The AP offers some factual analysis of Obama's speech, including his lame response to the millions of Americans angry that are paying for the bad decisions of their neighbors:
OBAMA: "We have launched a housing plan that will help responsible families facing the threat of foreclosure lower their monthly payments and refinance their mortgages. It's a plan that won't help speculators or that neighbor down the street who bought a house he could never hope to afford, but it will help millions of Americans who are struggling with declining home values."
THE FACTS: If the administration has come up with a way to ensure money only goes to those who got in honest trouble, it hasn't said so.
Defending the program Tuesday at a Senate hearing, Federal Reserve Chairman Ben Bernanke said it's important to save those who made bad calls, for the greater good. He likened it to calling the fire department to put out a blaze caused by someone smoking in bed.
"I think the smart way to deal with a situation like that is to put out the fire, save him from his own consequences of his own action but then, going forward, enact penalties and set tougher rules about smoking in bed."
Similarly, the head of the Federal Deposit Insurance Corp. suggested this month it's not likely aid will be denied to all homeowners who overstated their income or assets to get a mortgage they couldn't afford.
"I think it's just simply impractical to try to do a forensic analysis of each and every one of these delinquent loans," Sheila Bair told National Public Radio.
END EXCERPT
It's not just impractical, but impossible to determine the circumstances underlying these loans with any degree of certainty. Bernanke's false analogy is typical socialist rhetoric and is misleading at best. This isn't an accident, like smoking in bed. Most of these loans were deliberate attempts to make money through debt the borrowers either knew or should have known they couldn't afford.
The way a free economy should deal with that is to allow those folks to experience the consequences, honest mistake or not. What you don't do is reward that behavior by handing the bill to everyone else.
Had these folks made money from their recklessness as many did during the bubble, would they have shared their gains with the rest of us? Of course not. So once again, like Fannie Mae and Freddie Mac, we have private profit backed by public risk.
The argument that this scheme will stabilize neighborhoods is nonsense and will actually prolong the problem. Many of these borrowers will never be able to pay any loan and will just default again. Additionally, the price drops from foreclosures provide opportunities to buyers now sitting on the sidelines, which will allow the market to work itself out if the fools who got us into this mess in the first place would just leave it alone. That's happening right now in many neighborhoods.
No one can morally justify forcing 92% of homeowners into bailing out the excessive risk taking or just plain foolishness of the other 8%.
And what of the 32% or so of Americans that rent their homes? A lot of them probably had the good sense not to buy homes with risky debt. And this is how we reward them? They have every right to feel screwed.
How about all the folks that have already lost their homes? Are we going to give them a Mulligan and return their homes?
Policies that reward the irresponsible and punish the responsible are never justified, no matter what the short term pain may be. Over the long term, we are encouraging bad behavior and discouraging the good.
Filed: real estate, mortgage, obama
No comments:
Post a Comment