled that “cost” simply doesn't seem to be part of the liberal vocabulary. I say “mortgage bailouts impose a cost by rewarding failure and punishing success.” The response isn't “yes, that's part of the cost, and it's worth it.” It's instead “Oh yeah? Well, George Bush sucked!”

    Well, that's a strawman. There are plenty of people out there aware of and concerned with costs who have a much more reasoned response.

    One thing I'd say is this: you mention concern about “rewarding failure.” In a normal economy, I'd agree that people who cannot keep up with their mortgage payments have failed in some sense. In an economy with 10% unemployment, I just don't buy it. There are millions of hardworking Americans out there who have lost their job not because they were stupid or lazy, but because of the economy as a whole.

    Those people didn't “fail;” they were just unlucky.

    And I'm *only* saying this because of the 10% unemployment. These are not normal market conditions. As long as the mortgage relief is temporary and targetted to those who were laid off and are looking for employment, I'm okay with it.

  • Don Quijote

    I've taken out a few mortgages and I can't remember any of the attorneys holding a gun to my head and making me sign – as I remember there is a big repayment agreement where I agreed to all the terms and conditions and signed my name. But I guess that didn't apply to other people.

    If I loan money to someone I know cannot repay the loan, who is guilty? Me for loaning money to him, or him for accepting the loan?

    Now it's very likely that the individual taking a mortgage is not a financial genius and does not understand all the finer points of the loan ( If he is like most people he/she has only taken out a couple of Mortgages over his/her lifetime), the Banker OTOH who gives out more Mortgages on a daily basis than the individual taking the Mortgage has taken over his/her lifetime has no such excuses…

    There is such a thing as professional ethics and responsibility, and from the looks of it bankers have neither…

  • NJK

    Can I ask where he gets the authority to do this? Is anyone at anytime going to challenge this third world despot?

  • shannonlee

    “There is such a thing as professional ethics and responsibility, and from the looks of it bankers have neither…”

    I think the days of expecting professional ethics to overcome greed are over….for almost any profession. Yes, there are ethical people in all professions, but there are just enough unethical people out there to make everyone very cautious anytime they sign their name to something.

  • steveinch

    You know, I've been thinking more about this as I've read the posts here.

    It seems like we should just pay people's mortgages for them for a while, if this is a temporary problem. That would be a lot simpler than all the rigamarole we're going to go through and probably cost a lot less. Of course, determining who deserves to have their mortgage paid and who was just overextending himself in an irresponsible way might prove a bit challenging…

    To Don, I very much doubt that a lot of bankers loaned money to people who they KNEW couldn't repay. But, if they did, the right answer is to give them the undervalued home as opposed to having the government given them money to offset the fact that the home is undervalued.

    For those who think bankers are evil, the best solution would be to give them the undervalued assets that they should now own and let them worry about the future market downside. Empty homes don't sell too well.

  • chipsilicon

    Your comment is meant as a joke, right? Or are you completely unaware of the pressure brought by the government on banks to expand their lending activities to low-income households? In your insane world, bankers are evil when they deny loans to marginal applicants and then, when the resulting house of cards falls apart, they are evil for having made those loans. Barney Frank and friends pushed for a policy that was based on the assumption that housing prices would continue to rise. Oops!

    You should also read up on the Bush administration's attempts to rein in Fannie Mae and Freddie Mac, and the Democrats' successful campaign against that. This information is widely available online pretty much anywhere outside of Daily Kos and HuffPo.

  • chipsilicon

    I think this is the most relevant part of your passage:

    “Am I not allowed to do what I choose with what belongs to me?”

    The parable you cite is clearly a defense of private property over the claims to that property made by others in the name of “fairness.” It is a complete indictment of the mentality behind wealth redistribution.

    You must also recall the direct statement by Jesus, “My kingdom is not of this world….”

    Finally, a question I put to those commenters who are concerned about those people who lose their homes under foreclosure: What do you have against the families who would be able to buy those houses if the banks sold them at reduced prices? Foreclosure doesn't destroy a single house, it just redistributes it. And I know you're usually all for redistribution of wealth.

  • Dr J

    Well, that's a strawman. There are plenty of people out there aware of and concerned with costs who have a much more reasoned response.

    Strawman? That's practically a direct quote from this very page. Imavet actually said “You are delusional if you ignore the fact that Dubya shifted so much wealth towards his country club buddies.” I will concede that more reasonable views of cost exist, they're just hard to find on here. And in Congress.

    In a normal economy, I'd agree that people who cannot keep up with their mortgage payments have failed in some sense. In an economy with 10% unemployment, I just don't buy it.</>

    Then we should talk about the definition of “failure.” I see it as a simple question of fact, not a set of hypotheticals about what seems fair or what outcomes people might have achieved under other circumstances. These were the circumstances, and these are the outcomes. If you're failing to keep up on your mortgage, you're failing to keep up on your mortgage.

