Tag: homeowners

Senator Clinton: Let’s Keep People In Their Homes

Senator Hillary Clinton:

This is not just a financial crisis; it’s an economic crisis. Therefore, the solutions we pursue cannot simply stabilize the markets. We must also deal with the interconnected economic challenges that set the stage for this crisis — and reverse the failed policies that allowed a potential crisis to become a real one.

Senator Clinton makes tremendous sense in the WSJ op-ed, but like many misses one crucial point. Saving those that are already underwater assumes there is nobody more creditworthy (and more patient) willing to step in once asset prices normalize. Most would rather have struggling homeowners think they are getting a fresh start, when all the process accomplishes is maintaining a semblance of bubble times and the perception of wealth.

It exacerbates illiquidity and decreases economic mobility.

Bailing out your neighbor

Alan Greenspan is now promoting a direct taxpayer-funded bailout of homeowners. Mr. Greenspan has been trying very hard to shift blame for the mortgage crisis, but this statement takes the cake. Begging for increased Fannie Mae, Freddie Mac, and FHA limits serves much the same purpose. It’s socializing losses.

Be forewarned – a direction is being drawn. A 600 FICO score and a pile of credit card debt is no problem – you are hereby authorized to sign any borrowing agreement you can get your hands on. You won’t need to return that widescreen TV that’s now a part of your HELOC. That leased car you’ve already missed two payments on? It’s yours – just keep it.

It’s not a liquidity issue, or one of solvency. It’s a government problem.

A solution for your debt overindulgence is close at hand – you’re neighbor will soon be bailing you out.

UPDATE: More support for subsidies, at the high end of the market. The high end hasn’t started getting whacked, yet.

UPDATE 2: Yet more on neighbors, including how some are being hurt by the questionable decisions of others.

UPDATE 3: And back to blaming the Fed.

Newton’s Laws and Real Estate

I sold my house a while back, and right now I rent. I have heard every reason why I should be buying again, but still I rent. My friends and colleagues continue to invest in real estate, continue to say how their area is different than the rest of the country, and that appreciation is inevitable. My reasoning – house prices have been acting like bonds – interest rates went into a long decline, and Newton’s Third Law kicked in. And the external force that causes Mr. Gravity’s First Law to take affect are now on our heels.