McCain gives up on his own mortgage plan
By Steve Benen Thursday Apr 10, 2008 7:30amAbout two weeks ago, John McCain, in a high-profile speech, unveiled his response to the mortgage crisis. Despite the seriousness of the issue, the GOP presidential nominee unveiled a classic YOYO policy: “You’re on your own.”
As the New York Times noted shortly after the speech, “The real core of his speech was his argument against government action to help dig distressed homeowners — or the country — out of the mortgage mess…. His suggestion that federal aid might wrongly reward ‘undeserving’ homeowners sounded both mean-spirited and economically naive. And then there is the double standard. He seemed less concerned about the government helping reckless bankers, endorsing its role in preventing the bankruptcy of Bear Stearns.”
Yesterday, in one of the quicker flip-flops in recent memory, McCain reversed course. The Washington Post, apparently anxious to give McCain a hand, said the senator was “refining” and “revising” his plan. That’s enormously generous of the newspaper, but in reality, McCain’s proposal was an embarrassing dud, so he gave up on it.
Senator John McCain, who drew criticism last month after he warned against broad government intervention to solve the deepening mortgage crisis, pivoted Thursday and called for the federal government to aid some homeowners in danger of losing their homes, by helping them to refinance and get federally guaranteed 30-year mortgages.
“There is nothing more important than keeping alive the American dream to own your home, and priority No. 1 is to keep well-meaning, deserving homeowners who are facing foreclosure in their homes,” Mr. McCain said in a speech on economic themes that he gave at a window company in the Bay Ridge section of Brooklyn.
Funny, two weeks ago he thought these same homeowners shouldn’t be “rewarded” for acting “irresponsibly.”
Perhaps the nation’s callous constituency is not quite as large as the McCain campaign had hoped.
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McFrist.
Sadly, the press continues to ignore the difference between the candidate they are reporting on and the 'straight talker' myth they have chosen to promote. The voters are not so sanguine.
Mc Cain can't think in terms of a 30 year mortgage. He'd be 101 by then wtih about the same ideas as he has now.
None.
McCains not serious about it to begin with. Because he knows it's a complete disaster and the first thing he would have to do to even begin fixing the U.S. is STOP-END the "war". Cut off the Neocons and MIC from the hog trough. Put Wall Street on notice the free ride is over. Etc, Etc.
And it's time to help the people and rebuild this country and it's reputation.
He'll never be able to rise to that challenge.
And where was Bush Co when these con artists we're pulling off all this stuff the past 7 years on an American Public that was led to believe . . . hey we got you covered just sign on the dotted line and you'll be the proud owner of a big shiny new home.
"well-meaning, deserving homeowners"
See, the well-meaning, deserving homeowners didn't buy out of their price range or take risky loans. Have to say I'm not exactly opposed to the "on your own" strategy, except for the fact that extremely poor financial planning by some people will cause huge impacts in communities and neighborhoods due to foreclosed homes and loss of taxes. I don't understand rewarding bad behavior. Keep in mind, this same strategy should be held with corporate America as well.
This whole "homeowner" fiasco has gotten out of hand. These people aren't homeowners - they are mortgage holders. They gambled at the poker table and lost. OTOH, the lenders - in the gambling analogy, the "house" - didn't win either, as they knew full well the gamblers couldn't afford the risk of losing. The result is that both sides lose. Why, and under what authority, should there be a bail-out of either player? Too big to fail? Bullshit. If we keep bailing out the "players" we will learn, the hard way, that no entity is too big to fail. Including the US as a whole.
While I detest the BA to the very core of my being, I'm appalled that the Democratic Congress would choose to support the developers, of all people (there is no benefit to the greater economy by doing this, as there will be no net effect - other than greater loss of money and jobs - on the bottom line). Check your rep's campaign contributions from builders/developers and/or the "charities" to which they (the developers) contribute.
At this point, it's getting very difficult to tell the Dems from the Repubs.
Here is I believe an example of a person getting taken and it should have been caught but it wasn't. A lady owned her home outright. She took out a loan on her house with payments she could afford. I can't remember the amount of the loan or what it was for, but it was reasonable. What she wasn't told and it was probably buried in a sea of small print was that the interest on the loan would like triple in only a few months. The new payments she owed sky rocketed. She is now in foreclosure.
That lady wasn't buying out of her range, she wasn't trying to make a buck on the rising home prices, she was just trying to use some of the money invested in her home for something she honestly needed. This lady deserves some breaks.
McCain or anyone else can't group all the people effected by this mess into one category. They need to be examined on an individual basis.
Now can we go back and see what really happened at Bear Stearns? I think that's a good place to begin.
McCain will lose bigger then Dole in 1996. Everything the guy says is a joke.
If you sign a legal document without reading it, or if you read but did not understand the document you were signing, there is no legitimate recourse for your lack of due diligence. I feel bad for the lady you mention, but she agreed to the terms of the loan - I didn't. If the terms of the loan were fraudulent or otherwise illegal (we need to reinstitute usury laws), then she has recourse. Otherwise, she's on the hook.
Marcus Aurelius @ 10:
I understand this woman is technically on the hook, but if anything this woman should be able to go into arbitration,as some others should be able to do.
McCain is a empty-headed empty suit. My friends, this senile codger will float on the breeze of the hot air from the host of lobbyists propping him up.
pissed off patricia @ 8:
Agreed. If an idea like this one is going to be used it must be applied on an individual basis. There are people like the woman you mentioned and then there are those that provided no documentation for an ARM loan, got into the house and then took out massive lines of credit off of that house to buy other stuff. They did this with the thinking that they could pay it all off when they sell it just after it has appreciated in value.
mudshark @ 11:
In this case Marcus, I have a feelin that this woman was taken advantage of. Not knowing all the facts, but in situations like this one(and I'm sure there are more) these people should qualify for arbitration.
