Obama Approval Rating Falling!

"But the present state of affairs demonstrates private enterprises are sure as hell not perfect either."

Neither is perfect but as a whole, the government is slower and more cumbersome.

"In the end, where do Americans go for help in the most dire of situations?"

I go to my family, if ever I'm in dire straights and they will come to me if ever they are.

Free enterprise hasn't failed us. We could go on and on about what's happening with the Big 3 automakers but.....Very few will be honest about the housing market fiasco. The majority of folks want to point their fingers at the bankers and say "You did this to us!" but that's only partially correct. The government pushed many of those banks into making loans to people who couldn't afford them. Are they victims? I'd be hard pressed to say "yes" because they enjoyed the profits that they received but if it were me, I would have taken it to the Supreme Court. Would they have made these bad banking decisions without coercion from the government? We really don't know.

Unlike the banks, the people weren't forced into making these deals. Some of them were duped, no doubt about it, but they didn't have the U.S. Government applying any pressure to them at all. Now that same U.S. Government is going to play "savior" to them and we (those of us that are living within our means) get left with the tab and the banks are made to look like the villains. Government was the motivating force behind this mess; they get to be both the instigator and the "rescuer". Obama was one of those attorneys suing the banks into making these bad business decisions. Now he gets to be a hero. Why won't he be an honest hero? Because he's relying on the people's ignorance to further his agenda. He's pitting these poor, hapless consumers against those big, bad, greedy bankers.

 

Quote from Bdev:

"I go to my family, if ever I'm in dire straights and they will come to me if ever they are".

Abner:

While it is nice you and I have strong family ties and support, many do not. Let us be grateful brother.


Abner

 

Except in the infrequent cases where there was clear fraud (i.e. signature forgery) or if the person signing the contract was mentally unable to do so, the responsibility ultimately lies with the person paying the bills every month - the homeowner.

In NY, you are required to have a lawyer represent you at contract and closing. I always questioned the value of it until I saw some of what went into the process. There is a LOT of paperwork, and although I read through everything (including the fine print) it's helpful to have someone who does it a lot tell you if anything's out of the ordinary.

What a lawyer won't do, however, is tell you if you can or cannot afford a house. If people entering into stupid mortgage deals asked the following questions there would NOT likely have been a major problem:

- how much is my monthly payment?
- what is the interest rate?
- is the interest rate fixed or variable?
- if variable, what is the maximum monthly payment possible for the life of the contract?
- what are the fees?
- what are the prepayment penalties or fees payable if I renegotiate the mortgage with you or another company?

Here's the sad reality - people wanted to hop on the rising home value express and get in knowing that they couldn't afford payments if they reset but hoped their home would increase in value so they could sell and repurchase before it happened.

Like any Ponzi scheme, the last ones in got burned.

 

"While it is nice you and I have strong family ties and support, many do not. Let us be grateful brother."

Abner,

You are absolutely right. I thought about those statements hours after I posted. I kind of figured I'd get that kind of response from you. You are a gentleman and a scholar. Never think that I'm venting at you. You seem to be a very gracious person. My venting here is nothing less than therapeutic and if I can get a different perspective that helps me put it all in perspective then that makes it even better for me.

Government does and should play a role in our lives. Many of the rights that we have are because of our government. I never want to give the impression that I think that government is "evil" because I don't. We're best served by our government when it is of, for, and by all of the people - not just the rich or the poor.

Mark2000,

I agree with you. Since we can't undo what has been done, I'd love it if the government insisted that these people get financial counseling as well. Ignorance may be how they got where they are but let's try to keep this from happening again. Some people that I know really felt like they hadn't achieved the American dream because they didn't own a home. They went out and got these "ginormous" loans that I know they'll never be able to pay off and...it's a sad lesson to learn but what angers me is the sense of entitlement that they have concerning this money that is about to be handed out. What's really sad is I get the impression that not everyone that thinks they are going to get this help is going to be eligible for it. I wish he would communicate that better.

 

This is a sad state. I overpaid for my condo because I brought on the upside. All the nice (waterfront/waterview) rental units were being turned into condos and I was afraid I would be stuck renting in a dump. The value dropped on my condo as the market dropped but I purchased what I could afford. I pay a little more in mortgage then I paid in rent. Since the purchase in Oct 2005, my salary has increased (and I am very thankful for that) and I have been sending double payments for the past 2 years.

