December 07, 2007
– Comments (4)
Jesse Jackson is the proof.
Don't miss the required reading link from from Seth's last post.
Read the article to which devoish is hyperlinking. REALLY, it is long, but it tells you in detail why the sub-prime mess is only the beginning...
Thanks for your excellent series of articles on the housing meltdown / bailout. As someone who purchased a house within my means, and definitely not in the pricey neighborhoods I favor, I have little sympathy for those who irresponsibly bought too much house and priced me out of the city. That said, I do support the idea of freezing ARM resets at current rates.
Let's say I'm the investor - bagholder of a slice of subprime mortgages. Right now, I'm not concerned about lower interest rate income, I'm scared of massive defaults and permanent loss of capital. I'd want to work with those mortgage holders on a payment plan that preserves my investment and I'd be willing to negotiate a lower rate of return. But, how does the bagholder, 3 degrees of investment separation from a bunch of geographically dispersed homeowners re-negotiate those rates? In comes the government to broker the deal.
Deal re-negotiations happen in business all the time. Companies on brink of chapter 11 gain incredible concessions from their business partners who realize if they don't re-negotiate a deal, they'll lose worse in the courts. The government isn't bailing anyone out, it's facilitating a workable business deal that minimizes the pain for under water homeowners and investor - bagholders...a deal that logistically can't be worked out between the parties themselves.
Appreciate your excellent reporting and analysis!
dcgatlanta, you're not paying attention to what people are proposing. They are not proposing the government broker a deal - that's already happening, if you consider Paulson part of the government more than part of Goldman Sachs. What's being proposed is that the government contribute money from the tax coffers to cover the shortfall between what these mortgages were supposed to yield and what they're going to yield.
"The government" includes responsible taxpayers like me with an 815 FICO score who know that we could have easily bought a home with an ARM, but could never have afforded to make the payment once the rate reset.
Sure, I'd like to own a home. I'd like to live in my own house, take care of my own yard, and build equity for my future. I also want to pay for what I get, and if I can't afford to do it, I won't.
What I don't want to do is to pay for my irresponsible neighbor's unsustainable mortgage with my tax dollar while I am stuck renting. That's what Jackson would have me do. It doesn't seem fair.