    Trying to excuse the failure by tracing blame–to George Bush, or to the economy, or to bad luck–is a hopeless exercise because real life cause-and-effect is too complicated. Sure, you can blame bad luck. Or you can argue that fortune favors the well-prepared, and had these people not taken a gamble on a house, they wouldn't be facing foreclosure. Or if they'd studied harder in school, they'd have a steadier job or a bigger financial cushion.

    You could argue these speculations until the end of time because there's no way to determine the “truth” about what would have happened under other circumstances. They are therefore a lousy basis for government policy.

  • http://www.facebook.com/people/Brian-Allen/100000722626210 Brian Allen

    What a ridiculous statement. I would ask you to provide some numbers but I know you don't have them. The Bush tax cuts alone cost over 2 Trillion, and that was only one aspect of the wealth transfer strategy. I could make outrageous claims too, but I prefer to remain anchored in reality.

  • steveinch

    Depends on what he does. Let's say he wants the banks to take a cramdown on LTV. What he'll probably do is say to the banks, hey if you want to qualify for any FHA loans in the future, you'll agree to this program. Note, that's not a mandate. The banks don't have to do it but it will hurt them more to forego the government subsidy to their business than to accept the cramdown, so they will do it.

    Goes to the point of having government involved in business is just a bad thing all ways round.

  • http://www.facebook.com/people/Brian-Allen/100000722626210 Brian Allen

    Ah, where were you when Bush was giving TRILLIONS away to the wealthiest. Where were you when Bush was spending hundreds of billions in direct stimulus to Americans in general. Where were you when Bush was giving hundreds of billions to bankers who had created their own crisis.

    Oh, right, getting ready to vote for his successor.

    I think the word starts with a capital H.

  • Schadenfreude_lives

    The parable does not hold up in this case. Here, people who agreed to pay back a loan. One group does so, the other does not. The group that does not is now being allowed to not repay with no no penalty, and in fact with new terms advantageous to them. Those who did repay do not get those new terms.

    So, there is no 'fairness', as each is not getting or giving what they agreed.

  • steveinch

    There you go with the wealth transfer strategy again. The Bush tax cuts cost the treasury money but they also skewed the tax burden in favor of the lower income households. Take a look at the years 2000 and 2006 on the following table.

    http://www.cbo.gov/publications/collections/tax

    In 2000, the total federal tax rate was 6.4 percent for the bottom quintile, 16.6 percent for the middle quintile, 28.0 percent for the top quintile and 33.0 percent for the top 1%.

    Fast forward to 2006 and the numbers are (in the same order) 4.3, 14.2, 25.8, 31.2

    So the reduction in tax rates is

    Bottom quintile — 32.9%
    Middle quintile — 14.5%
    Top quintile –7.9%
    Top 1 percent — 5.5%

    So to say that Bush redistributed money to the rich through the tax code really doesn't square with the data. I'm sure the “other aspects of the wealth transfer strategy” must have been what did it.

  • steveinch

    I think you just lost your “anchored in reality” pin

  • chipsilicon

    You have an unusual definition of “giving,” which you consider to be a synonym for “allowing to keep.” Apparently you believe that all income belongs to the federal government to do with as it pleases. In that case, I understand why you equate tax cuts to gifts.

    We can spare everyone a lot of pointless back-and-forth if we just agree to disagree on this point. You should realize, thought, that under your concept of ownership there will be a lot less income for the government to give away.

  • casualobserver

    An obvious theme at TMV…………liberals think non-liberals are worthless, except for those times when it comes to recruiting someone to do the actual funding of the liberals' programs……then, without exception, liberals have no resources but for the non-liberals.

    If liberals actually paid for their programs themselves, there never would be any disagreement at all and they could institute any program they desired……….but they are incapable of doing so……why is that do you think?

  • JSpencer

    Despite arguments over principles, which are interesting and and revealing (and obviously important) there is the matter of where we are today. What policies need to be implemented that will best help the economy as a whole? If letting millions of homes be foreclosed on is better for the economy than helping homeowners keep paying their mortgages and keep their homes, then the draconian route would have some merit, but I doubt this is how it would work. Rather than argue ideology and pet principles we should be concerned more about boosting the economy as a whole – meaning longterm. Mortagages and home ownership isn't like buying a car, these are usually longterm investments that lead to greater economic stability overall. Oh, and by the way, most homes are still American made. ;-)

  • chipsilicon

    A good idea. I'll throw out some red meat for you to chew up: Let individuals and their lenders negotiate without the intervention of the federal government. If a bank thinks that it's better to change the terms of the loan than to foreclose, then fine. This is especially likely to be the case when a borrower is in temporary difficulty (and so will be able to resume paying fairly soon) or when the local housing market has collapsed (so that the bank isn't going to be able to get more from a resale than it can get from the current borrower long term). But if the bank thinks that there is someone else who's willing and able to meet its price, then I'm completely opposed to using tax money to prevent a house from changing hands.

    Over to you.