The point: I purchased when the market was high, still found a fair deal, and only got what I could afford at a fix 6% interest rate. Where is my "government reward" for being smart???

 

Exactly how did the government push the banks into making sub-prime loans?

 

I'm in the same state. Not under water, but probably at water level now after purchasing in mid-2005. I don't expect a handout, nor do I want one, but I also don't want people getting a free handout because their house is worth less and they chose poorly.

My solution is simple - just as the government is taking a position in banks, they should take a position in the homes of people getting a bailout. The Federal government should get security in the home equal to the amount granted the homeowner.

An example:

Home sold for $250,000, with little down and an exotic option ARM.

It's now valued at $200,000 and the homeowner still owes $250,000.

Federal plan agrees to reduce principal to $200,000 so the home is no longer under water and gets them a 30 year fixed mortgage. Government gets a preferred lien on the home to the tune of $50K so if the homeowner ever sells they get their money back first.

This helps to ensure that people getting the grant have the intention to live in the home for a while (at least enough time to pay back the government) and not profit when the market improves. The $50K can be paid back interest free at any time before the home sells, or it can be taken out "off the top" when the house sells.

THIS kind of plan I could live with, as at least over the longer term as the people taking the bailout don't profit.

However, what then happens to the responsible homeowner who lives next door who originally purchased using a 30-year fixed mortgage? Their home, because of comps, is now worth less. Over the long term it won't amount to too much, but it's still distressing.

 

If it prevents a foreclosure or two in your neighborhood then the value of housing in your neighborhood should recover faster so everyone in the neighborhood should benefit to at least some degree.

 

Agreed, but it doesn't make it any more palatable.

Unfortunately, there are more people like this lady around:

http://www.newsday.com/news/local/suffolk/ny-bzprof0212379519mar02,0,2831936.story

How in #%@#% did she ever get approved for a mortgage? How did she ever think she could afford it using 60-70% of her "income" for house payments.

 

Let's see...I pay over 60% of what I have right now (counting what someone else gives me) in a mortgage payment and know it could/will increase in the future (adjustable rate) but I hope I will have a job that will pay me more in the future since I am going to school now so it will all work out....

Sounds like a sound plan These are the people we want to save??

 

"Exactly how did the government push the banks into making sub-prime loans?"

Ted,

The Community Realignment Act:

http://atlasshrugs2000.typepad.com/atlas_shrugs/2008/10/obama-sued-citi.html



This is what Bill Clinton is referring to in the link that I posted previously. I'm not saying that they weren't all unwilling participants but...the flood gates were opened in the 90's. Bush should have closed them when he became aware that this was going to tank the economy but...to blame him fully for this is not accurate.

 

My understanding is that the rest of the story is that these subprime loans were then bundled together into blocks of 1000's and used as partial backing for liquid securities that the banks used as short term trading securities to keep the necessary liquidity balance on their books. When the bottom fell out of the subprime mortgage market then these banks were stuck with what had been a very liquid security to what was now something so difficult to value that they couldn't get rid of them. This is what froze the banking market.

There has been criticism that these subprime based securities should have been regulated. This is what Greenspan was referring to when he said that he mistakenly thought that the banks' own self interest should have been enough and that he was in error for thinking that regulation wasn't required.

 

Absolutely, Bill. I remember Greenspan telling Bush in 2002/2003 that he needed to regulate the industry otherwise it would tank the economy. Initially he (Bush) resisted because he said that he wanted to give more people an opportunity to own homes. Then he started sounding the alarm and the Dems fought him, they kept saying nothing is wrong and that the market is fine...essentially, "the sky isn't falling". I think he should have either used the bully pulpit or his Republican majority to nip it in the bud before 2006...I don't understand why he didn't. This whole mess could have been lessened if not avoided. I know, hindsight is 20/20.....

I think that what the CRA was trying to accomplish was very noble, in all sincerity. Government intervention started it(initially Carter and then Clinton)...the lack of government intervention let it go on (Bush)...now more government intervention and add in condemnation will make it better? I really hope this works. This was a huge, failed social experiment.

 

Hmm. I guess it's a question of common sense. Why is it that I at some point became aware that one's mortgage payments should be no more than 25% of one's monthly income? Or that one could normally expect about $1,000 a month in mortgage payments for every $100,000 of house? Or that this would mean that one should make about $4,000 a month (~ $48,000 a year or $24 an hour) before even considering buying even a basic starter home? Why doesn't everybody know this?

