March 26, 2010

"It's Like Déjà Vu All Over Again!"

Stop me if you've heard this one before:

The Obama administration plans to overhaul how it is tackling the foreclosure crisis, in part by requiring lenders to temporarily slash or eliminate monthly mortgage payments for many borrowers who are unemployed, senior officials said Thursday.

Banks and other lenders would have to reduce the payments to no more than 31 percent of a borrower's income, which would typically be the amount of unemployment insurance, for three to six months. In some cases, administration officials said, a lender could allow a borrower to skip payments altogether.

So a year and a half into the greatest financial and real-estate collapse in decades, and the Barack H. Obama administration still hasn't learned its lesson: You can control the price but not the cost of goods, services -- or money itself.

I envison Greg from the Brady Bunch, perpetually trapped in the throes of "teen logic." It's not a picture to inspire confidence.

Oh, but this time, everything is totally different:

The new push, which the White House is scheduled to announce Friday, takes direct aim at the major cause of the current wave of foreclosures: the spike in unemployment. While the initial mortgage crisis that erupted three years ago resulted from millions of risky home loans that went bad, more-recent defaults reflect the country's economic downturn and the inability of jobless borrowers to keep paying.

Suppose someone has a perfectly sensible mortgage -- fixed or ARM shouldn't make much difference, since interest rates haven't gone up -- and was responsible enough to obtain mortgage insurance; suppose something terrible happens, and he can't pay his mortgage... and then the mortgage insurer goes belly-up, to boot.

I don't believe that has happened, at least not on a large scale; the closest analogy is American International Group (AIG) -- and even AIG didn't go bankrupt; if you'll recall, the Bush and Obama administrations gave the insurer $182.5 billion in loan guarantees in exchange for 80% of its stock.

But suppose this "unfortunate series of events" occurred, through no fault of the borrowers but due entirely to government meddling in the mortgage market. Under that scenario, I can see those folks directly impacted getting some mortgage relief from the feds.

But what about freeloaders who obtain (by hook or by congressional crook) mortgages they are unqualified to receive, predictably too large to pay, perhaps with a huge balloon payment (like Octomom's dad), certainly with no insurance. In the fullness of time, the inevitable inevits, they default on their loans, and they have no money to make it right. What then?

Under our capitalist system, when a borrower makes stupid decisions and winds up underwater, we should let him sink. At least as far as allowing the bank which lent the money to foreclose on the house and sell it for what it can get (generally taking a bath itself, as well it should!) -- then to sue the borrower for the remainder, which the stupid bank likely won't get.

It's not as if we'll wind up with millions starving on the streets; our bankruptcy laws are pretty lenient... probably overly so. (I don't believe we've given adequate consideration to indentured servitude.) But the price of liberty is that each of us has the "right" to fail, and in failing, to learn from our mistakes and serve as an example "pour l'encouragement des autres." That's the capitalist way.

Heartless conservatives push the unenlightened idea that rank stupidity and extreme bad judgment carry harsh consequences, demanding contrition, restitution, and penance before the law and society can grant fiscal absolution. Finally, regressive classical economics suggests that when government tries to obviate or short-circuit that natural economic process, chaos and counterincentives ensue, leading to an economic death-spiral for the whole nation, or even the global financial markets. Obamunism, meet Greece.

Well all I can say is -- thank goodness our beloved president has cast aside that running-dog, imperialist thuggery upon which the country was founded! Who needs Capitalism when you've got Obamunism? The essence of the latter is simple: Vote for us, and we'll give you free money, as much as you want!

• Borrowed more than you can pay off? No problemo; the president will simply order your creditors to wipe away part or all of the principal. Problem solved.
• Can't borrow at all, because you have insufficient (or no) income, bad credit, and a history of defaulting on loans? The One will order banks to lend you the money anyway. At virtual gunpoint.
• Hallelujah, you're a bum? Easy as falling off a bicycle: Uncle Barack will simply extend you another 26 weeks of unemployment "compensation."

Market, schmarket, we haven't time to wait for the ectoplasmic "invisible hand" to guide buyers to sellers; the government will tell you what to buy and how much to pay. As Brother Benito said, no time for talk, no time to think -- we need action, action, action! Impatience is the new creed of the masses: We want everything -- not now, yesterday.

Subjects suffering the malady of Americanism have a cockamamie fantasy that if a borrower makes a terrible mistake, buys too much house with an unpayable mortgage, and can't find another lender to extract him from the tar pit, then he should suffer the consequences.

But that was before the Dear Leader came along and invented the New Obamunist Man, he who scorns fiscal consequences and economic law as relics of a bygone, transitional antiquity. The authors of the progressive housing revolution -- from Jimmy Carter, to Bill Clinton, to Sen. Chris Dodd (D-CT, 100%), Rep. Barney Frank (D-MA, 100%), and umpteen directors of Fannie Mae and Freddie Mac -- have long since thoroughly discredited the bourgeois sentiment of monetary sobriety. Since money is naught but fiat anyway, unrelated to any real underlying wealth, why not just buy our way out of debt by super-sizing the Bureau of Printing and Engraving?

And why not "solve" the problem of foreclosure by forbidding it?

(Technically we needn't even print more money... just increase a few figures on a central spreadsheet at the Federal Reserve.)

My Magic 8-Ball foresees a big, fat, Greek shredding of fiscal responsibility, the free market, the national debt, and any other roadblock that stands between the nationalist-socialist Left and a total "income shift," spreading the wealth away from those who made it and redirecting it to those who, in the government's opinion, really deserve it.

Here's a hint: One surefire way to demonstrate to the feds that you really need to spend someone else's money is to join a union -- preferably the SEIU -- and start beating up conservative "Tea Baggers." That seems to have become the de facto federal relief application.

Cross-posted on Hot Air's rogues' gallery...

Hatched by Dafydd on this day, March 26, 2010, at the time of 3:57 PM

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The above hissed in response by: MarkJM at March 26, 2010 4:41 PM

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