We Just Got Mugged Again. And Again.

Back in November, I wrote about my suspicion that we'd just gotten mugged by the original Troubled Asset Relief Program. As far as I can tell, we just keep on getting mugged … over and over, and always in the name of averting imminent disaster.

Stick 'em up!
TARP has turned out to be an expensive and chaotic nightmare lacking in accountability or transparency. For example, a Wall Street Journal article in January pointed to political interference in some bank bailouts that took place under TARP. OneUnited Bank, a seemingly insignificant name, appeared to be getting TARP money because of the intercession of Rep. Barney Frank, who wrote into the bill a provision specifically intended to help that bank … which just happens to do business in his home state.

This kind of chicanery is by no means uncommon. In fact, there's about $300 billion in spending in the "new and improved" TARP package that seems a little frivolous, considering how dire we keep being told our circumstances are. Allotting $200 million to "design and furnish" the Department of Homeland Security headquarters? Maybe the government can hire John Thain to advise on ways to waste other people's money on decorating, since he apparently knows about cool things like $35,000 commodes.

So much for the government's self-righteous indignation about the greediness of the free markets -- apparently, Capitol Hill has some of its own tendencies to engage in self-interest at the expense of others.

Other people's money
Citigroup (NYSE: C  ) and Bank of America (NYSE: BAC  ) just keep getting more and more funding from the government. How is that working out? If General Motors (NYSE: GM  ) is any indication, not so well. The automaker recently said that -- surprise! -- despite its last dose of highly controversial public money, it already needs of another bunch of billions or it's going down … suckers.

The stimulus package has also inspired lots of controversy over boneheaded ideas like an ill-conceived "Buy American" provision that many companies drooled over -- although notable standouts such as General Electric (NYSE: GE  ) and Caterpillar (NYSE: CAT  ) took a stand against any such provisions.

Meanwhile, our new Treasury secretary, Timothy Geithner, has come up a bit short on details -- again, what a shock -- with the new version of TARP. All we're getting is exactly the same kind of financial "bazooka" rhetoric that was supposed to instill confidence back in the fall -- even though there wasn't a coherent, understandable plan to be found.

If nothing else, the Obama administration is sure keeping the scare tactics from last fall ratcheted up, now that we've endured the threat of a complete economic catastrophe if the $787 billion stimulus package hadn't passed.

And don't even get me started on the ugly irony with Geithner's tax problems. Since he's so busy doling out taxpayer money, I'd like to think that he -- the Treasury secretary, of all people -- would at least pay his own taxes.

Mugging one's neighbors
The $75 billion plan to attempt to stem foreclosures is supposed to help 9 million borrowers, but here comes moral hazard again. How many of these borrowers couldn't afford their homes in the first place? And what about those who saved money, paid their mortgages regularly and on time, or rented and waited for prices to fall to the point where they could buy? Those people are screwed. They get no justice. In fact, they'll end up subsidizing all kinds of other people, including those who didn't act as responsibly.

There was always a commonsense, buyer-beware risk that the housing market was in a bubble and that asset prices simply do not always go up, especially when they've gone up in such an unprecedented fashion in so short of a time.

I think we need a lot more foreclosing, and maybe even a good bit of bulldozing. Sorry, Toll Brothers (NYSE: TOL  ) and Beazer (NYSE: BZH  ) . The building frenzy was part of a massive disconnect from reality, and the growth wasn't real. The homebuilders came up with bizarre growth models that reflected the complete dream state that suggested that everybody could have a McMansion.

It's too bad, but the American dream turned into a nightmare, and trying to coerce some of us to pay for others so that we can attempt a return to that dream state isn't going to put us back on the path to true prosperity.

Grab your Mace … here come the suits again
The bailout mentality -- whether it involves bailing out Wall Street or (supposedly) Main Street -- absolutely stinks. Moral hazard is alive and well and causing a lot of resentment among lots of Americans. Taxpayers are on the hook, and our future generations are hopelessly indebted as the powers-that-be scramble to save people from their own faulty decisions and reinflate a bubble that was never economically feasible in the first place.

A consumer-debt-driven economic utopia with something close to full employment, and in which we could all have whatever we wanted, whenever we wanted it, with the bill coming due at some indistinct point in the future, was never realistic. It was a Siren song, and like all Siren songs, it was dangerous and left us in a mess.

