Recent crabbiness provoked by what's lately streaming from the MSM notwithstanding, I am made happy by one piece of news: The next door neighbors are moving out.
Imagine a guy with a six-pound nose ring and a haircut that appears to have been tossed in for free, whose other proudest possession is a four hundred dollar car with a nine hundred dollar stereo system, who likes to drink with his roomies in the driveway after getting off work at 3 a.m., whose principle utterances would be sniffingly dismissed by a Neanderthal as "primitive-sounding," and … you begin to get the idea.
He told me he's moving about three miles away.
I told him, with an amount of fervent sincerity that I can't remember previously achieving, "Good luck in the new place."
7 comments:
Was he the "victim" of an adjustable rate mortgage that went into foreclosure?
If so, for your sake, I hope that Hank Paulsen isn't able to bail the foreclosees out.
Heh. Nope. Just a renter. I wouldn't wish the loss of a house on anyone, not even him.
I'm of two minds about this. I had a conversation with my dad about this and his opinion was that the people who were ultimately to blame for the foreclosures were the ratings agencies who looked at the crap mortgages the banks were churning out and proclaimed it gold.
I countered with the point that any responsible person would not get into an adjustable rate mortgage knowing that they could not actually afford the real payments once the teaser rate was up and whose whole ability to own said house was premised on paying for it by banking on an increase in home prices and the equity and ability to refinance that would afford them. He said he couldn't blame anyone who was offered such cheap money for taking it and running. I guess that's true (although he admitted that for people who were more aware of the situation and were buying houses to flip or as speculative investments they deserve some blame too).
I wouldn't wish the situation of taking a mortgage you couldn't afford and then being foreclosed on on anybody, but with that said I can't support an expensive government bailout of people who took these unsustainable loans. It might be painful, but eventually we as a nation are going to have discipline in our credit practices enforced either through self-discipline or forced on us because we can't afford credit anymore. Not bailing out the foreclosees seems like bitter medicine, but sometimes that's the way these things shake out. Easy to say as a renter in a rent-stabilized apartment, I guess, but that's the way I see it.
Adam:
There's a lot to what you say that resonates with me. I share a strong feeling that the definition of maturity is accepting the consequences of your own decisions. I know people who have played at real estate as though it were a predictable short-term investment, doing the house-flipping thing as though profits were guaranteed, and I have no patience for their consequent whining.
I also agree with you that we're long overdue in this country in realizing that many of us live beyond our means.
On the other hand, I also know people who make decisions to the best of their abilities, yet get burned by fast-talking salesmen who dissuade them from reading the fine print. At some point, it seems reasonable to say that if Big Bank lent Little Borrower money, Big Bank shares some of the responsibility for assessing the risks involved in the loan. In many other areas, we have strong consumer protection laws, including rules about truth in advertising and other responsibilities assigned to the seller. It does not seem as though the same applied to mortgages.
There is also the grim reality of administering your proposed bitter medicine. We're talking about condemning people to a financial situation that they will have a very hard time getting out of -- loss of principle asset, destruction of credit history, and in probably all too many cases, homelessness. You want to push a young couple with three babies out on the street?
Personal aspects aside, there are also macroeconomic considerations. Just letting one sector of the economy crash tends to have ripple effects. If nothing else, looking for ways to soften the landing is usually the better path for the nation as a whole.
I am not familiar with the specifics of the various plans being floated to help people who are being foreclosed upon, but it does seem to me that it would not be cripplingly expensive for the government to take over some of the mortgages and keep them running at something close to the previous rate. You could further cut the long-term costs by bumping the rate up slowly and steadily, say, 1%/year, until it got to where the (by then, hopefully stabilized) market would have it. This way, you'd give people a chance to adjust, and not whack them over the head with a sudden doubling, or worse, of monthly payments. This program could be limited to people who own only one house, and I suppose you could come up with other restrictions that would prevent the speculators from taking too much advantage.
I think that your attitude is colored by your own comfortable situation. You're young, smart, and educated, you have a good job, and you have no dependents. Try to step outside your own skin and consider the situation from a different point of view. It's all well and good to tell others that they just have to suck it up, but beyond some point, such an attitude is just plain cruel.
I've thought a lot about this and I dunno I think I'd need more information before I would be confident on one policy position or another.
My first inclination is not to support the government spending money to bail out people with unsustainable spending habits.
As for your example of people being made homeless, I'd like to see some data on how much that situation is what people are really facing. I'm sure people are declaring bankruptcy and having their credit ratings screwed for 7 years or however long it takes to recover, but homeless? I'd imagine that for the vast majority of people the foreclosures either mean moving to a rented house or apartment that's more within their means, which might not be a bad idea in the current housing market.
Furthermore, I'd want to know more about the number of people who actually were victims of misleading business practices. In their cases I'd think a more appropriate response might be some sort of legal action, either civil or even criminal in cases of actual fraud as opposed to just unclear mortgage terms. If people really did know what they were getting into as far as these adjustable rate mortgages, I can imagine empathizing with the plight of someone who thought their financial situation would work out better but who grossly mispredicted the market.
I'd turn the question around on you slightly and ask you about another aspect of the mortgage meltdown. There are presumably a number of people, perhaps not as widespread and probably for the most part more able to absorb the hit, but I'd but not in all cases that well off, who lost a whoooole lot of money in the Bear Stearns collapse. This was a piece of paper that was worth $60 a week ago that's now worth $4. I'm sure people lost thousands of dollars of savings in this mess. Should the government step in and bail out the shareholders? I can empathize with people who've suffered financial misfortune, but not every financial misfortune is an appropriate place for government intervention.
Many good points, Adam, and I have to admit, I don't have a whole lot of data at hand, either, so I won't try to make claims about how widespread the made-homeless aspect is. But I do know some people who have really been pushed close to this, to the point of sleeping on friends' floors, which is one thing when you're single, and another when you've got kids.
To answer your turnaround question: No. I have no sense that the government should bail people out who lose money in the stock market.
First, I think stocks are much better understood to be a gamble.
Second, there appears to be better regulation as far as selling stocks goes. You cannot hear an ad or read a prospectus without having to wade through required disclaimers like "past performance is no guarantee …"
Third, stock market losses rarely put people so completely in the hole that they're truly struggling to survive. You might lose your shirt, but you don't lose your house.
I grant the exceptions of people near retirement who get pension plans wiped out, particularly if Bear Stearns required heavy investment in itself on the part of its employees, and I could be talked to about those few.
As I stated out the outset, there's a lot of me that agrees with your starting point:
My first inclination is not to support the government spending money to bail out people with unsustainable spending habits.
I just don't think that it's quite that simple in the case of primary domiciles, though, especially if people were mislead into borrowing more than they could afford by people who should have known better. And I remind you that my proposed program, of the government taking over some of the mortgages, is a lot less than a bailout.
P.S. It occurs to me that my proffered exception about near-retirees probably already does have a bailout program of sorts in place. Most mainstream pension plans are backed, in some sense, by the government, IIRC.
Post a Comment