This past week, I watched the most recent presidential debate and the one that occurred before that (the one from 10/7). I've realized there are two things that really anger me about the way presidential campaigns and debates work. One, a common gripe, is that the candidates never answer the question. In the past, I've felt like they've cleverly avoided the question. I don't know if its me becoming more cynical or if the candidates have just degenerated, but I feel like the ignore the question altogether and continue talking about what they were talking about during the last question. It's like they're giving a speech that occasionally gets interrupted by the other candidate and the moderator. That's not a debate!
The second thing I hate is when the candidates invoke their own or their opponent's voting record in a legislature (state or federal). Quite frankly, I think its dirty. Every bill is a complex beast. Just because you vote for something doesn't mean you support every aspect of the bill, just that on the net it is good. Similarly, just because you vote against a bill doesn't mean its bad. Once again, you feel on the net its bad. The situation is more tricky for bills that will definitely succeed or fail. In these cases, you may vote for or against just to make a point! The fact of the matter is that both candidates realize this, but selectively choose to ignore it. For example, McCain is big fan of talking about pork and how it gets introduced into legislation at the last second. Couldn't this be a good reason for voting against an otherwise good bill? Sure it can be. So just because someone voted against something doesn't make them evil. Similarly, maybe its worth letting the pork through so that other critical measures get enacted. Does that mean you're pro pork. Obviously not. This case in particular was supposed to be eliminated by the line-item veto. However, that was judged (probably correctly so) to be unconstitutional by putting legislative ability into the hands of the executive (in particular the president).
While I'm talking about the election, one more thing I'd like to mention. Why when talking about the economy do we vilify Wall Street and mourn Main Street? There is no doubt in my mind that excess, greed, and poor judgment on Wall Street are largely to blame for the current economic mess. However, on every bad loan that was given, there were (at least) two parties involved. Those giving the loans and those taking it. If an individual or family accepted an obligation they knew they couldn't meet, they're part of the problem! And, the last I checked, we, as a nation, do not accept ignorance as an excuse. If someone making a large investment (as buying a house is) does not do their due diligence to understand not only how much their mortgage will cost next month, but how much it'll cost 60 months from now, well shame on them. If they understood it, and took a risk (for example on home values or interest rates) and those things did not work out in their favor, we shouldn't feel sorry for them. They rolled the dice and lost. That's what risk is about. We don't feel sorry for the person who loses money on the blackjack table, so why should we feel bad for those that lost it in real estate gambling (unless of course, they can convince us that they're addicted to the real estate market and need help).
I do feel bad for any home owner that is in trouble now because an unscrupulous loan agent lied to them in the past. These lies can come in many forms, whether explicit or lies of omission. However, there is certainly a fine line here. If the consumer doesn't ask the right questions, they're never going to hear the right answers. You can't walk into a bank trying to get a mortgage and worry only about your monthly costs in the short term. There is some responsibility on you to ask the tough questions about the future.
One last point on this subject. Where is the mourning for the person who acted responsibly. You'll find this person in fairly sound financial shape, renting an apartment, wishing he or she could buy a home. Unfortunately, because these people could do math, understood how the interest rates and the various loans worked, and were fiscally responsible, they rejected mortgages they couldn't afford and decided not to buy a home, or settle for something smaller than they really wanted. At the same time, the irresponsible people (both lenders and borrowers) kept making more money available so that home prices were driven up, making it even harder for the responsible folks to buy a home. And now that the market has begun to correct itself, we hear the politicians talking about stabilizing home prices. And how are we going to do that? Well, we'll tax the responsible people a little bit more and force banks and other organizations to renegotiate mortgages to more reasonable values. All this does is let people who shouldn't have been able to buy a home in the first place keep their homes, while responsible people still can't afford a home because the prices are, once again, artificially high. Why not, in these re negotiations, give first dibs to people who acted prudently through the growth of the real estate bubble. Reward them for acting responsibly, instead of using them to support the excess not only of Wall Street, but of Main Street too.
2 comments:
The guy in the apartment is actually better off than a responsible person who bought an overpriced home they could afford. Instead of being bailed out, they'll be paying an upside-down mortgage and not be able to move without defaulting. At least the renter dodged that bullet.
I agree with you. The problem however is that the person who's upside down has every incentive in the world to make it now look like they can't afford their mortgage. From the an article in the NY Times:
“I guess they are forcing me to deliberately stop paying to look worse than I am,” said one borrower with a Countrywide pay-option loan. “Crazy, don’t you think?”
The borrower, who lives in suburban Los Angeles, took nearly $200,000 in cash out of his house and then paid less than the monthly interest due on his new loan.
He now owes about $350,000 on a house that is worth only $150,000. He asked not to be identified for fear he would not get a modification, which could reduce his mortgage to $142,500.
This is exactly the stuff I'm worried about. But in reality, I think some sort of fairness needs to be part of this bailout to reward responsibility.
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