What's real are the trillions upon trillions of dollars in debt that our country is racking up. And that debt is not only propping up bad players -- it could well take our troubled economy and mess it up even more. (Fellow Fool Christopher Barker recently came up with a tally of about $10 trillion in outlays.)

So there you have it. We're all getting mugged, again and again -- and it all gets a little scarier with every passing day. For all of the talk of restoring confidence, I don't how we're supposed to feel better when we just keep on getting rolled. Do you think these muggings are anywhere near over? I sure don't.

Of course, there's no use in practicing your self-defense moves; these guys aren't too worried about you or me, or what we think of their thuggery. Just get the ice packs ready for your aching head and your bleeding wallet -- and those of your descendants. See you again in a couple of months.

Alyce Lomax owns no shares of any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days. The Fool has a disclosure policy.


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  • Report this Comment On February 20, 2009, at 4:58 PM, eathian wrote:

    Sounds like you got caught with your motley shorts or bloomers down. Ha Ha Ha Ha!!!!!!!!!!!!!!!!!!!!!!!!!!!

    Serves you right for being an economic terrorist in the first place. You people selling America short have done more economic harm to this country than Osama bin Laden ever dreamed of doing.

  • Report this Comment On February 20, 2009, at 5:06 PM, JGBFool wrote:

    I don't recall any instances of Alyce Lomax "selling America short".

    Got a link?

  • Report this Comment On February 20, 2009, at 5:15 PM, slimduck wrote:

    I think the moral hazard is not a good point at all. I am a renter who waited for prices to fall. I know many homeowner that pay their mortgages on time. Everybody is dragged down by this mess. So, the claim that helping struggling homeowner is a moral hazard is just plain wrong. I am not saying that moral hazard doesn't exist, but people with some ideology who cannot see the reality applies their ideology like donkey to the wrong problem. In this case, homeowner who paid their mortgage on time get screwed, renters cannot get loans and gets screwed. We are so much past the sub-prime crisis, currently the prime homeowner have difficulties. Helping struggling homeowner, who have seen quite dramatic fall of their asset, is just the right thing to do.

  • Report this Comment On February 20, 2009, at 5:26 PM, jerhoad wrote:

    If helping people with falling values is "the right thing to do", then send me my check for a loss of value in my 401k. I bought the house I could pay for, regardless of the economy, not the one I thought would be nice to have for the sake of "image". Rewarding failure is repugnant.

  • Report this Comment On February 20, 2009, at 6:45 PM, 44humble wrote:

    I have an idea!...If we simply all get together and quit paying taxes, then they have no money to blow on idiots who lie and buy houses they cant afford, they have no money to reimburse the banker who knew it and blew it. And we save the economy with our savings. Hell they cant put all of us in jail.

  • Report this Comment On February 20, 2009, at 7:06 PM, AlyceFan wrote:

    Alyce I have to say that is quite a rant you have going there. I can't say I agree with nearly anything you have written here...bit as usual you do it with style :) Always a pleasure to read...

    You are correct on the first 350 billion of the Tarp funds...I suggest we take that up with Bush and his cronies as they were responsible for its mismanagement.

    As for the second 350 billion I would argue it is a bit too early to evaluate its effect - or the Obama administrations handling of those funds. However now that adults are in charge my expectation is that we can expect a far better outcome.

    It is of course always easy to pick out a provision or two in any piece of legislation that is bad and use that to trash the entire thing. Would be like me pointing out a misspelling or misplaced comma in one of your articles and concluding from that you are a bad writer. An obviously absurd conclusion. I agree that these types of earmarks are not good, but they do not have much bearing on the potential efficacy of the larger effort.

    It is easy, in this age of intant information and the expectation of instant results, to make a conclusion about the results of money loaned to banks and the car companies. We are in a very deep recession, so to expect that money loaned to GM would within a month restore it to fiscal health is absurd. In fact it has had the desired effect this far, GM is still in business, 10's of thousands of people still have jobs that might otherwise have lost them, hundreds of smaller businesses dependent in large part on the automobile industry are still alive. GM and even Chrysler are making strides at a better business model. Full restoration of their health will not occur until the economy improves and sales increase - and they implement their promised reforms (no guarantee that will happen of course). I think we could give it more than a month before we make sweeping judgments about the result of these efforts.