  • http://sovereignmind.wordpress.com/ adelinesdad

    “Ah, where were you when Bush was …”

    I try to keep my personal life our of political discussions, but if you really want to know: For most of that time was studying full time and working part time, raising young kids, and volunteering for my church. I had little time and interest in politics. Why am I not allowed to criticize Obama?

    But for those who don't have those excuses, a number of other answers come to mind:

    1) Maybe they *were* speaking out against Bush's spending.
    2) Maybe they are more concerned with Obama budget projections which are much higher than Bush's, even when counting his wars and even not counting recession years.
    3) Maybe they were one of the large number of people on the left and the right who weren't interested in politics before the 2008 elections.
    4) Maybe they are hypocritical partisans.

    But simply assuming #4 is getting tiresome. If the “cost” criticism is valid, then address it.

    On the other hand, if liberals want to go down the “Republicans did it too” road, they might want to remember what happened to Republicans in 2006 and 2008. Then again, after the next two elections they might console themselves with “Republicans did it too.”

  • Don Quijote

    Your comment is meant as a joke, right? Or are you completely unaware of the pressure brought by the government on banks to expand their lending activities to low-income households? In your insane world, bankers are evil when they deny loans to marginal applicants and then, when the resulting house of cards falls apart, they are evil for having made those loans. Barney Frank and friends pushed for a policy that was based on the assumption that housing prices would continue to rise. Oops!

    Your comment is meant as a joke, right? Or are you completely unaware of the pressure brought by
    the stockholders on banks to expand their lending activities to any households? In your insane world, bankers give loans to marginal applicants and then repackage the loans as AAA bonds rated by Moodys and Standard and Poors to some suckers, when the resulting house of cards falls apart, you blame the suckers who bought the Bonds and the suckers who took the mortgages but not the poor innocent bankers who had no clue as to what was going on…

    Maybe you should read something besides RedState, Hot Air and Hindcracker, I would suggest staring with Calculated Risk and Naked Capitalism…

  • DLS

    There are a lot of cheap votes, and voters, to be bought. That ObamaCo would do this is no surprise.

  • DLS

    “What else would you expect from an administration”

    whose misspending dwarfs all before it and who is leading us toward a debt trap (which limits deficits, so has them resentful) and eventually toward inflation (the true opiate of the gullible masses).

    The only question is, will we actually see that happen during this decade, before the 2020s, making this decade lost, thrown away rather than used to prepare for the tougher times ahead? (So far, we're being given variously disappointing to disturbing signs that the answer is, unsurprisingly, Yes.)

  • DLS

    Chavez treatment for creditors, buying cheap votes of cheap voters, is nothing new from these people.

  • DLS

    “It seems like we should just pay people's mortgages for them for a while, if this is a temporary problem. That would be a lot simpler than all the rigamarole we're going to go through and probably cost a lot less.”

    In fact, yes. And I thought about it when overhearing just this conversation in Michigan last year, where despite its sordid Blue and sclerotic and dinosaur reputations it still had normal people there (I was there last year, too) who told all who would listen (including me) that they would gladly take as part of the so-called “stimulus” measures a voucher, that could only be used to pay mortgage payments — not cash.

    I have also noted that even some on the Left have been critical of the “stimulus” measures and the bank bailouts and all the rest, which if you total the amounts, are staggering, and what would they have accomplished, instead, had they been distributed to everyone per capita, or as severence pay to everyone who has lost a job since the start of the slump? Think about that. I have, and have posted that before, and I'm no flaming redistributionist lefty. I'm just giving examples of where we could done much more, for less.

    (There are other examples, such as as that it would be cheaper for air pollution to just give everyone a new, less-polluting, car once every few years than what Washington has done instead — or related to what I discussed with someone a few years ago, rather than subsidize Kathy's rent in New Jersey, implement what liberals like Lind would want for many people, give them a house in places like the northern Great Plains, relocating them there and leaving the expensive coastal areas to liberals like Lind, or to the likes of DC-worshipping people in the news like David Frum or David Brooks, for example, who can afford to stay.)

  • http://greendreams.wordpress.com GreenDreams

    “Since inequalities of privilege are greater than could possibly be defended rationally, the intelligence of privileged groups is usually applied to the task of inventing specious proofs for the theory that universal values spring from, and that general interests are served by, the special privileges which they hold.”

    Reinhold Niebuhr, Moral Man and Immoral Society

    http://www.nakedcapitalism.com/2010/03/indefens

  • Dr J

    I presume you're referring to the privilege to tax, to make Robin pay other people's mortgages? That seems to be the only privilege under debate here.

  • StockBoySF

    However, it is from a theological perspective where this really gets murky. … “Friend, I am doing you no wrong; did you not agree with me for the usual daily wage? Take what belongs to you and go.'

    I don't think there is anything murky about the theological perspective. For me the theological point is that we each must live our lives according to what is right. We should not try to lead others' lives for them, nor should we be envious of what they have. We must first and foremost live our lives ourselves, tend to our own spiritual garden and let others follow their own spiritual paths and learn from life's lessons. No one else can live my life for me.

