Somebody Stop our Gubmit

[Superman]

They're at it again. When will they ever learn? I hear the gubmit is looking into this real estate loan crisis, and thinking of DOING SOMETHING! I hope they come to their senses and let all those loans default, rather than pander to the weak by teaching financial irresponsibility. We're all doomed if gubmit does not step aside and let these people and businesses suffer.

[Porsche-O-Phile]

Finally you're making sense.

[cairns]

Where's NOTA when you need him?

[legion]

Do these same types of lessons carry over to building your home in a disaster prone area?

How about not saving for retirement and expecting the government to bail you out late in life?

[Dantilla]

The private enterprise system has already put a stop to the silly loan practices that we have seen the last few years.

Now that it is over, the government wants to insure that it doesn't happen again. A nice thought, just a little bit late.

[Superman]

Originally Posted by Dantilla

Now that it is over, the government wants to insure that it doesn't happen again. A nice thought, just a little bit late.

Right on! Where does gubmit come off trying to prevent people from making free decisions? Who in their right mind would prefer that the gubmit do stuff to prevent people from making bad decisions or worse, to prevent companies from taking advantage of those people?

[legion]

Originally Posted by Dantilla

The private enterprise system has already put a stop to the silly loan practices that we have seen the last few years.

Now that it is over, the government wants to insure that it doesn't happen again. A nice thought, just a little bit late.

On the one hand, somewhere between 10 and 40 years from now, someone is going to come along and try to sell these products again. Look out for phrases like "this time is different" and "the market has fundamentally changed". In that respect, it might be good to have some after-the-fact type of laws.

On the other hand, the government tends to over-regulate, and only have an eye on the current situation. I'd hate for these kinds of products to be outlawed if we discover they can serve some useful purpose in the future. Also, almost all government regulation is a case study in the laws of unintended consequences. You never know what kinds of things may be invented to get around the letter of existing laws and regulations.

[legion]

Originally Posted by Superman

Right on! Where does gubmit come off trying to prevent people from making free decisions? Who in their right mind would prefer that the gubmit do stuff to prevent people from making bad decisions or worse, to prevent companies from taking advantage of those people?

So, where's your catch?

How are you going to twist this into an anti-W rant? This is where these posts inevitably lead.

[Rick Lee]

Between 10-40 yrs.? Try about 2-3 yrs. before you see some subprime products reappear. Fannie/Freddie have had a 100% financing program for about 10 yrs. now. They may never take subprime FICO scores, but I bet they dabble in stated income eventually. And they're way slower than the other guys at product development.

Anyway, I don't see how any of the proposals made by Bush or Schumer or any of the pres. candidates would make an iota of difference either in helping those currently losing or who have just lost their houses, or preventing it from happening in the future. Until they ban stupidity and enforce it, people will always sign onto bad deals.

[Superman]

Yeah. Unintended consequences. Another good reason for gubmit to do nothing. That's in addition to the regular reason, which is obvious. The real reason the gubmit should stay out of helping people and protecting people is.....well......because that's just inappropriate. It's not natural for people to be saved from misery. Even when gubmit CAN. People have made bad home financing decisions. Lenders have also. If those lenders go bankrupt, great. If those people become homeless, that's a good thing too. If the financial markets collapse and the economy gets set back a couple of years, then we will ALL learn an important lesson. If gubmit could have prevented all this, it would be a mistake. That would be mamby-pamby socialism. Protecting Americans. What will they try next?

[Rick Lee]

Supe, show me one gov't. proposal with regard to the subprime mess that would prevent it from happening again. Fraud has always existed in real estate and it was not the cause of the subprime implosion. In fact, one could argue that gov't. involvement in mortgages to begin with is what got the subprime ball rolling. Gov't. didn't get involved to help middle-class or rich folks get houses. They got involved to help folks with low cash and low FICO's get houses. They insured loans in order to get private lenders to follow suit. Fannie/Freddie are a little higher up in the food chain, but are still a gov't.-funded secondary market with the US Treasury as their checking account. Private lenders can never compete with that kind of capital. So they get more innovative in their underwriting guidelines in an attempt to get out in front of the monolithic gov't. lending. And they crossed the line with 100% stated loans for 580-600 FICO folks.

[legion]

Originally Posted by Superman

Yeah. Unintended consequences. Another good reason for gubmit to do nothing. That's in addition to the regular reason, which is obvious. The real reason the gubmit should stay out of helping people and protecting people is.....well......because that's just inappropriate. It's not natural for people to be saved from misery. Even when gubmit CAN. People have made bad home financing decisions. Lenders have also. If those lenders go bankrupt, great. If those people become homeless, that's a good thing too. If the financial markets collapse and the economy gets set back a couple of years, then we will ALL learn an important lesson. If gubmit could have prevented all this, it would be a mistake. That would be mamby-pamby socialism. Protecting Americans. What will they try next?

Okay, that's a 90ş twist...where's the final 90ş?