    I think your comments on the mortgage plan are misguided as well. The plan is designed primarily to keep homeowners who have been paying their mortgages from entering foreclosure. People are being hit hard from all angles - rising unemployment, increased health care costs, small buisness failures etc. Many many folks are having trouble not through any irresponsibility on their part but because they are being buffetted about by an increasingly crappy economy, brought to this condition by incompetence and greed among George Bush and his cronies. Would be nice if they could refinance at the lower rates now available, but for many home values have dropped so much their is not enough equity to refinance with. They are caught in a cycle they had no part in starting.

    I'd like to see your evidence for the supposed wide resentment of these member among the American people. I don't see it. The RIck Santellis of the world are hardly an accurate reflection of what the American people think. Latest polls show Obama and even Democrats at a high approval rating. Certainly the american people knew what Obama was proposing when he was overwhelmingly elected, and seem to approve of the measures he is taking so far.

    http://www.dailykos.com/weeklytrends

    Even the right track/wrong track number is improving.

    You write

    "A consumer-debt-driven economic utopia with something close to full employment, and in which we could all have whatever we wanted, whenever we wanted it, with the bill coming due at some indistinct point in the future, was never realistic. It was a Siren song, and like all Siren songs, it was dangerous and left us in a mess."

    Wonder if you could provide a single example of anyone in a position of influence or power who makes a claim of this type. In fact this is the ridiculous straw man argument those opposed to Obama and his plan concocted before it was even enacted.

    And I have to say Alyce, your remarks on Geithner were the kind of cheap shot folks use that have no other argument to present. I know you are cabale of better than that...

  • Report this Comment On February 20, 2009, at 9:29 PM, Atrossity wrote:

    Alycefan,

    The only thing fanatical I detect in your article response to Alyce’s articles, is your attacks. You also write very well, though not as good as she, as a typo or two might fairly indicate.;)

    Labeling or calling names, is the most sophomoric forms of rhetorical debate and labeling Alyce’s article a rant in the response which could fairly be called a rant, is, wait for it… disingenuous.

    I find the majority of what you say to be well argued, though I don’t agree with your conclusions. Another thing you do, speaking of straw men, is seeming to imply that Alyce is in some collusion with Neo Cons or the former administration.

    I could go through your, wait for it, diatribe, and pick through it piece by piece and formulate an even longer response than yours, but I’ve got other things to do. What I’m really wondering is where you are coming from. You call yourself Alycefan and I’m wondering why, since you seem to offer nothing but attacks. Perhaps there’s a particularly complementary response I missed? Of all the responses I’ve read I believe yours are the longest, so I’m really wondering what is inspiring you.

    But enough about you, let me say something about Alyce's article. Alyce, I agree almost completely with everything you say and am especially ticked off that whoever is President our Oligarchy, the wealthy greedy foxes who got us into this mess seem to have landed nice positions as hen house guards. I believe the only way out of this is for the American people to remember they live in a Democracy and hold their government’s feet to the fire by figuring out who their Congressmen are and writing them, along with their Senators and their President for that matter. I’ve been writing and was gratified to see that the Billion dollars, admittedly a piddling sum amid today’s numbers, was not delivered for further nuclear weapons research. Let’s end the Oligarchy and take our government back, write your elected officials and make it happen.

  • Report this Comment On February 20, 2009, at 9:37 PM, Varchild2008 wrote:

    Adults are in charge? hahahahahhah. AlyceFan, you crack me up.

    You are talking about the same regime that claimed through Barney Frank that they were going to have a Corporate Tax Cut as part of the Stimulus Package and have Infrastructure Spending in the amount of $200 billion. None of which was true after the BAIT and SWITCH.

    While all of the Obama Fans were outside gazing in awe and drooling in the shadow of their messiah, the Democrats in Congress under Pelosi were screwing the one chance to get things right.

    Yes, President Bush screwed up big time in 2008 by going against Free Market Principles that worked in 2001.

    But President Barrack Obama is just following in the same footsteps taking President Bush's fed. deficit and more than tripling it in just 1 month in office.

    Oh.. But the ADULTS are IN CHARGE now so I guess we can suck our thumbs and grin.

  • Report this Comment On February 20, 2009, at 10:04 PM, AlyceFan wrote:

    Atrossity, I neither insulted Alyce nor did I imply she was in cahoots with neocons (don't believe I used the word neocon). The fact is she does make the same strawman argument as opponents of the stimulus were making before it even passed. Pointing that out does not mean I believe she is in cahoots with them.