 

I would say then that the government gave the banks the opportunity to get themselves in trouble but no-one forced them. Each bank individually chose whether to get into the sub-prime lending business. Any bank individually could have chosen to stay with the more traditional loans (and some did) while others, drawn by the allure of being able to charge higher interest rates, got into sub-prime lending. Any good businessperson should know the equation of higher risk equals higher return and so the banks should have weighed the risk of having higher than usual defaults (and hence foreclosures) before deciding to get into the sub-prime lending game. The banks were not victims.

 

The only thing I will add is that there are government auditers that come in every year to companies that lend money for home mortgages to ensure that CRA regulations are being met and if they are not, those companies can be fined pretty heavily. In that sense, the government was forcing them to make riskier loans than they would have preferred. Needless to say, I don't think the CRA auditers are going to be very active this year...

 

"I would say then that the government gave the banks the opportunity to get themselves in trouble but no-one forced them. Each bank individually chose whether to get into the sub-prime lending business. Any bank individually could have chosen to stay with the more traditional loans (and some did) while others, drawn by the allure of being able to charge higher interest rates, got into sub-prime lending. Any good businessperson should know the equation of higher risk equals higher return and so the banks should have weighed the risk of having higher than usual defaults (and hence foreclosures) before deciding to get into the sub-prime lending game. The banks were not victims."


I think that if a bank declines a client and then is picketed by community organizers or sued by Attorneys like Obama that constitutes extreme coercion, if not "force". It happened. No amount of spin is going make the government less culpable. There is plenty of blame to go around and I don't just blame the government. I'm saying that ramping up the CRA is what laid the foundation for this mess.

Have you noticed the ACORN folks recently breaking into homes where people have been evicted from and moving them back in? This stuff is happening.

 

Ted: "I would say then that the government gave the banks the opportunity to get themselves in trouble but no-one forced them. Each bank individually chose whether to get into the sub-prime lending business. Any bank individually could have chosen to stay with the more traditional loans (and some did) while others, drawn by the allure of being able to charge higher interest rates, got into sub-prime lending. Any good businessperson should know the equation of higher risk equals higher return and so the banks should have weighed the risk of having higher than usual defaults (and hence foreclosures) before deciding to get into the sub-prime lending game. The banks were not victims."

BDev: "I think that if a bank declines a client and then is picketed by community organizers or sued by Attorneys like Obama that constitutes extreme coercion, if not "force". It happened. No amount of spin is going make the government less culpable. There is plenty of blame to go around and I don't just blame the government. I'm saying that ramping up the CRA is what laid the foundation for this mess.

Have you noticed the ACORN folks recently breaking into homes where people have been evicted from and moving them back in? This stuff is happening."

Ted: The banks made their own damn decisions to engage in sub-prime lending or not. Besides, "community organizers" and "attorneys" are not the government. Get over yourself!

 

Ted,

You're acting like this is hard for you to grasp. They did what they did based on the CRA. Obama sued one of the banks for violating the CRA and won. I never said they were the government. Heck, I never even implied it. It was the governments rules that they used to achieve their goal. Surely you get that. Or have you been sipping the "O"-flavored Kool-Aid? It's all out there on the internet...it's really not hard to find:

"The expansion in risky mortgages to underqualified borrowers was encouraged by the federal government. The growth of "creative" nonprime lending followed Congress's strengthening of the Community Reinvestment Act"


http://www.cato.org/pub_display.php?pub_id=9788


"Community Reinvestment Act (CRA) under which the Fed and other financial regulators have pressured/extorted banks into making more loans to less-than-creditworthy borrowers than they would normally be willing to risk."

http://mises.org/story/2963

For you to tell me to get over myself implies that I'm giving the impression that I think highly of myself. I believe you to be the only egotistical person in this discussion. Do you think you can get over yourself? You think too highly of yourself, Ted.

P.S. Most people know that MSM is short for mainstream media. Don't PM me asking me questions anymore. You're too pompous to not know everything. Maybe you're not acting after all.

 

This part is a bit hard to believe.

The banks made their own damn decisions and presumably they either had - or should have had - brains enough to price their loans according to risk.