Given the current republican govt's willingness to bail out companies, McCain's stance of telling homeowners YOYO does look kinda bad. Especially in an election year.
The problem lies in the fact that the present administration, in it's zeal to favor it's Corporate Masters Lowered the standard rules that the loan companies had to follow in lending.
Those of you over 40 will remember that in the past it was always a case, that in order to secure a loan for a piece of property, you (1) had to have at least 10% of the gross for a down-payment and (2) the monthly premium could not exceed 25% of your monthly Net Salary.
The same kind of thing happened with the Credit card companies, the standard was lowered and then they started just "mailing out" credit cards to students who had no jobs, no visible means of support (except their families who were probably already struggling to pay for the students education.).
I don't know the fee for a real estate attorney today, but that is where most people missed the boat. They should have had an attorney look over the papers before they were signed.
Last April we sold a house and we had our attorney look over everything we did, the realtor did and everything at closing. Sure they charge for their work but what it could save the buyer or the seller makes it worth the $$
The lady I mentioned in my above comment was elderly and sadly very trusting. She was taken advantage of in the most horrible financial way. She was robbed of her home. There is just no other way to look at it.
mudshark @ 14:
I doubt very seriously if a clause that the interest rate on her loan could go up dramatically in a few short months would've been buried in fine print. But if that is the case, then yes, she should be able to go to arbitration or seek some some legal recourse, especially if the loan officer didn't point that out to her and made absolutely sure she knew and understood that. She doesn't have to wait for any legislation to be able to take action if that were the case.
Whether it was housing or credit cards, they were used as bait and many people took the bait because it looked so tempting they couldn't say no. Now the hook's barb has appeared in that bait and the people can't spit it out. They will be in debt to someone for a long long time. They will be working basically for the banks as they try to scrape together principle and interest for years to come.
Seems to me the banks should be punished along with the borrowers. Banks took advantage and people were gullible.
realclearpolitics dot com just ran a piece (yesterday??) arguing that a huge percentage of the bad mortgages can be blamed on the borrowers. Here it is then, the right wing official story. Blame individuals, bail out corporations. Individuals are supposed to have sufficient knowledge (despite real clear asymmetries) to avoid making bad decisions. The poor banks were DUPED into making loans without checking documents. 40 year mortgages, interest only mortgages, ARMs.... Many of these should simply not be available. Without them, housing prices can't inflate beyond what people can REALLY afford.
As a notary public in a rural area, I am hired to witness home loan closings with national companies. Some loans are good with low, fixed interest rates, some not so good. The worst I have seen was for a family with a child with medical problems. They knew the loan had an adjustable interest rate but were desperate to get money to pay the medical bills. Their home was a very modest one and I often wonder how they are doing in this economy. They were "on their own" and having a very difficult time when things were looking OK several years ago.
The holders of the newly fangled mortgages DO bear some of the blame for the mess they're in. I'm sorry but if one is stupid enough to think that by earning $20,000/yr qualifies you for a $300,000 mortgage, you are a MORON.
pissed off patricia @ 19:
Don't get me wrong - the bankers should lose all they have (even if it means we take our collective lumps), followed by lengthy imprisonment at hard labor.
Why is it ,that the government can bail out big business with tax-payers money,but not homeowners (taxpayers) with "dodgy mortgages?????
Don't you just LOVE how it's always the consumer's fault? When predatory lenders and bad banking make the mortgage industry go boom, it's the consumer's fault. Economy is shaky? You're not shopping enough! [never mind that the dollar is in a free fall] Jobs going over seas? You're wages are too high! [but CEOs of bankrupt companies still get their million dollar bonuses]
mcstain is an idiot and C&L is doing the world a service by pointing this out as often as possible.
dennis @ 18:
I agree with Dennis. If that is indeed the case then she has other avenues available to her that do not require legislation.
Aged 32, I've saved over $1 million in cash over the last 5 years by being prudent with my savings. I did this so I could afford a home when the unreasonable house prices finally crashed. I did this by saving 70%+ of my income and making a few timely investments so that i could buy a decent house outright. While doing this, I have lived in what can only be called "substandard" accomodation and working 80+ hour weeks.
By any measure of fairness, I should be a windfall winner now for my prudence, sacrifice, and patience. But, no, beause of pandering to the center, house prices will continue to remain artificially high and inflation will increase. I support obama in most things, but this bailout of homeowners is ridiculous. Let them lose their houses, let the mortgage banks fail, and let the market do what it does best.
Dr. Acula @ 22:
i agree. the problem is how SOME where trapped in the illusion that they were making a short term investment of some kind. meaning my $200,000 home in only 5 years will be worth $280,000 and all i have to pay is the interest.... oops now their payment has doubled and their home is only worth $120,000. these "investors" went all in with their money, if the would have made out, great, unfortunately they did not.
now, if they were talked into the loan with the promise of profits the mortgage company better be doing something about it.
Just to add to my comment at #28
i would also like to know this was their primary residence or if some of these people just got caught trying to flip houses using this types of loans. these "flippers" no way in hell should be bailed out.
L.A. Confidential @ 4:
By the second year of his term, he won't be able to rise from the toilet on his own.
The real estate bubble will deflate regardless what folly of a government program is developed to put losses on the government balance sheet.
everybody wants to manipulate the market after it begins to crash. Too late. A bust follows every boom.
A cycle has an up phase and a down phase. After one cycle, one arrives back at zero. +5 -5 = zero.
A median house in Los Angeles should never have reached 500,000 dollars. Thus prices will fall.