    Her article was a rant...perhaps I view that word differently than you do...nothing wrong with a good rant from time to time...and Alyce's is far better and more coherent than most(see Varchild2008)...and mine was definitely a rant :)

    Of all the writers at Motley Fool I find her to be the most enjoyable to read(including those I agree with more often than Alyce)...and IMO she appears to be a better writer than most there. Doesn't mean I agree with her that much. But what fun is it to post hallelujahs to people you agree with all the time. I'd rather have a discussion with people I don't agree with...usually both parties learn something...and it is far more entertaining. And contrary to your characterization of my comments I do not believe my comments were attacks on her...but on portions of her article...there is a difference...

    As to your comments on her article some I agree with...certainly holding our representatives accountable is something everyone can agree on. However I for one am not ready to pronouce a failure something that has only been in place for a month.

    Oh and you are right...my typing skills are atrocious!! :)

  • Report this Comment On February 20, 2009, at 10:05 PM, SteveTheInvestor wrote:

    It's very true that the airheads that took on mortgages they could not afford brought the problems onto themselves. This is especially true of those with no down payments or a second mortgage down payment. Then of course, we have the option ARM crowd. What can you say about these people? Talk about living in a fantasy world.

    Equally sad though is the fact that none of these practices were prohibited nor even discouraged by our government. Option ARM's should clearly be illegal. For this type of mortgage, you might as well draw up the foreclosure papers at closing. I'm of the same opinion when it comes to zero down deals. Just absurd. Sometimes you need to protect the consumer from himself and we should have been doing that all along. Since we didn't though, we now have to clean up the mess.

    The muggings you refer to are most certainly not over. Our economy is trash for the foreseeable future and government debt will be a nightmare for generations to come. And don't get me started on the grand scale fraud and theft of assets that Wall Street has gotten away with.

    I won't make a judgment call on the Obama administration just yet. He's only been there a few weeks. I think it obvious though that no matter what they do or don't do, it won't be pretty.

  • Report this Comment On February 21, 2009, at 12:27 AM, Cry0 wrote:

    I enjoyed the article, but like a few other people responding i dont understand how Alycefan can read that article, which from what i understood was basically bashing the new democratic leadership, and then make a jab at the bush administration and say how we are in better hands now. The entire article is focused at the gov spending and how the TARP money is going to waste and you can read that and say, "However now that adults are in charge my expectation is that we can expect a far better outcome."

  • Report this Comment On February 21, 2009, at 6:20 AM, AlyceFan wrote:

    Cyr0, I don't undestnd your point. The TARP money that has been spent so far was in fact mismanaged by the Bush administration. So criticizing them hardly seems like a stretch. Second, it seems premature to criticize the Obama administration for mismanaging funds it has yet to spend. The entire Bush Presidency was an exercise in bull headed ideology - pursuing wrong headed policies in the face of overwhelming evidence what they were doing was making things worse. An almost childlike stubbornness, with the primary goal apparently to NEVER admit they were wrong. It is my opinion Obama will be a more engaged, pragmatic President who will not ignore the results of his actions and make necessary changes.

  • Report this Comment On February 21, 2009, at 7:47 AM, kstoltz wrote:

    The moral hazard argument is based purely on emotion. I has nothing to do with reality, which shows that the longer the housing crisis goes on the more the tide goes out for ALL boats. Some people just don't want to see anyone get a helping hand if it's comes from the government. They obviously have not seen their housing prices drop far enough. Maybe we should listen to the moral crusaders, and let millions more Americans fall into foreclosure, and perhaps their tune will change when due to the continuing falling market, it's the crusaders who are suddenly upside down on THEIR house.

  • Report this Comment On February 21, 2009, at 8:11 AM, AlyceFan wrote:

    Varchild2008...you appear to be the funny one. The final stimulus had 150 billion in infrastructure. Obama's business tax cuts were removed by more progressive elements in Congress...and I am glad they were

    The final bill was not perfect of course...nothing that is subject to a legislative process ever is, but it is a significant and crucial step toward recovery...

    Tax cuts (of which there are billions in this bill) are not the panacea to every problem. They can be mildly stimulative in the context of a fundamentally sound economy going through a mild recession perhaps. In the current situation however they would be wholly inadequate to the task. Consumer spending is in the tank, and getting bit more money from a tax break isn't going to induce people to spend at the level that is needed to jolt the economy. Those in trouble will use it to pay down debt or save (not a bad thing btw, but not stimulative), and those with means aren't going to suddenly go on a spending spree with a few extra bucks in their pocket.

