+- MacResource (https://forums.macresource.com)
+-- Forum: My Category (https://forums.macresource.com/forumdisplay.php?fid=1)
+--- Forum: 'Friendly' Political Ranting (https://forums.macresource.com/forumdisplay.php?fid=6)
+--- Thread: Why not solve the mortgage crisis by giving money to homeowners? (/showthread.php?tid=62761)
Why not solve the mortgage crisis by giving money to homeowners? - guitarist - 09-24-2008
"So, instead of the massive moral hazard -- and general unseemliness -- of putting taxpayer money on the line to bail out Wall Street banks and brokers at the top end of the pyramid, why not aim at the broad BASE of the pyramid?"
http://www.concurringopinions.com/archives/2008/09/krugman_on_the.html
(Check the reader comments, too. The main objections to this proposal question the wisdom of punishing responsible homeowners who paid their bills and avoided risky loans, rewarding those who didn't. It's an interesting discussion)
Re: Why not solve the mortgage crisis by giving money to homeowners? - Acer - 09-24-2008
Low-interest loans directly to the people who got caught between devaluation of their property and ballooning interest rates on their ARM. Sounds reasonable. Hard to administer, though.
Re: Why not solve the mortgage crisis by giving money to homeowners? - MGS_forgot_password - 09-24-2008
How is giving money to irresponsible home buyers any less of a moral hazard?
Re: Why not solve the mortgage crisis by giving money to homeowners? - mattkime - 09-24-2008
i think administration is probably the biggest problem. you'd want to give them only to people who deserve them and that would be difficult to determine.
Re: Why not solve the mortgage crisis by giving money to homeowners? - Acer - 09-24-2008
Well, there's irresponsible, as in bought a McMansion on a McDonald's salary and an unsustainably low interest rate. Of course, behind every foolish buyer is a mortgage guy, who said, "Sure, you can afford it!" Of course, he sold the loan before the ink was dry.
Then there's "got a new job in a new city and bought a house in a hot real estate market which then cooled and now the house is worth less than the mortgage" Of course, behind this scene is a real estate agent who said "Oh, this market looks like it will stay hot for years. And I have a mortgage guy who can cut you a sweet deal." Both guys cashed their checks before the ink was dry.
Or, give $700 billion to the corporations who bought these stupid loans and REALLY should have known better.
Who gets the money?
Re: Why not solve the mortgage crisis by giving money to homeowners? - cbelt3 - 09-24-2008
Typical overly simplified look at the entire ecosystem.
We are talking about a component of the economy that drives liquidity being allowed to collapse. The effect on the overall economy has nothing to do with one person getting a check from the gummint, and everything to do with the overall economic ecosystem dying.
Investment banks are essentially the intestines- they take in liquidity and convert it into more liquidity, moving it around. Or, to paraphrase Thorton Wilder, "Money is like Manure. It needs to be spread around to encourage things to grow."
Allow the intestines to die off.. well, that actually happened to a dear friend of ours last weekend. And she died within 2 days, in great pain (inoperable).
Politicians like to talk about 'who gets the money' because they can then theoretically control the person who gets the 'check'. In this case, it's all of us.
The patient on the table is our entire economic system, and by extension the entire world's economic infrastructure. The patient is cut open, and the doctors (congress) are pausing with their scalpels in hand. Do SOMETHING, dammit !
Re: Why not solve the mortgage crisis by giving money to homeowners? - Filliam H. Muffman - 09-24-2008
Giving reasonable loans to struggling homeowners does not benefit rich people.
Re: Why not solve the mortgage crisis by giving money to homeowners? - mattkime - 09-24-2008
well put cbelt - although i have to say i don't like the urgent push to just "do something". particularly when the current "do something" involves $700 billion dollars without oversight.
Re: Why not solve the mortgage crisis by giving money to homeowners? - guitarist - 09-24-2008
Filliam H. Muffman wrote:
Giving reasonable loans to struggling homeowners does not benefit rich people.
On the contrary, unwisely granting loans to "struggling homeowners"---buyers with substandard credit, inadequate collateral, a questionable ability to repay the loan---is part of how banks and policymakers got us into this disaster in the first place.
People who are creditworthy aren't necessarily rich, and those that are rich aren't necessarily the beneficiary of unearned privilege. A credit freeze affects everyone, regardless of status. Low income borrowers bought into the fantasy the same way everyone else did. About 6% of them defaulted, leaving banks with property they don't want.
The idea that credit is a "civil right" got into the mix somewhere. It may sound benevolent, but it doesn't make economic sense. It only worked under the illusion that property values would continue to grow, absorb the risky loans, and reward struggling homeowners with equity the same way it rewarded affluent homeowners.
Predatory lenders, housing-boom blindness, and inadequate regulation are partly to blame, but part of why we're in this mess is because our political elites thought it was good social policy to encourage banks to give mortgages to uncreditworthy borrowers.
Re: Why not solve the mortgage crisis by giving money to homeowners? - Rick-o - 09-24-2008
No one that claims we need to just "do something" has said this giveaway to the rich will cure the problem.
Why not just loan the money to these thieves with a substantial interest rate? You know, just like they have treated us working class sons of bitches for years and years. But we know that's never going to happen.
Welfare for the rich - just like it's been since the beginning of time. I guess I'll just have to lie, cheat, and steal like my "elected" officials and other corrupted azzholes in America. Apparently, it's the "in" thing to do. If your honest, pay your bills and not get over you head in debt, you're considered a chump. I'm learning, just as our young people are as this unfolds.