  • chipsilicon

    I want to apologize for the “your insane world” phrase. It was meant as a jokey allusion to your avatar, but it doesn't read that way at all.

    As for the mortgage market, here's the point I'd like to make in a serious way: Mortgage-backed securities were viewed as a very successful way to reduce the riskiness of individual mortgages for some time before the financial crisis. That's why I don't think that they were merely vehicles used by commercial banks and mortgage companies to fleece unsuspecting investment bankers. Instead my inclination is to try to figure out what changed in the mortgage market to induce mortgage originators to make and repackage loans that weren't such good credit risks. The only convincing answer I can find is that (1) banks were being pressured to reduce their lending standards and (2) they were reasonably confident that they'd be able to sell those loans to Fannie and Freddie. I don't believe that any bank's shareholders had any reason to want their own wealth put at risk by degraded lending standards; that just doesn't pass my “smell test.”

    A different question is why savvy investment bankers were willing to buy derivatives based on packages that included riskier loans. I think this is the big mystery in the whole fiasco. I can only figure that they were confident that they'd be bailed out if things went horribly wrong–and if so, then they were right! The final piece of the puzzle, why Moody's rated these things AAA, I do not know. I do know that Moody's reputation has taken a huge hit because of this.

  • kathykattenburg

    But simply assuming #4 is getting tiresome.

    It occurs to me that one could apply that statement to the assumptions in Robin's post and in most of the responses to Robin's post in this comments section.

  • davidpsummers

    Its ironic that after a housing bubble where we ignored government efforts to keep home prices high (because it was popular with voters), we blame the banks and have the government worry about helping to keep home prices high. (Rewarding those who contributed to the bubble at the expense of those who didn't).

  • Bandit

    More self parody – nobody 'gave' anything to anyone by lowering taxes. That's like a mugger thinking he's giving someone the money in their wallet by not taking it.

  • Bandit

    Nice self parody. When you agree to repay you agree to repay. Except when you have no self respect or concept of personal responsibility then you cry about being a victim. Funny how people are able to find access to capital, fill out the forms and comply with all the regulations but then don't understand it all after they welsh on their debt.

  • VeratheGun

    Nice try, but fail.

    And you say you doubt…

    Here you go:

    http://www.sustainablemiddleclass.com/Subsidize

    (shows that blue states donate money to the red states–not the other way round)

    http://www.slate.com/id/2199810/

    (details economic progress under the two parties over the last 40 years–guess who loses?)

    It is conservative–I got mine, everybody else go suck it–CONSERVATIVE political thought that has run this country into the ground over the last 40 years.

    And every time you guys go screw it up , the American people have a moment of lucidity and elect a Democrat that saves the bacon.

    Here's more, if you don't believe it:

    http://sideshow.me.uk/annex/JustForTheRecord.htm

    Neither the numbers nor the facts bear out your assertions. Not that you really care.

    You're welcome.

  • Don Quijote

    Nice self parody. When you agree to repay you agree to repay.

    I am sure you'll hold Morgan Stanley to the same standard

    Dec. 17 (Bloomberg) — Morgan Stanley, the securities firm that spent more than $8 billion on commercial property in 2007, plans to relinquish five San Francisco office buildings to its lender two years after purchasing them from Blackstone Group LP near the top of the market.

    The bank has been negotiating an “orderly transfer” of the towers since earlier this year, Alyson Barnes, a Morgan Stanley spokeswoman, said yesterday in a telephone interview. AREA Property Partners will take over the buildings, which have been held by the bank’s MSREF V fund. Barnes declined to say when the transfer will occur.

    When people do it, it's commonly known as Jingle Mail, when Corporations do it, it's known as a business decision…

  • Don Quijote

    A different question is why savvy investment bankers were willing to buy derivatives based on packages that included riskier loans. I think this is the big mystery in the whole fiasco.

    Because their salaries and bonuses are based on quarterly or yearly profits, so as long as they make money for the bank this year, they get their multi-million dollar bonuses… What happens next year, well that's someone else problem…

    A bird in the hand is better than two in the bush…

    My question is even simpler: Considering that the rating agencies are paid by the bond issuers to rate the bonds, how exactly were the bonds supposed to get anything other than a AAA rating?

  • Bandit

    Sorry your comment makes no sense. If private parties agree to a settlement of the debt then it has been repaid. What is the issue?

  • archangel

    dear shannonlee: I think education can help people tstay away from 'the edge,' but on the road, remember when i wrote about the fellow I met who wrote a book about his life as a tramp on the streets? Extraordinary education. Terrible hard breaks.

    Also, for the guys and women and children who live under the bridges, same, some hard breaks for many, but also other issues, alcohol, drugs, so so many drugs, mental illness, closed head injuries, PTDS from service.