    In the situation we are in onoy the government has the ability to provide the jolt that is needed.

    I always find it amusing hear folks talking about the good old free market Bush days...as if they ever existed...

  • Report this Comment On February 21, 2009, at 8:27 AM, AlyceFan wrote:

    kstoltz, you summarized this very well. Alyce's argument almost seems libertarian in nature, implying that eveyone in mortgage trouble is there solely through their own incompetence - people got themselves in trouble and so should get themselves out of it - no government help needed.

    It is of course easy to hightlight an irresponsible homeowner or two, flash their story all over the TV and newspapers, and make the assumption that they are an accurate representation of all in danger of default. Another instance of the ability to distort the truth of a story by overpublicizing the exceptions.

    This is of course dangerously misleading. In fact homeowners - responsible homeowners -who are the target of Obama's mortgage plan - have been severely affected by events wholly out of their control. A deepening recession dropping home values making refinancing nearly impossible, loss of their job with little prospect of finding new employment in an economy where workers are being let go at an alarming rate. Rising health care costs, which become draconian once you lose your job, unscupulious lenders and banks...etc etc etc.

    Simply letting these people go into foreclosure in subservience to some pie in the sky idealogical objection simply accelerates the spiral downward for everyone else.

  • Report this Comment On February 21, 2009, at 8:33 AM, Strnj1 wrote:

    Alycefan,

    When you have to go to the "Daily Kos" for a positive approval rating, you're definitely stretching...

  • Report this Comment On February 21, 2009, at 8:46 AM, AlyceFan wrote:

    Strnj1...Research 2000 is a well respected and generally accurate pollster (would be glad to point you to a published analysis if you are truly interested).

    Rather than make conculsions based on the location of the poll why don't you show me some evidence it is wrong...

    I'm not a huge fan of Kos frankly,I think his analysis is usually shallow and reflects a knee jerk ideology rather than careful study. Some of his front pagers are quite good through. Having said that though I have no reason to doubt the accuracy (or more precisely - the integrity) of the polling there...

    However, here are others you might want to look at

    http://www.pollingreport.com/budget.htm

    http://www.pollingreport.com/obama_ad.htm

    http://www.pollingreport.com/institut2.htm#Democrats

    http://www.pollingreport.com/institut2.htm#Republicans

  • Report this Comment On February 21, 2009, at 8:52 AM, kstoltz wrote:

    Thank you for the comments, Alycefan. You're right, it is easy to highlight the stories of the irresponsible. There's no doubt that it's cathartic. There's also a lot of people out there (yes, I'm looking at you, Rick Santelli) who see this as an opportunity for coffer lining self-promotion and self-aggrandizing. But it's important that in the end, people realize that this catharsis makes for incredibly poor public policy.

  • Report this Comment On February 21, 2009, at 9:10 AM, dhvn1234 wrote:

    My concern is with the new Mortgage Bill to halt foreclosure and to address falling property values.

    It appears there are two scenarios to this program and I fail to see how either of them will work for the people they are intending to help.

    First, as I read the details it appears Fannie Mae and Freddie Mac receive over 70% of the funds available.

    This concerns me as it leaves only 20 billion or so to pay for what the bill was intended for.

    Second, as I understand provision number one which is designed to help homeowners that bought a house and are making payments and had the preferred 20% down payment and normal mortgage guideline requirements the numbers I see do not make sense.

    Example:

    Customer buys a $200000 home.

    Puts a 20% down payment. $40000

    Finances $160000 plus loan fees etc..at 7 % average rate in late 2007.

    18 months down the road (today) finds themselves in a position due to declining property values with a house worth $140000 (these are figures from the example they gave, not mine)

    Proposed solution: the government says we will refinance into a current rate mortgage which in their example is 5.1% saving the homeowner approx. $200 per month which of course they can use to buy things and stimulate oour economy.

    Government proposes they will loan up to 105% of homes value ($140000 according to their scenario)

    $147000 is amount they will finance.

    Does anyone see a problem here?

    Customer owes $160000, banks will loan $147000.

    Customer needs $13000 plus any loan and mortgage fees etc.. to qualify. Do we think said consumer is going to come up with $13000 plus to save $200 on his monthly payment?

    Second problem with scenario:

    Customer is borrowing 105% of homes value.

    They are going to need PMI Insurance which is going to be approx. $150 per monoth.