"Despite the seriousness of this issue..." Where were you when Greenspan dropped the rate to 1% and told home buyers to get adjustable rate mortgages? That was when this was a serious issue, not after the bubble bursts.
The cart comes after the horse, not before it. The boom comes before the bust. Every boom will end in a bust.
You do not get yin without yang. A bailout program will not work. The record credit bubble will deflate, as the virtuous cycle becomes the viscious cycle. Hoover raised taxes. A recession turned into a depression- a credit bubble deflated. This credit bubble will deflate as well. The governmen tcannot prevent the inevitable.
pissed off patricia @ 8:
Thanks Patricia, I agree with you. There was a lot of predatory lending going on. NY's former governor Eliot Spitzer was trying to stop these banks too, until he was forced to resign. I'm sure it was just a coincidence. [snark]
The holders of the newly fangled mortgages DO bear some of the blame for the mess they’re in. I’m sorry but if one is stupid enough to think that by earning $20,000/yr qualifies you for a $300,000 mortgage, you are a MORON.
------------------
You are not a moron when Alan Greenspan, head of the Federal Reserve at the time, and the banks say you are qualified for such a loan.
left of center @ 28:
Yeah, Left of Center, you're describing another aspect of the crisis, which I've read in the papers too: That homeowners thought their homes would increase in value. Instead they wound up with mortgages worth more than their homes, and they couldn't afford the usury interest rates on the mortgage.
You know, when you close on your mortgage: The bank has its representative at the closing, a lawyer, the seller is there with their lawyer, and you're there with your lawyer. And your lawyer is supposed to guide you through the signing of a mountain of paperwork. There's no time to stop and read every paper. Because it's literally a huge stack of paper and everyone is trying to proceed swiftly.
Ron.j @ 33:
Ron, you are 100% right. And we're is the responsibility on the part of the LENDERS to do due diligence and QUALIFY who they lend money to.
Banks don't GIVE money away. Regulation WAS there to protect against GREED on the part of predatory lenders. These investment houses, mortgage houses knew EXACTLY what they were doing. They got the green light from the Fed and from the GOP Congresses that have been calling the shots for the last 25 years. They got the green light from happy talk economic forecasts with NO BASIS IN REALITY, a misguided simplistic view that cheap money guarantees growth, and a misguided monetary policy that has led to a destroyed currency, chronic and literally unmanageable trade and budget deficits, and a hollowing out of the American economy.
Larry Lessig @ 27:
Yeah, the new Bushvilles... Not everyone deserves to live in a tent city.
I guess *I* am part of the nation's "callous constituency." I am 28 with a good-paying job and yet my wife and I can not possibly afford to buy a house in our area given how much prices have risen over the last 5 years. Even with the mild "adjustment" downwards, everything is still way to expensive because homeowners don't want to take a "loss."
Look, I'm not in favor of bank bailouts, but neither do I have a high degree of sympathy for people who took out interest-only mortgages or used other fancy means to buy more house than they could really afford. The whole concept - from Wall Street down to many of those who used these clever new mortgages - was that everyone would get rich when they sold their houses for a lot more money. And who would make them rich? Me and other new homebuyers who happend to be younger and looking for a first house. At least that was the plan.
Homeowners who used these mortgages to buy houses beyond their means took a risk. If they were right and prices kept going up, they would have made easy money. No one would have been looking to tax them on their gains to help me buy a house today. But it didn't work. The only way my wife and I can hope to own a house is if housing prices in our area come down. Please explain to me why it is callous to NOT want to help subsidize homeowners to help 1) stabalize housing prices 2) thereby ensuring that we will continue to not be able to afford a home.
Give me a break!
Apt Dweller @ 37:
I agree with you to a point. Those "interest only" borrowers are SPECULATORS, and yes they do not deserve sympathy. However, the typical GOP right wing response is to throw the baby out with the bath water. There are HOMEOWNERS out there in real trouble. These are middle to low income borrowers who bought homes to live in and raise their families. ARMS and other lending schemes were put in place and marketed to provide opportunity. However, again...the onus is on the lending institutions to be diligent in who they lend to. The majority of this population does not work in finance and is not fully knowledgeable in the ways of finance. They rely on the professionalism of the professionals to do their jobs. Those professionals are kept honest by regulation. Without regulation there is greed and predation, and I'm sorry...we do NOT live in the jungle. This is a SOCIETY, and society is about PEOPLE...not corporations.
Bear Stearns should have gone bust, and the PEOPLE that were impacted are helped by government, because it is the consumer who keeps this economy going. Plus, tax money is for the PEOPLE, paid by people and by corporations who utilize the public services of the PEOPLE. The roads, the land, etc. etc. Corporations are NOT people.
This is about people and government. Government did not do its job with regard to protecting people. Regulation is NOT evil. It is necessary to maintain order, fairness and civility.
"... part of predatory lenders.... "
Oh stop. What is a "predatory lender?" I think it's the equivalent of "ritual satanic child abuse." - something that sounds really scary in theory but in practice DOESN'T EXIST, unless your definition of a "predatory lender" is "lender who lends to stupid people who are too lazy to do basic research on what is generally the largest and most important financial transaction of their lives." But, even so, it's not predatory, since this isn't the case of a car dealer getting away with selling a moron a car for 10 times its normal value - rather, the lender often loses if he chooses to make a bad loan.
for some illumination of how stupid this concept of "predatory lending" is, read the wikipedia article on "predatory lenders." one of the practices done by predatory lenders (in fact, the first one listed) is "Risk-Based Pricing", whichi means you charge higher interest rates to riskier clients. Sounds reasonable, right? No, not in the "blame everybody else!" fantasyland that is today's mortgage mess.
all of the other points in the wikipedia article are ridiculous as well, since they all involve a mindbogglingly irresponsible or lazy buyer who can be bothered to do absolutely no research whatsoever other than what the lender tells him. Its crazy.