    I think education can keep you from the edge, but with certain hits, nothing can keep a person from going over the edge, whatever THEY count as the edge. Some see the edge as losing priviledges they formerly enjoyed, vacations, buying 'stuff;, things like that.

    For many of us though, the edge, is 'under the bridge.' I've met more homeless guys /women in the library who can quote Chaucer or know Yeats, or seem to have strong education backgrounds.

    Some disaster comes from not seeing, from being lavish and not saving a cushion, especially when self employed. But some comes just from hard hard knocks.

    I've a friend who owns a business, has about 100 employees. Advertised for an entry level assistant, basic, tea bringing, phone answering, keeping calendar. Over 200 people applied, many with MAs and PhDs. Serious. Serious need and serious desire to work without enough jobs.

  • archangel

    Hi Jared: Robin, the writer, is a man.

    Thanks,
    dr.e

  • Don Quijote

    You said and I'll quote:

    When you agree to repay you agree to repay.

    I am just pointing out that we have a major corporation who ran the numbers and decided not to repay despite the fact that they probably could afford it…

    I am still awaiting your heartfelt condemnation of this corporation and their lack of respect toward debt…

  • chipsilicon

    The biggest net “contributor” states are New Jersey and Connecticut, for the simple reason that they have the highest per capita incomes in the county. Because of the progressivity of the federal income tax, residents of those states pay the most in taxes.

    But this does not refute Casual Observer's point, because his point concerns individuals. For example, Obama won 57% of the vote in New Jersey in 2008, not 100%. It is quite conceivable, and in fact likely, that the high-income earners in that “blue” state are not nearly as liberal as the state as a whole, yet they're the people being called upon to pay for the programs being voted for by the 57%.

    The other fallacy in the “net contributor” breakdown of the states is that even if every state had the same income and paid the same taxes, some states would surely receive more federal spending than others, for the simple reason that not all states have the exact same industrial composition. So, for example, California gets far more federal spending than Connecticut because defense-related industries are a far bigger part of its economy. So what?

    Also, states that have very low population density will tend to receive higher federal spending per capita, simply as a result of federal highway spending. If the highways are going to cross a large state, then that state is going to receive a lot of highway spending just because it's big. If that state doesn't have many people in it, then spending per person is going to be high. Again, so what?

    As for the data on presidential administrations and the economy, there's a simple way to summarize them: the Democrats tend to hype the economy unsustainably through monetary and fiscal policy, until they screw things up enough that the people elect a Republican to fix the mess. The fixing of the mess usually involves a recession.

    To recapitulate, none of your data addresses Casual Observer's point, because he is talking about individuals, not states.

  • Dr J

    I am still awaiting your heartfelt condemnation of this corporation and their lack of respect toward debt…

    The point, DQ, is that we don't have to either condemn them or bail them out. They did what they did, they'll see whatever consequences they see.

  • ProfElwood

    Looks like a lot of people have had fun responding to you, but I'm not going to let that stop me.

    The answer to me is the same for both the parable and mortgage question: responsible living is its own reward — just ask someone who is trying to recover from either a wild past or a debt overload.

    As for grace, I'm not sure that always fits here. Everyone situation is different, but in general, we should be trying to fix the core problems, and have to carefully consider the full effects of what legislation will do, not just what people want it to do. I think that's how we got here in the first place.

  • ProfElwood

    Anytime some is trying to argue a point at a macro level, beware. Individuals give money, not states, so the only meaningful statistics would involve people, or households.

  • StockBoySF

    Because there were some earlier comments about this…. The bank bailouts were done by the Bush administration and need I remind everyone that he wanted hundreds of billions of dollars from Congress with no strings attached. Thankfully Congress made the Bush administration change the terms to lessen the impact to the taxpayer. And the big bailed out banks did pay back the money, with interest.

  • ProfElwood

    Goes to the point of having government involved in business is just a bad thing all ways round.

    There's quite a few regulations that i favor because they encourage transparency, but your point is well taken.

    I still have to blame Fannie and Freddie for this bubble. When banks serviced their own loans, they were much better at checking people's financial condition. The mortgage-backed securities were an attempt to get more money into Fannie and Freddie, so that they could buy more loans, so that banks could make more loans. By adding so many degrees of separation from those putting up the money and those who originated the loans, they made it hard to determine who was responsible for failures. Bad idea.

  • ProfElwood

    I personally don't blame either liberals or conservatives, because bailing out commercial failures doesn't fit into either ideology, at least as I would understand them. But both Democrats and Republicans, including both presidential candidates, supported it, knowing that it wasn't popular with people.

  • derHundepo

    How much should it really matter that the value of your house is now less than the value of the mortgage you took? I ask this with the thought that these values are constantly changing, and for the most part, going up. I don't know the exact percentages, but aren't home values up something like 30% over the last decade even after taking into consideration the housing decline? And while one's home value may have gone down, if your income has remained the same, the value of the home should not figure in your ability to pay said mortgage. Yes, it entirely sucks that at the moment you may be paying on a mortgage that is worth more than the house, but unless you plan to sell anytime soon, this shouldn't be an issue. Houses aren't supposed to be short-term investments.