    So we expect this person to spend over $13000 to lower his monthly payment $50 per month.

    It appears the only one that benefits from this plan is Fannie Mae and Freddie Mac.

    Am I missing something here?

  • Report this Comment On February 21, 2009, at 10:37 AM, Corporality wrote:

    If you are an American veteran of an American war, even one I disagreed with, than as an American I owe you support out of my taxes. Anyone have a problem with that?

    So if I make an American investment with American money and the market goes down and my investment ends up costing me money instead of making it, then American taxpayers should pick up the tab and bail me out. Hang on this makes sense, just wait for it…

    Especially since my investment was an American house, did I mention if you look at it in a certain angle and a certain light you might agree that it was PINK? If you don’t believe this makes perfect sense then you must be a stinking (color?) Libertarian, what color are they anyway? Certainly not an American color, right?

  • Report this Comment On February 21, 2009, at 11:22 AM, ShortyShorty wrote:

    Alyce, your essay's thesis that "...those who saved money, paid their mortgages regularly and on time, or rented and waited for prices to fall to the point where they could buy...are screwed.... [and] get no justice" is fundamentally missing a key point: nobody really needs to own a house.

    The article does not get to the heart of the mugging, because the actual crime begins with all the tax breaks given for home ownership since the government starting charging taxes for the military to clear Indians out of land slated for development by Whites.

    We don't need to go back that far though. You will see the connection at the end of THIS essay: Tax breaks for home ownership have contributed to the very inception of the mortgage crisis, by feeding a mania for "free" on others' backs.

    Now, what is the best argument for bailing out homeowners? I think it was made yesterday, when the new White House Press Secretary, Robert Gibbs, made the argument that we should help homeowners because... well, they are homeowners. This is a purely emotional argument the entire debate is centered upon. But the choice whether to help out homeowners should be taken as optional to individuals, not forced on everyone. I mean, if I want to help a poor starving child in Bangladesh, that is my option, not the government's to force me to do so. Americans should not be forced to suck it up for other's foolish mistakes, which exactly what buying a home in an obvious bubble is. At the very least, anyone who took out a home loan in the past ten or so years since the bubble took shape should be disqualified from any kind of government assistance.

    Where the government gets off track is trying to appease a political base by catering to desires, and not basic human needs. And for all those people who own, and especially those of you with large suburban spaces to park yourselves at night, this is for you: there is no catharsis until matters are either cleared, and they are not being cleared, and will not until either 1) the wrongs are righted or 2) the matter is forgotten. In the case of the first the extent and nature of the wrongs being committed will extend the case of second which will not be forgotten quickly. The bitterness of the home owner bailout will persist long after most of these homes have fallen to the bulldozer or to time.

    Lots of people have posted saying they are responsible citizens who save and are "waiting for prices to fall" before they purchase a home and are wronged. But what about the stupidity of home ownership itself, and not just the Fed's keeping interest rates down and the fact of the real estate crisis and all its various players. What about the fact of other tax breaks for home ownership that enables such widespread mass stupidity of home ownership as ownership? Because let's face it, home ownership is purely an emotional addiction and not something the government should be involved in at all. We know if the government gets involved that there will be a price to pay later on line, don't we? So, let's keep the government out of the home business all together.

    Besides, in this era of global warming, where homes are energy sinks, shouldn't we start rewarding--if we want to be morally responsible that is--people who don't own homes? There are many posters who claim to be renters "waiting for prices to fall, but why cater to their needs? And what about those people who don't even want a home at all? Like retired people, like students, like those who don't want or never could afford one? What about those who simply don't want the burden of caring for a home? Those who prefer to spend their money on other things, like feeding the poor? Why should they be forced into the business of subsidizing home ownership?

    This whole emphasis on the somehow inherent good of home ownership is just beyond me and should be recognized as foolish obsession with property. Why, after all, does a person need to have a home to be "whole?" Home ownership is purely ideological, and even entirely unnecessary. Much of it is based on a fear of homelessness, or lack of wealth displayed for social status reasons, but we do not need to discuss the psychosocial causes of our Foolishness to establish some sort of fundamental truth about all this.