Larry Lessig @ 39:
Go back to school. Unless you understand and accept the most basic principles of life and human nature, we have no basis for conversation.
Why all the surprise about this latest McCain flip-flopping bullshit... Fucker already admitted he don't know dick about the economy.... I think the actual sad truth is... He don't actually know dick about just a whole lot of shit.... He's a dangerous man folks... A clueless old ego driven opportunist with grand ambitions for himself and a short temper... Exactly, NOT what we need these days.....JD
Liberal AND Proud, I have no problem at all with regulation. This whole crisis is a perfect example of precisely why regulation is necessary.
My problem is with bailouts and the "privatized gain, socialized loss" approach taken after-the-fact with Bear Stearns and being considered here with homeowners. I understand that there are homeowners who are in trouble, and that many are middle-to-low income. But what? They were there first, so they now have more of an inherent right to homeownership than me? So much so that I have to help subsidize homeowners to bail them out on payments, thereby ensuring I continue to not be able to afford a house?
I understand that people like houses and are emotionally attached to the houses they live in. But not everyone can afford a house. I know this because I can't afford a house, despite having a good job. And I know this sounds "callous," but there are a fair number of people who own houses that they really couldn't afford and shouldn't have bought. If prices come down some more, my wife and I could afford to buy a house.
My point is that there are also REAL PEOPLE (i.e. me and many more in my position) who are hurt by any bailout program. So again, please explain how it is "fair" for us to have to pay to help subsidize current homeowners when doing so will have the precise effect of stabilizing prices and ensuring we are unable to own a home to raise a family in. And explain what is is "callous" about me wanting to be able to own a home, myself.
Apt Dweller @ 42:
Very simple. We live in a society. THAT is why we pay taxes, to assist our fellow citizens. I've already drawn a difference between speculators and inexperienced homeowners who were taken advantage of.
Why do you think we have unemployment insurance, medicare, medicaid, etc., and where do you think the money comes from. It comes from you and me.
Bear Stearns should NOT be salvaged. They are not individuals, they reap benefits and suffer rewards in conjunction with their business acumen in the free market. The rules for them should not be...Heads I win...Tails the government bails me out.
Liberal AND Proud @ 43:
sorry...meant "suffer the consequences in conjunction with"
And before we get into a conversation of taxes. Every developed country on this earth has taxes and has been collecting taxes for milennia. Taxes are not evil. Taxes build society, infrastructure and assist the general public (in the form of aid) when things go bad.
I never cease to be amazed. People jump up and down if some poor person collects unemployment or food stamps so they can maintain a minimum standard of lliving...yet they are more than willing to use public money and GIVE public money to some huge corporation to pay for the building of some idiotic football stadium.
And before we get too deep into that...heres another fact. No publicly built stadium has EVER generated the kind of economic growth and return ever estimated to justify the project. They are a net loss for the public on a financial basis.
No, it's just once they have the screws put to them they can whine louder and faster then anyone I've ever seen. Until that time, they could care less.
Uhh...McCain is consistent, if you actually read what he said on March 25.
How is his proposal unreasonable? Here are some selections from the NYT article covering his response:
Mr. McCain split the blame between the rising housing bubble and the use of confusing and complex financial arrangements, which he said were badly understood even by financial managers. He said initial losses, coupled with the lack of transparency, has caused a “crisis of confidence in the markets.”
“Capital markets work best when there is both accountability and transparency,” he said. “In the case of our current crisis, both were lacking.”
Any government assistance must be accompanied by measures to ensure the problems are not repeated, Mr. McCain said. He said homeowners and lenders must be clear from the outset about the terms and obligations of any mortgage.
“We must have greater transparency in the lending process so that every borrower knows exactly what he is agreeing to and where every lender is required to meet the highest standards of ethical behavior,” he said.
Mr. McCain did not rule out a bailout, instead saying any such aid should be temporary and “no assistance should be given to speculators.”
“Any assistance for borrowers should be focused solely on homeowners, not people who bought houses for speculative purposes, to rent or as second homes,” he said.
What I see here is criticism of the mortgage industry, and a sketch of a plan to bail out worthy homeowners, likely very similar to any plan that would be implemented by either Obama or Clinton. I don't see any blame of the consumer... How is this YOYO? What's the beef?
In response to Loud Larry Lessig....
Just a quick lesson for you on predatory lending...
I transferred to a 7% rate for life credit card several years ago. I have never sent in one payment late....ever.
Last year, I went on the bank's website and checked a box allowing them to send me my checking account statement via email rather than US mail. The next month...they didn't send me a credit card bill in the mail. It turns out my credit card bill was buried in a link..in the email...with my regular bank statement.
Subsequently, when I realized I hadn't received a bill in the mail...my payment was due that day. I made the payment over the phone immediately...and was informed that it wouldn't 'post' until the next day...making me one day late for the first time ever.
Again, I had never in almost 5 years, been late.....even one day. Due to that one so-called 'late' payment, my 7%, for life, interest rate was immediately raised to 29.9%...raising my monthly payment to 340.00......260.00 of which is interest alone.
If that isn't predatory, I don't know what is. Banks will do anything to cause good customers with low rate cards to be 'late'...so they can jack up the rate. And we have absolutely no recourse. When I called to complain...I was told that I will NEVER be able to get back to 7% again...but they will look at my rate again in 2011.