  • VeratheGun

    Okay, let's look at individual behavior, then.

    Here's the breakdown on the 2008 Election vote, quite detailed:

    http://www.msnbc.msn.com/id/26843704

    To highlight a couple of areas: those people making more than $200,000 a year, voted for Obama 52% to McCain's 46%. Total Family income of over $100,000, was split 49% to 49%.

    Those are the top 20% of wage earners in the country, I believe. Clearly, there were some wealthy people who voted Democratic despite warnings from the right of taxes, taxes, taxes.

    The people McCain won overwhelmingly in 2008 were white, non college graduates (an 18 point advantage). He also won white people between the ages of 30 and 65+. He lost every other demographic. EVERY OTHER DEMOGRAPHIC.

    Superdestroyer is probably the only conservative here who has actually internalized this–Republicans have lost everyone except for middle aged white people.

    Split by age, the only demographic McCain won was the over 65 vote. It's true. Look it up.

    Hence, these same bitter whites, regroup and now call them selves “Tea Partiers” and spout any number of nonsense slogans such as ” I want my country back!” or “Socialism!”. Nooo, what they really want is to still be calling the shots, even though their political philosophy FAILED.

    In terms of education, Obama won every single education demographic. There was not a single level of education that voted overall for McCain, from non HS grads to post graduate candidates.

    I know you wanted examples of individual behavior. Voting seems pretty individual to me. Accepting that INDIVIDUALLY, the country rejected Republican principles and leadership in 2008, is the adult thing to do.

  • steveinch

    True but run the survey on Obama's popularity today and you'd get quite a different result. Voters are fickle. ; )

  • kimpriestap

    You said “[t]he Bush tax cuts alone cost over 2 Trillion, and that was only one aspect of the wealth transfer strategy.

    You think the Bush tax cuts were a transfer of wealth? I'm assuming your argument is that Bush took money from the poor and middle class and gave it to his rich buddies. How do you reconcile that with reality? This is from the Tax Foundation (source: http://www.taxfoundation.org/blog/show/24944.html)

    Newly released data from the IRS clearly debunks the conventional Beltway rhetoric that the “rich” are not paying their fair share of taxes.

    Indeed, the IRS data shows that in 2007—the most recent data available—the top 1 percent of taxpayers paid 40.4 percent of the total income taxes collected by the federal government. This is the highest percentage in modern history. By contrast, the top 1 percent paid 24.8 percent of the income tax burden in 1987, the year following the 1986 tax reform act.

    Remarkably, the share of the tax burden borne by the top 1 percent now exceeds the share paid by the bottom 95 percent of taxpayers combined. In 2007, the bottom 95 percent paid 39.4 percent of the income tax burden. This is down from the 58 percent of the total income tax burden they paid twenty years ago.

    To put this in perspective, the top 1 percent is comprised of just 1.4 million taxpayers and they pay a larger share of the income tax burden now than the bottom 134 million taxpayers combined.

    Some in Washington say the tax system is still not progressive enough. However, the recent IRS data bolsters the findings of an OECD study released last year showing that the U.S.—not France or Sweden—has the most progressive income tax system among OECD nations. We rely more heavily on the top 10 percent of taxpayers than does any nation and our poor people have the lowest tax burden of those in any nation.

  • chipsilicon

    It's not the voters who are fickle. They've only just begun to realize the extent to which they were lied to in the last campaign.

  • Boonton

    Handouts continue … deficits are no concern I guess.

    A few months ago, the principal on my mortgage was comfortably more than the place was worth, and my low income was in decline. So I did the responsible thing, cut my expenses back to the bone, and raised and moved whatever money I could to cover it, and to try to pay it down. I wanted to deal with the fact that I was upside down on the mortgage and dangerously exposed to future rate increases; most of all, I wanted simply to reduce my monthly payments.

    OK so this guy is saying less than a year ago he had:

    1. Low income, that was getting lower.

    2. A house that was upside down.

    2.1 A house seriously upside down. His previous sentence asserts he brought it in 2004 and is now worth about half of what he paid for it!

    3. By simply 'cutting back', he was able to dramatically reduce his balance…

    Is it me or does something not add up here? I have an above average income but even if my monthly expenses were reduced to zero and I devoted my entire paycheck to paying down my mortgage I could only make a tiny dent in it over “a few months”. Perhaps the key is he says his mortgage is a variable rate mortgage. I suspect most of his reduction in monthly payments has come not from his heroic paydown sprint over the last few months but from the fact that interest rates of dropped dramatically since 2004.