    For those of you who truly believe in freedom to choose, and to be independent, the only correct answer to the repeated requests of the government to help home owners is to RESIST! People don't NEED house ownership, the government is stepping way beyond itself to save those assets, it was not why the president was elected, and you don't have to refer to "others" who are more prudent in their timing to state your case. Let the market "handle" those folks who made mistakes, and where they are not, their own consciences. They will have the burden either of bankruptcy which is short lived, but the entire country does not need to have rebellion over being forced into the home buying and property ownership industry, because then we are enslaved to backwards and wrongful ideologies of government-enforced ownership.

  • Report this Comment On February 21, 2009, at 1:33 PM, BSHumphreyII wrote:

    ShortyShorty,

    I agree with you inasmuch that the government shouldn't be using the tax code to engage in ANY sort of social engineering. I also agree that homeownership is a desire and a privilege, not a need or a right.

    However, I detect in your comment a hostility to homeownership in general, as though owning one's own home is some sort of social evil in and of itself. Someone has to own the roof over one's head, whether that is the resident or a landlord. I certainly don't see how the latter frees up any more money to be spent "feeding the poor" than the former. I also certainly fail to see how land ownership concentrated in the hands of a few is in any way socially or morally more desirable than widespread homeownership.

  • Report this Comment On February 21, 2009, at 2:03 PM, trac1964 wrote:

    OK, so now Obama press secretary explains that the mortgage "bailout" is not really baling out anyone since they will be required to "keep paying mortgage payments". Fine. Is there any reason that by accepting the deal Fed could require that they pay back the difference between their old and new mortgage payments if and when they resell the house in more normalized future markets? This amount could be amortorized and no penalty for early payments. Say?

  • Report this Comment On February 22, 2009, at 2:57 PM, parkallee wrote:

    Dear Mr President,

    Please consider to attach the following stipulation as a condition for any family receiving a government bail out for their inflated mortgages:

    Each recipient family has to donate one family member to devote one weekend day, every weekend for the entire duration of the loan, to a community type service activity, such as taking care of old people, handicapped people, sick or young people, taking care of animal shelters, maintain roads, city parks, or any other activity that benefits the common good in exchange for receiving taxpayers money.

    My family has spend the past 10 years fleeing the expanding housing bubble in California, searching for a way to find affordable housing. We have spend thousands of dollars of our savings on making numerous trips to the north, searching for an affordable property. We have invested all of our life savings into buying a piece of bare land, money which was earmarked to have been invested for our retirement needs. We have spend years in underpaid jobs in an economically depressed area, enduring abuse in a call center, and cleaning toilets, so that we would have the necessary 3 year employment history to show for to be eligible for a building loan. We have lived 5 years in moldy trailers, suffering great harm to our health, to save money, while working on the construction of our affordable house . After many costly detours we ending up buying a manufactured house, with no trimmings, (no garage, no hard wood floors, just covering the most basic needs) so that our mortgage payment would be below 30% of our income, so that we would be able to pay for our mortgage in good and in bad times.

    During the past 10 years I have witnessed other people build Eco- mansions, complete with solar panels, hard wood floors, wrap around porches, all on a minimum wage job income, with the reasoning that 'with our lifestyle, we will never be able to afford these things later, so we might as well get them now'. I know of someone who bought a 1.2 million dollar property with a household income of less than 30.000/ per year through a fixed arm rate mortgage. I have witnessed several houses being build entirely on high interest credit cards, because the builder was denied a construction loan. These are just a few of the mind-boggling, outrageously insane housing financing methods employed by fellow American citizens I have encountered.

    We cannot subsidize this type of financial dementia with the tax monies extracted from hard working citizens who have lived within their means their entire lives and have always paid for their purchases with actual cash that they have earned with legal activities, without requesting debt repayment from the bail-out recipients.

    Homeowners receiving a government bail-outs for their mortgages must repay society for their debt by volunteering their time to benefit the common good for the entire duration of the loan.

    Thank you for your consideration, Mr. President.

    Blessings to you and your family.

  • Report this Comment On February 22, 2009, at 6:01 PM, monkeyWithCharts wrote:

    I agree with ShortyShorty and AlyceFan.

    As Shorty said, the article "feels libertarian in nature." The implied proposal is to use the free market as a cure-all. This article is yet another political editorial citing "moral hazard" to justify a sit-on-our-hands approach to weathering the economic downturn. Let's review some other cognitive/sociological phenomenon that Alyce may be guilty of:

    1) people would self-destruct rather than participate in a system of unfairness.

    http://www.newyorker.com/talk/financial/2007/11/19/071119ta_...