Let's get structural here -- why are housing prices so high that people can't afford a house without a non-traditional 15 or 30 year fixed rate mortgage? Well, first, with the way that schools are funded, there's a shortage of housing in good school districts. Second, because exotic mortgages have been made available, current owners can jack up prices and the next round of owners is made to think that they can afford the inflated prices -- either because the prices will keep going up and so you can flip/sell/refinance your way out of disaster, or because monthly payments are made deceptively low at first. Third, Bush's "ownership society" likely made some number of people think they really needed to own something. (Imagine what'll happen if Social Security ever gets privatized....We'll OWN that, too.) And fourth, we have created such a horrible economy that people who are saddled with debt are promised instant relief through refinancing. The refinance themselves "out" of debt and out of their homes. There really is predatory lending, there really are unsophisticated and desperate people out there. I'm glad that many of you are not unsophisticated, but then, why do you think YOUR house has appreciated so much in value?
When a commodity price so outstrips people's ability to pay that people have to stop buying it, the price is bound to drop. Far better it would have been to regulate the prices downward from the beginning.
Only sophisticated buyers understood the bubble, only sophisticated buyers understand the paperwork. For our first mortgage, we were laughed at for wanting to consult a lawyer -- it wasn't local custom. For our third mortgage (we refinanced to a lower rate and then eventually moved) we had no idea that property taxes in the new location go up every six months (estimated, then actual in 6-month cycles -- meaning that payments are not fixed even if the interest rate is fixed). There's a lot to know in taking out a mortgage, and if the bankers or realtors are not REQUIRED to make sure you know what you're getting in for, then we ought not to go around blaming people.
And this is the place for regulation. In some locations, realtors work for the sellers, in some, they work for the buyers. For whom do mortgage brokers work? It would seem to be for themselves. We need brokers to be required to work FOR BUYERS so that buyers get full information, full disclosure of all current and future and possible payments. We need loans that fit people's income, housing prices that fit people's income, and we need to render illegal "exotic" loans. There's a reason for making credit unavailable at some level, and we are now living that reason.
Liberal and Proud, you quote my post but then go on to rip apart a strawman. I should say, to your credit, you do quite an effective job in this endeavor and I happen to agree with many/most of your takedowns of points I never raised.
Who is this person who is "jumping up and down" because people are getting food stamps to maintain a "minimum standard of living?" Who said that taxes are "evil"? And why are you emphasizing that Bear Stearns should "NOT" be bailed out?
1. As I said in my original post "I'm not in favor of bank bailouts." So let's just leave that out of the discussion.
2. Taxes are not "evil" and they pay for services? Funny, as a progressive Democrat, to be receiving a lecture on this point. Particularly since I made no such claim and never implied anything about taxes generally. So let's just say we agree here too.
3. "People jump up and down if some poor person collects unemployment or food stamps so they can maintain a minimum standard of living." I honestly don't know if this is in response to my post or not. It really has nothing to do the points I raised. So even though this is off topic, I guess I should specify: I FULLY SUPPORT unemployment and food stamps (and universal single-payer healthcare for that matter).
In a country as well-off as ours, no one should go hungry, or have to worry about being able to afford getting sick, or go to sleep without a roof over their heads. And I support programs designed to help Americans maintain a "minimum standard of living." But is owning a house really part of a MINIMUM standard of living? That's funny. Because my wife and I can't afford a house. Which is my whole point. I'm not arguing that I am *entitled* to a house. But I am questioning why it is callous for me not to want to pay for a SPECIFIC PROGRAM to help (i.e. subsidize) people maintain a "standard of living" that is beyond what I can afford. And it is THAT question that I have yet to hear a reasonable reply to.
Why - in a country where we DON'T have universal health care, where many Americans, particularly in our inner cities, have a hard time affording safe and reliable shelter, where food stamps are inadequate in the face of rising commodity costs to enable families to provide balanced meals to their families - is bailing out homeowners such a priority? Help me out here.
Apt Dweller @ 51:
Because Americans are shortsited in this regard, and so is government. Bailing out homeowners is on the front burner because elections are won and lost on issues like this. So they take priority.
Universal Healthcare is a long term policy issue...and one that will not be discussed until THAT reaches even higher crisis levels than we're already at.
Politicians play politics with these issues because that is what they do, and the Party in power sets the agenda. Now, the Democrats can't change the agenda until they have the majority numbers to do so.
You're asking me to explain politics to you. For someone trying to come across as so intelligent...are you really that unaware of how the system works...or just wasting my time.
Liberal AND Proud @ 52:
You are a communist. No one has a "right" to housing, healthcare, or any other commodity. The govt. cannot give away anything without taking from someone else. By following your logic, who is to say that everyone shouldn't have their own house? What if someone works at McDonald's? Do they deserve a house? They work hard too, right? My wife and I have decent jobs and make about $80,000/year between us. We cannot afford to buy anything decent in our neighborhood, why doesn't the govt. tax some rich guy so I can buy a $400,000 condo? It's the same principle with the mortgage bailouts, some people cannot afford homes, it is a fact of life. Unless you want total collectivism, with everyone living in govt. backed housing, get used to a little variance in economic status. It's part of living in a capitalist system.
I'm quite liberal, but don't believe legislation should be used to bail out any and all bad decisions. The reason I don't believe the consumers should be bailed out is because losing the house isn't a death sentence. Life will go on, and while it's a setback, it's also an expensive life lesson. I believe in social programs as a backstop, but don't believe they should be implemented for individuals who used extremely poor judgement, still have recourse (ie Walk away from the mortgage), and whose circumstances aren't morbid.