    As far as his complaint, it's the classic cutting your nose off to spite your face….or to use an anology FDR used, refusing to lend your next door neighbor a hose to put out his burning house. The thousands of foreclosures in the Phoenix area aren't doing anything to help reward him for his 'responsibility'. They are making his plight even worse by driving down his home value even more making it impossible for him to refinance (which now would be a great time for him to do to lock in a low rate). If banks work with some homeowners like him to avoid at least a portion of foreclosures until the economy turns around life would be better for all of us.

  • steveinch

    FWIW, I don't think the voters were lied to. I think they did what they often do which is imbued a candidate with the positions they'd like him or her to have as opposed to the positions that were spoken. I had many debates with friends of mine who voted for Obama where I'd say “but you recognize he's for policy x or y” and they'd say some version “yes but he won't really do it”

    My own view is a careful read of what Obama said during the campaign is entirely consistent with his actions while in office. Whether the voters understood that or not is a different question.

  • steveinch

    Actually it's got nothing to do with noses and faces. It's simply a question of whether you can continue to erode the notion of responsibility without killing it.

    To argue that the citizens of the 50 states should pay to artificially raise the value of houses in Phoenix for a period of time doesn't make much sense to me unless you believe that the value of those houses today is artificially low. I've not seen any facts that would lead me to that conclusion. Indeed, the fact that prices continue to fall in most areas might suggest the opposite conclusion is correct.

  • chipsilicon

    Seriously?

    From the 3rd McCain-Obama debate:

    “what I've done throughout this campaign is to propose a net spending cut…. What I want to emphasize … is that I have been a strong proponent of pay-as-you-go. Every dollar that I've proposed, I've proposed an additional cut so that it matches.”

  • Boonton

    To argue that the citizens of the 50 states should pay to artificially raise the value of houses in Phoenix for a period of time doesn't make much sense to me unless you believe that the value of those houses today is artificially low.

    I'd agree with you if there was some special policy to simply raise Phoenix's housing values 'artificially'. There isn't. The policy described above sounds like it is tailored for the person who is on the edge. They want to make payments, are willing to make payments, but the banks are refusing to work with them for much the same reasons the banks made thousands of horrible loans to begin with. On the other hand the 'heroic effort' to be 'responsible' is sounding more and more like a fool's effort when it is being meet by banks who yank the foreclosure lever without even trying some modest adjustments that would improve the whole market. If there's a fire in a theater, running to the exit is a good choice for the individual but if every individual does it most will die whereas walking orderly will save many more lives. That's not 'artificial'. When one bank hits the foreclosure button, they may get back a good portion of their money. When every bank does it they probably won't.

    Now as for personal responsibility, I think my earlier post addressed that very well. If the author's story is true (and I'm starting to think it is 'embellished'), it is almost certain nearly all of his 'victory' is due to the massive drop in interest rates and not his noble 'paydown' effort he made over a 'few months'. Where did that massive reduction in rates come from? Not because his paydown efforts created such a sense of calm in the credit markets that interest rates fell!

  • rkoerner

    I wasn't going to comment on the comments.. but since you've asked a fair question and integrity is important…

    I was able to pay down a chunk of my mortgage with the cushion I had built up over a long time by being careful with my $$$. I moved that money from savings to mortgage principal. It was getting effectively 0$ saving (Thanks Bernanke) but my mortgage rate is obviously much higher than that.

    This was part of a more general push to reduce my outgoings, which involved more than just paying down my mortgage (obviously).

  • http://sovereignmind.wordpress.com/ adelinesdad

    Those numbers mean nothing without looking at the corresponding shift in income inequality over the same period of time. The reason the top 1% are paying more of the total share of taxes than they were before is because they are making more of the total share of income. According to the data underlying the tax foundation article, the average tax rate for the top 1% was 27.5% in 2001 and fell to 22.45% in 2007 (http://www.taxfoundation.org/publications/show/…).

    My position is that our tax/entitlement system is too progressive on the lower end of the income scale (effective marginal tax rates can exceed 100% at some points), and not progressive enough on the higher end.

  • steveinch

    I don't think that's right. If you look at the data from the CBO that I posted upthread, it shows that the tax rates fell the most (as a percentage of the initial rate) for the lowest income earners from 2000 to 2006. I don't know why the Tax Foundation has different data than the CBO but that's a different discussion.

  • Boonton

    So technically your pay didn't happen because you rolled up your sleeves and decided to live light for a few months and bank the savings in extra mortgage payments. Instead you had a nest egg already. This is somewhat unusual since most people end up putting down a large down payment on a home and have little left over in their savings (aside from maybe 401K's).

    I'll grant that I'm sure you are living light and have cut back due to your lower income but its not quite the story you initially depicted. Nonetheless, I suspect your situation is still better off than anyone aided by this program. To even qualify you have to be on unemployment which means basically someone who had income, was probably making payments (otherwise they would have lost the house by now) and now can't due more to the economy than themselves. The fact is you're better off seeing such neighbors keep their house with modified mortgages (which still hurts their credit and 'locks' them into their homes) rather than letting the banks snatch them all now and they rot as they lay empty for months to years.