    2) there's a predisposition towards less complex, more comprehensible solutions (eg "free market is understandable and simple, therefore perfect")

    http://en.wikipedia.org/wiki/Ambiguity_effect

    The administration is trying to employ Keynesian theory to stimulate the economy. Keynesian theory was developed because classical economic theory's explanation for the massively high unemployment during the depression is "wages too high in the labor market, therefore reduce quantity of labor." This explanation obviously misses the point of macroeconomic stability. The evidence strongly suggests that Keynesian theory succeeded. And yes, only having been deployed once on this scale, Keynesian theory is still in the prototyping phase.

    I suppose I'm responding to this article because I wish we were debating the next steps instead of step one: Keynesian vs Classic. For instance, how do we best deploy our money? How do we decouple toxic asset from he rest of the economy? How do we minimize moral hazard? (I thought parkalee made an effort here.) How much can we afford? ("zero" is not the right answer.)

  • Report this Comment On February 23, 2009, at 8:00 AM, whereaminow wrote:

    Alyce,

    Great article. You know I'd love to jump in here and point out how American markets are not free, that Classical Economics predicted rather than caused the Great Depression, and that the market distortion was caused by the Fed's endless supply of money and shown very clearly by the Austrian Theory of the Business Cycle....

    but I'm on vacation in Spain right now enjoying my lack of participation in y'alls recession. Ah, if only everyone were a Libertarian, they'd be so much happier...

    taxes are for suckers.

    David in Spain via Qatar

  • Report this Comment On February 23, 2009, at 1:35 PM, chali2na wrote:

    Thanks democrats! You got us into this when you took over Congress and looked the other way. You have further screwed us with senseless plan which helps no one but them and their interests. Democrats do not have brains, that's why the need $$$ and an infinite amount of employees in order to do any job. How many democrats does it take to screw up an economy? No one know because the # of government officials has started rising by the minute. Creating jobs the lazy people don't even want, and cannot and/or will not do is not the answer. It's just another way to do nothing and live off the gov't (i.e. welfare). Where is the bipartisanship Mr. Obama? Republicans have no choice to the vote against anything you do because though you talk a big game, you are now in the system and are now officially a Lefty. No matter how bad you'd like to be moderate (as we'd all hoped you'd be) There is nothing you can do about it because the political claws are tearing into you. Ron Paul in 2008....please!

  • Report this Comment On February 27, 2009, at 12:06 AM, jastds123 wrote:

    One thing I haven't seen discussed is the massive amount of debt hanging around the neck of most people; whether it's buying more house than they can afford via imaginative mortgages or living beyond their means via high-interest-rate credit card debt, the albatross is there and causing a huge drag on personal and national economies. At some point we bought into (pun intended) the idea that debt was good, because it allowed us to have more sooner, to grow our businesses faster, to create more wealth, etc. That was and is false. Debt ultimately inflates the cost of everything associated with it and results in being able to afford less, not more. The only way to create wealth is to live below your means, get out and stay out of debt, and save, not spend yourself (and the nation) into oblivion. Living on debt, whether personal or national, is like trying to get more out of a steam engine by sitting on the safety valve---it's gonna blow up! Ultimately, that is what this fantastically, grossly bloated "stimulus" is: tying down the safety valve. And the entire national economy is gonna blow.

  • Report this Comment On February 27, 2009, at 4:40 PM, DreamersRock wrote:

    So, if your country owed China more than the GDP and there was a great possibility that the dollar could fail. What would you do? For quite a while now I was thinking that the AMERO was a myth.

    But, all this financial vodoo is just bad majic.

    In a real world. Things that go up eventually go down. No such thing as too big to fail. What we have here is a bunch of folks in charge which seem to not have the guts to stand up and call foul on funding useless wars while we have failing healthcare systems, failing schools, and an out of control banking system. News flash, this is all the lenders and realestate peoples fault. Some how in spite of getting caught, there is no teeth in regulation. Slap their hands and a sweet no, no, bad dog. Then let them go pee on the rug again.

    Ethic is a four letter word here.

    Nobody knows were the power is. Or how to effectivly use it. Might just as well shut down all the law making activities. Can't keep the ones in place. Why then is it nessisary to make more. The defination of insanity is continuing to do the same thing over and over expecting different results.

    So, I would ask this. Exactly how many ways can rice be prepared? And are there 462 characters in Cantonese or 465? Becoming familiar to those who own us might be of a benifit to all.

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