That said, I despise the inconsistent application by the cons regarding who should receive the help. If they weren't such hypocrites they would see how wrong it is to denounce social programs as evil, and at the same time endorse the bailing out of corporations. I suspect it's because they have a vested interest in protecting stock prices.
Both groups need to deal with the consequences of their poor choices.
I think McCain is your typical conservative hypocrite by supporting corporate welfare, while telling consumers to go piss up a rope, but half correct on his particular stance here.
I am fully aware of how the system works. I am only asking someone to explain:
1) Why bailing out homeowners is a good policy substantively
2) Why, per the original C&L post, I am "callous" for not supporting this
I really would be interested to hear someone make the progressive case for this.
Apt Dweller @ 55:
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.
Apt Dweller,
I believe the term callous was with regards to McCain's willingness to help out corporate america and at the same time tell joe six pack to take a hike. I personally have no problems with someone applying an ideaology consistently, but that's not the case here.
Bailing out homeowners might turn out to be good public policy because:
Lack of reasonable regulation entangled a lot of people who should have been given better information, and shouldn't have been allowed to take out the mortgages in the first place. Brokers are more complicit than many here acknowledge.
When numerous houses are abandoned, whole neighborhoods go down the tubes.
The lowering of property tax collections will screw up schooling for a lot of kids.
The reason that many people have new-found wealth is that they cashed out of the housing market just in time -- their wealth comes from the misery of those who entered the market late.
The disruptions of home loss, change of school, sheriff-led evictions are not really so easy to deal with.
There's so much anger here coming from people who "played the game straight", didn't buy a house, did nothing wrong.... In a civil society, we help each other even when someone screws up. How do you think health insurance works? If you screw up on your motor cycle, other policy holders pay and pay and pay. If you screw up and breathe in asbestos (no one MADE you take that job...) then other policy holders pay and pay and pay for you. If you die from some dumb action, society sends money to your widow/er and kids through the Social Security system. If we don't take care of people, we're not really civilized, and we're certainly not a society.
Bailing out homeowners might turn out to be good public policy because:
------------------
because you imagine it so.
300+ billion deficit
29 billion Bear Stearns guarantee
168 billion stimulous package
That comes to 500 billion in deficits
Add in bailouts, what does the bond market do in response? What does the dollar do?
In 1931, the bond market creashed, sending yields soaring. People could not repay their debts as a result.
This is what you are asking for by government bailouts.
If excesses are added upon excesses, instead of excesses being liquidated, ther will be dire consequences.
Senator Kennedy asked FED chairman Bernanke what congress should do. BERNANKE REFUSED TO ANSWER THE QUESTION. Bernanke was not going to leave himself open to become a scapegoat when this all falls apart.
“… part of predatory lenders…. ”
Oh stop. What is a “predatory lender?” I think it’s the equivalent of “ritual satanic child abuse.” - something that sounds really scary in theory but in practice DOESN’T EXIST, unless your definition of a “predatory lender” is “lender who lends to stupid people who are too lazy to do basic research on what is generally the largest and most important financial transaction of their lives.
---------------
Nonsense. A lender should be honest. if they are not, they are predatory. Stop blaming the victim.
I understand all of the anger here, I'm angry too. But what are some of you suggesting?
That we kick families out of their homes with nowhere else to go.
Leaving aside the speculators motivated by greed, this would not be a few people, this would be MILLIONS of people. Mothers, fathers, children. The elderly. Taxpayers. Americans. Most of them working at least one full-time job. Most of them on the losing end of an attempt to make a home for themselves and take some pride in their being. These are human beings, for fuck's sake.
I'm sure some people in this country will go all Marie-Antoinette on the upcoming dustbowl and suggest they stay at the Ritz-Carlton until they get another place to live, but seriously, this is what we're facing.
I didn't get one of these tantalizing mortgages either at the time everyone and their mom were getting three. I had restraint. I know a lot of people around here did too, and we're feeling all superior about our good sense. But as a citizen of this nation, I don't want to see my fellow Americans on the streets with exponential levels of stress, malnutrition, and danger. That doesn't do anyone any good.
Help the helpless. It isn't communism, it's the right thing to do.
Saw the thread title and hoped it was about McShit giving up his bid the buy himself into the White House. Damn, I was wrong...
Ohio Liberal @ 49:
So let's review:
1. YOU checked the box turning off paper statements.
2. YOU simply assumed that becuase you didn't get a paper statement that no payment was due.
but it's somebody else's fault.
It's a really sad day for america where somebody like you can so clearly relate the facts of the situation but not understand that they themselves are entirely at fault. If you don't like or can't understand the terms of the contract, DON'T ENTER IT.
this is not rocket science, people.
Ron.j @ 60:
Of course they have to be honest. This is already WELL WELL WELL WELL WELL covered by truth in advertising laws. However, what people here seem to think evil "predatory" lenders are, include:
- lenders that don't tell you that you can get a cheaper loan down the street.
- lenders that charge higher rates for customers that they perceive to be riskier
or, in other words, organizations that engage in perfectly normal practices in every other business known to man. if your lender actually LIED to you (or, per your wording, are "not honest"), you can sue them and win trivially.
katie @ 61:
the "nowhere else to go" bit of your argument is what is nonsense. A family who can not afford a $3000 mortgage deserves to lose the house and either purchase another one for $1200 per month which they can afford but maybe doesn't have as much granite and plasma and, egad, the kids might actually need to share a room OR they can rent a place for about the same until their finances allow them to purchase a place they can afford. If enough families will be forced out as such, the prices will go down and things will normalize. Every single thing we know about market economics says that the sorts of distortions that are suggested by well meaning idiots and panderers with regards to the mortgage crisis will result in MORE unhappy families.