[Superman]

No unexpected turns, Legion. Just taking you guys' ride out for a spin. I do this. In my mind, I take trips "going with" somebody else's thinking. I take it to its logical extreme, to see if it works. Or only works sometimes. Or whatever. Here, I'm imagining that gubmit's purpose does not include protecting Americans and giving them security. I hear that some folks believe that security assurances are counterproductive, only making Americans less inclined to build their own "security systems." Of course, other folks notice that a bit of a safety net also encourages entrepeneurs to take risks, since the penalty for failure isn't actually starvation and hypothermia, but nevermind that. Here, I am taking the gubmit security thing to a bit of a logical extreme. Frankly, by stepping in the government might be able to soften the blow on the economy (millions of defaulted mortgage loans WILL upset the economy substantially), on lenders and on Americans. That might make sense. But......it would be another form of welfare (let's call it "security," since "welfare" usually gets a MUCH narrower definition here). Make people lazy. Save millions, or hundreds of millions, of Americans from the general economic impact of a large failure of a principle industry (real estate).

Rick, you need to continue to read. Home ownership is a HEAVY cornerstone in our economy. Without it, and the mechanisms that brought it about and continue to make it attractive to citizens, our nation would be VERY different. Very. Indeed, I personally believe our economic system would have collapsed by now. Without it, we would be very much further along the path of understanding that there are winners and losers. Lack of it would have resulted in the game of Monopoly moving at a greatly accelerated pace, and somebody would have "won" by now. And of course, they would also have been ousted and the "game" would have started over by now, with new rules. Do you know, Rick, the relationship between home ownership and crime?

[Rick Lee]

Firstly, I don't believe gov't. duty to protect its citizens has anything to do with protecting us from our own bad decisions. It insults my intelligence when a pol. says they care about me. Yeah, they don't want me to smoke, but they want me to pay for their social programs with my cigarette taxes. Uh huh.

Also, the vast majority of subprime mortgages are performing just fine. The vast majority of such homeowners continue to make their payments on time. That might change when ARM's reset, but their income might go up in that time too and some ARM's adjust down. And yes, I fully understand how much of our economy is tied to the housing industry. That doesn't make it any more legitimate for the gov't. to step in and bail out people who bought more than they could afford, since the vast majority of us have houses or rent apartments we can afford and should continue to have to pay for ourselves. The only surefire thing I can think of that will make this subprime crisis happen again is if the gov't. shows people they will never be responsible for their own bad decisions and the rest of us will always bail them out.

[Superman]

I knew I could count on you, Rick.

[skipdup]

Originally Posted by Superman

They're at it again. When will they ever learn? I hear the gubmit is looking into this real estate loan crisis, and thinking of DOING SOMETHING! I hope they come to their senses and let all those loans default, rather than pander to the weak by teaching financial irresponsibility. We're all doomed if gubmit does not step aside and let these people and businesses suffer.

Sometimes learning, and growing, seems like suffering, at the time.

[gr8fl4porsche]

Does anyone here personally know anyone who is defaulting on a mortgage loan?
If I was struggling financially, the first bill I would pay is for the roof over my head. Everything else (except food and water) comes second.

I would guess that there are people defaulting on home loans who are still paying the cable bill over their DSL connection.

If you are dumb enough to buy something that you are not able to pay for, then that something should be taken away from you by the entity that was dumb enough to give you the money in the first place.

There are plenty of rentals available for those who cannot shell out the big bucks for overpriced real estate.

Speaking of bail-out. I cannot seem to make the note payment on my new $9,000 John Deere lawn tractor. It has the cool rear wheel steering. Can someone please take over my payments so I can keep the tractor and send JD some cash so they can also stay afloat?

It is a lot of work mowing my 1/8 acre.

Isn't this a simple problem with a simple solution. The lendors all knew the risks when they wrote the loan.

[onewhippedpuppy]

Whatever happened to learning from your mistakes? Does this mean I'm entitled to reimbursement from the govt, for all the stupid stuff I have done in the past that has cost me money? Sweet!

[Superman]

I wonder if we are assuming that the cost to the taxpayer of a bailout would be greater than the cost to that same taxpayer of a recession. Let's pretend for a moment that a million foreclosures brought the nation's financial markets down a peg or two, and that a million new homes on the market caused a real estate glut and price "correction." Let's further pretend that a subsidy would protect both those markets, and that the subsidy would be less expensive than repairing those markets once they have tanked.

Now what is your answer? Are you willing to spend more of your money just so that bad decision-makers can be taught a more painful and more effective lesson?

[MRM]

Originally Posted by Superman

I wonder if we are assuming that the cost to the taxpayer of a bailout would be greater than the cost to that same taxpayer of a recession. Let's pretend for a moment that a million foreclosures brought the nation's financial markets down a peg or two, and that a million new homes on the market caused a real estate glut and price "correction." Let's further pretend that a subsidy would protect both those markets, and that the subsidy would be less expensive than repairing those markets once they have tanked.

Now what is your answer? Are you willing to spend more of your money just so that bad decision-makers can be taught a more painful and more effective lesson?

Pat, what have you done to Superman and where have you stashed his body?