  • http://sovereignmind.wordpress.com/ adelinesdad

    steveinch,

    You're right. I'm also not sure why the numbers are different. But in any case, of the various sets of data to look at, the most deceptive of all is the “total share of taxes” numbers, which is what the tax foundation article used to try to show that tax policy has become significantly more progressive. That was the main thing I objected to. You get a much more accurate picture by looking at the effective tax rate (not share of all taxes) by income percentile. However, even that doesn't isolate the variable completely because it doesn't fully account for the change in the distribution of wealth. If the top 1% make a higher percentage of the total income than before (and they do, according to the CBO numbers: http://www.cbo.gov/publications/collections/tax…), then they would pay a higher effective tax rate even if tax policy doesn't change.

    What we really need to answer is this: how much does someone making $X (inflation-adjusted) pay in year 1 and year 2, varying X to reflect typical examples of poor, middle class, rich, and super-rich? I don't have numbers for that. But, in any respect, again my main objection was to the use of “total share of taxes” numbers.

  • steveinch

    Fair point although imo, you'd actually need to look longitudinally by HH rather than by cohort since people move in and out of cohorts.

  • alhabers

    It's a documented fact that the government forced banks to make up to 10% of their mortgage loans to “sub-prime” borrowers. If the banks had to make the loans, they may as well have repackaged them and tried to make something out of the pile of crap they'd been fed.

  • alhabers

    No, he didn't just roll up his sleeves. He already HAD been rolling up his sleeves and living w/in his means. THAT'S why he had a nest egg.

  • Boonton

    That's not what he said. He said he discovered himself with a house worth less than he paid for it, a mortgage more than the value of the house and as a result he 'rolled up his sleeves' and paid down the mortgage in a few months. Now he said his income was decreasing so scoring a big raise or nice new job doesn't fly. He also said he had a variable rate mortgage, which means he should have seen lower payments just due to the collapse in interest rates.

    Now I called him out on the fact that for most people even devoting 100% of their paycheck to their mortgage 'for a few months' will not make only a tiny dent in a mortgage balance (let alone an upside down one….). Now the story is he had previously saved up a lot of money, brought a house leaving this fortune in the bank rather than using it as a down payment. Now because 'the gov't' is giving him no interest he opt to lower his monthly bills by paying down the mortgage.

    Now unless he got a mortgage with an exceptionally low rate, it's very hard to make this a plausible story. I can understand keeping some cash aside but it strikes me as very strange to have a large portion of the purchase price of a house sitting in a savings account but opting to take out a huge mortgage….unless you got a 'funny mortgage' with say 'interest only' or something like that because you were trying to flip the house and got caught when the market crashed.

    More likely IMO is that he did cut back, made some extra payments and maybe tapped some of the old savings account but most of his savings is coming from lower rates. Complain all you want about low interest yielding savers very little, fact is its highly unlikely he was in a situation where he was making more interest on his savings account than paying on his mortgage.

    It's a documented fact that the government forced banks to make up to 10% of their mortgage loans to “sub-prime” borrowers.

    No its not.

    . If the banks had to make the loans, they may as well have repackaged them and tried to make something out of the pile of crap they'd been fed.

    So why would a 'pile of crap' command top dollar in the market?

  • rkoerner

    As I said in my original article,

    “So I did the responsible thing, cut my expenses back to the bone, and raised and moved whatever money I could to cover it,”

    You will see that I “raised and moved” whatever money I could to cover it. The moving money was exactly that. Because I have never paid a cent in credit card interest, never bought a car for more than $1500, don't have a plasma TV, don't eat out except very rarely, don't have children, and buy fresh food rather than the more expensive processed stuff etc., I had built that little bit of savings over the period I've had the mortgage. I then used it as part of my attempt to pay down the mortgage. It was not anything like enough to actually pay the mortgage OFF. I still have the mortgage, but it is now smaller than it was, and the impact on my monthly payments is significant – not least because it represents a large fraction of my outgoings, which I keep low.

    I certainly did not seek to give the impression that I had in fact paid down all my mortgage in a few months (although given the fact that I had any savings at all because of the decisions I made, it would note have altered the point of my article if I had). Anyway, apologies for lack of clarity.

    The lowering of my monthly payment due only to applying the money I have saved and am saving by living below my means (and I keep an eye on that on a monthly basis) was much greater than any lowering due to a drop in rates. In fact, my drop in rates is minimal, as my mortgage is on a rather slow-moving index, the COSI (not a LIBOR or suchlike), and is still around 6%.

    My point is that some people have bought themselves wiggle room – and therefore the ability to meet our financial obligations – by being prudent. Others cannot do so now because of, sometimes in large part, decisions they have made.

    Hope that clarifies.

  • Don Quijote

    It's a documented fact that the government forced banks to make up to 10% of their mortgage loans to “sub-prime” borrowers.

    Then you won't mind showing me the documented fact… And Hot Air, Redstate and company don't qualify as documented fact.