Larry Lessig @ 65:
Okay, let's think about this for a second. A family is in a $300,000 house, and the head of household makes $60,000. This is a very likely situation in this country, probably moreso than the $20K-making greedy bastard everyone is suggesting. This $300K house is probably not the mansion everyone is suggesting it is, and in a big city is probably actually pretty modest. If they have been trying valiantly to pay their rising mortgage payment, that WIPES OUT their checking, savings, lines of credit, and most will dip into 401Ks to keep their family where they are and not uproot their kids. When one is a family head, they want the family to have the best they can for as long as they can, and that's not greed, that's human nature. Once they're broke, THEY'RE BROKE. Once they default on a loan, their credit rating plummets and they CAN'T get a lease on a doghouse, much less another place where their kids are going to school, and especially in the middle of a mass exodus trying to do the same. If you don't believe this scenario exists or that it's not widespread, go to California.
I'm not suggesting the government forgive all these loans, that's not going to help anything either. But the exponentially rising interest rates are morally wrong and easy for the courts to re-calibrate.
If you're suggesting that they eat cake, the reality is they've been looking for crackers for quite a while. VERY EASY to look at them as gone-bust financiers, much more difficult to look at them as moms and dads, isn't it. The callousness of most people on this thread doesn't rise to McCain's, but it is astounding. Yeah, they shouldn't have done what they did, but for most of these people, the end reality is an unacceptable quality of life in a tent town. Go ahead, tell me I'm naive now, and we'll see who's right by the end of the year.
Seriously? This is what the whole argument for bailing out homeowners keeps coming back to from various commenters. Distressed homeowners should be entitled to their "minimum standard of living." We should help them because they are "helpless." And "in a civil society, we help each other even when someone screws up."
36.5 million people were below the poverty line in 2006. 36.5 MILLION. These are the helpless in this country - the people who should be entitled to a minimum standard of living. These are those of our fellow Americans who are most in need and who progressives should be thinking about, rather than self-righteously trotting out the "civil society" argument in favor of government bailouts to a predominantly middle-class constituency.
I understand the emotional element here: losing your house sucks! If you own a house, I'm sure having to give it up because you couldn't pay the mortgage is a terrible thought. But that does not make this good policy, nor does it give you the right to lecture those of us who disagree with these bailouts on how it's important to help those less fortunate than us.
I do not own a house because I cannot afford one. Fine. That's my problem. But you simply CAN NOT make the categorical claim that distressed homeowners are in any logical sense "less fortunate" than me or the millions of taxpaying Americans who do not own a house. And it is EVERY BIT as disingenuous to suggest that either I or others who oppose a bailout are in favor of throwing families out onto the street with "nowhere else to go." There is this crazy arrangement a lot of us Americans use for housing that is called "renting." Sure, I don't get to barbeque in a back yard, but there's heat and running water and even indoor plumbing!
So I know it sucks to lose a house, but owning a house is a privilege. It's not a birthright, nor is it in any sense part of a baseline minimum standard of living in this country. Indeed, per the Joint Center for Housing Studies of Harvard University, the 2005 homeownership percentage for minorities in this country was just 52% (as opposed to over 75% for whites). So please stop trying to cage this issue in progressive rhetoric. It's a bailout the same way Bear Stearns is a bailout.
$100 per month per family member. That is what we, as a society, have decided to provide to those with near-poverty incomes under the food stamp program. That's just over $3 per day to feed each member of their family. There are 27.8 million people on the program in this country.
Many of the people on the food stamp program have never known what it is like to own their own home (even a modest $300K home in a big city). We don't have to wait for the "fallout" from rising interest rates for a scenario in which millions of Americans are struggling to make ends meet. That scenario exists and it has existed for decades. Today, the average income for families in the bottom fifth of the population is $15,500.
Katie, in your own example, the head of the household makes $60,000! The MEDIAN household income in this country was $48,200 in 2006. I guess I'm still confused about what it is exactly about the prospect of losing that $300K house that merits special government intervention to prevent it from happening. Is that family more deserving because they *know* what a comfortable standard of living is like, unlike the poor rubes on food stamps?
Please don't misunderstand me on this. I am not suggesting that losing a home is anything other than a sad (and quite traumatic) experience for a family. Having to give up a standard of living you are accustomed too is undoubtedly fraught with stress, apprehension, and even a certain level of embarrasement. And I would support a limited role for the government in providing temporary assistance to those families unable to find or afford transitional housing. What I do not support is government intervention to help a $60,000 family KEEP their house. Especially not in a country where we think $100 a month for food stamps is acceptable.
Those of us who identify as progressives need to come to terms with difference between finanical hardship and poverty. Speaking for myself, I am college-educated with a good job history. I will most likely never know poverty on an intimate or personal level, and I am fortunate in that regard. On the other hand, I recognize that there is a chance I will know financial hardship. When I was in high school, my father was out of work for over a year. Although my parents tried to hide it from me, I could tell the stress and apprehension that this brought on. Thus, I am in a sense more personally afraid of financial hardship than poverty. It is more real to me and it has hit closer to home. I would venture that this is likely true for many on this comment list.
And so in focusing on how to help those less fortunate it is only natural I suppose to focus on situations that are familiar or where "there but for the grace of God go I." And in so doing to forget those most in need. Millions of our fellow Americans live in poverty and can barely feed their families. These are the Americans who need our help and who lack the voice we could help provide. And so one of the things I find so particularly troubling about these calls for homeowner bailouts, caged as they are in high-minded progressive terminology, is that they threaten to drown out even more the voices of those who are truly in need.
http://www.iht.com/articles/2008/03/31/america/31foodstamps.php?page=1
Okay, Larry and Apt Dweller, fuck 'em all! Out on yer asses, everybody! Go find a shelter, start food stamps, and if that's not good enough for you, do us all a favor and decrease the surplus population!!
It's not like there are 200, 2,000, or 20,000 families doing this. This is an epidemic. There's not room for everyone to fail at the house thing and get a cheap apartment. There's simply NOT ENOUGH ROOM.
"Self-regulation" is a term used for businesses. "Rock bottom pain, suffering, and death" is an equivalent for people. If everyone self-regulates like you guys suggest, you think we have crime now! Wait until that plus suicide rates skyrocket when everyone follows your plan. What this country is facing is not financial hardship where things get tight, it's poverty when things go bust, and there's going to be more of it before there's less. What you consider a good chance of finding a job with a college degree is not the reality for A LOT of your level out there. I'm happy you're so optimistic, but college degrees mean shit in the job market now. What you consider a "good salary" of $60K does not stretch to keep an average family in good standing with the current inflation rate. You seem very priveleged and for that I hope you are grateful. But your reality is not THE reality.
We are headed for a nation of Hoovervilles/Bushvilles and it's a tough idea to swallow, but it's coming nevertheless UNLESS government measures are taken to halt it. I see where you're coming from and you guys have every right to have these opinions. I just think they are inhumane.
This seemed odd to me, but would be a valid concern if true. So I looked into this and of course it turns out not to be true: "Nationwide, the rental housing market facing renter households at 80% of AMI (area median income) is fairly well balanced with a healthy surplus of affordable units available." - July 2007 National Housing Trust fund report.
First of all, $60K is *way* too high an income to qualify for food stamps. And my point, which I think was quite clear, was that food stamps are not "good enough" for anyone. If you think $60K is tough to get by on, what about the fact that 20 percent of American families have to make due on an average income of $15,500?
But I'm beginning to get the mindset here. Food stamps are fine for "poor people," right? When 1 in 5 families makes $15,500 and struggles to put food on the table, that's normal. But when predominantly white middle and upper-class Americans (our neighbors!) start to have problems paying for their $300,000 homes, then it's an epidemic!
People are starving in our own country. There are 36.5 million people below the poverty line. HOMEOWNER BAILOUTS WILL DO NEXT TO NOTHING TO HELP THOSE WHO ARE BELOW THE POVERTY LINE. Where is the concern for these people?
You know what's inhumane? The notion that white middle class Americans are *entitled* to $300K homes they can't afford in a country where parents have to try to feed each member of their family on $100 a month. That's just sick. This is not a damned landed aristocracy (at least not yet). You don't get to keep something just because you were born with it or are used to it. Get over yourselves and think about who this recession is REALLY hurting.
Two candidates for President are falling over themselves with solutions for the current mortgage, lending crisis. Their plans call for everything from delaying rate increases to throwing money at the debtors. This problem is really about supply and demand. Let’s look at these plans in a broad sense.
If we stay or delay the rate increases of the adjusting rates or give borrowers money to make payments, we must first solve the problem of who gets the juice – who benefits? Do we single out people who are 90 days past due and help them? If we do, then those folks 60 days past due will now have an incentive to make matters worse and become 90 days past due to qualify for help. If we help someone who paid no attention to their ability to pay, but jumped in any way, then how do we compensate someone who did not enter into such a mortgage, because they exercised good judgment – in essence, their tax dollars would be helping the person who got the house they wanted, but chose to pass on? Today’s candidates in pandering for votes want to spend your money on a problem that they clearly do not understand.
Yes, many subprime borrowers are out there in trouble – they are called subprime for a reason – did we or they expect anything else? The true victims of this crisis are all the homeowners who are now trapped in their homes due to the equity position. The value of their residential property has precipitously dropped. Whether they are investors for rental properties or occupants of their dream home, we are all being hurt by this loss in home values. So what is the solution? Senator’s Obama and Clinton, Senator McCain, President Bush, and Congress are you listening? The solution is to raise the property values and not just throw money at selected people in an unbalanced approached. Here is how. Raising property values stabilizes lenders, allows good payers now stuck in a property value vortex to be free to resell. Raising property values helps subprime borrowers, by giving them a chance to get out – sell and move on. Raising property values is the only equitable solution. How do we do this?
If the Federal Reserve took all the money being proposed by our pandering candidates, sweetened the pot and created a pool of mortgage money to be administered by FHA, Fannie Mae, Ginnie Mae, etc. for special mortgage lending. This money can be made available for a one year period and it supports only 10 year adjustable arms initially priced at the 3.5% APR. Most homeowners stay in their homes for less than the ten year period the ARM affords, thus over time these special loans would dry up and be repaid on their own. Qualifying borrowers could not be sub-prime – to qualify a prime credit score must exist for each borrower. Any of the borrowers must be first time buyers. Only owner occupants after purchase would be eligible – these homes may not be rented to anyone while under the special mortgage. These mortgages could only be used to purchase a resale home from an investor/landlord or from an occupant – no refinances. Cap the maximum available mortgage at 120% of the median home price of each county where the home is located. Do not permit second mortgages or equity lines at purchase. Allow PMI (Private Mortgage Insurance) as a security for weak equity positions. Permit financing to 95% with PMI is all borrowers have a first tier credit score.
This program would stimulate the residential housing market, create lots of demand, and start to bring home values up. At the minimum it would stabilize the values. Lenders would no longer have to suffer declining equity positions, credit troubled and financially troubled borrowers would now start to have a way out as home prices rise.
The affect on this rise in home values would secondarily lift new home sales and actually stimulate that industry. This property value stimulation is the most equitable and most effective to achieve what is needed, a stabilization of the residential housing market, and it can be instituted within 60 days or less.
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