President's Homeowner Affordability and Stability Plan

[mheslep]

As McCain might have called it, one 'fundamental' in the economy of this country is that ~90% of the mortgage holders continue to pay their mortgage on time. A hard question to be put to the HASP is what will it do to the mindset of those 90%?

 

[mheslep]

... modern western governments today are actually quite socialistic and generally moving even further to the left. The US is actually one of the furthest to the right. ...

That's true about the large EU states, but as I've pointed out before it is somewhat of a misconception in this country that all of the other modern Western governments are far left or even to the left of the US. All of the Baltic states have flat taxes rates. Ireland has a ~15% business tax (compared to our 35%). Several EU countries have moved away from their once government only health care systems for increasingly private alternatives such as in the Netherlands and Canada. Chile has a mostly private social security system.

 

[TheStatutoryApe]

If that's the concern then at least let us see a plan addressing just the predator loans. For fraudulent loans seize lender assets, or otherwise seek redress from those lenders. Then use the proceeds to help those that had mortgages w/ those lenders, directly. The present plan is closer to blank check.

the problem here is that the loan companies were not preying upon the home owners. no mortgage company is going to be able to make money by signing off on loans to people who are unlikely to be able to pay them off. they were preying upon other financial institutions. they signed up anyone they could(and lied so they could sign up more) and then sold the bad loans to other banks. they make money and the other banks suffer when the defaults occur. now you might want to still go after them anyway but when what they were doing became common knowledge in the industry no one wanted to buy their loans anymore and the vast majority of the companies went belly up. they don't exist any more so you can't get anything from them. and even if you could they would be bankrupt and cleaned out long before enough money could be found to fix the problem.

 

[Phrak]

Where were youall when Nick Guarino, Wall Street Underground, was telling this story as past history in 2001? Any talk of a 1930's style recession--or whatever the talking heads in the ABC's are calling it, was met with blank looks as late as 2007. I got zero traction in these forums in 2008.

The federal funds rate stands at .25%. Twentyfive more points and there's no where left to go. This is the corporate bailout that has been ongoing for nearly a full decade, has debased the dollar bigtime, induced millions to invest in cheap, Chinese imitation consumer goods, and has evolved to include propping up the housing market, and no one is complaining about this trillion dollar giveaway.

And, by the way, this also induced the housing bubble, the current topic of discussion.

On the plus side of this equation we are graced with the internet, cell phones, and Chinese knockoffs that are falling apart.

 

[WhoWee]

It's not clear to me that mortgage rescue package will stimulate the economy, unless the intent is to ensure a flow of money to the lenders, who then have to turn around and 'lend' or invest in the economy.

Perhaps it will keep the mortgage foreclosure crisis from getting worse, i.e. it will by like treading water, but treading water is not the same as being rescued. If those who can't make payment on their mortgage are given assistance that makes it possible to pay their mortgage, it would seem they still do not have much left to make other purchases. So the economic demand is still down.

All of the plans put forward should have clear goals...this one is as vague as save or create (insert latest # of) jobs...otherwise it looks/feels like they are shooting from the hip...and risking the largest sums in history.

 

[Phrak]

An economy is stimulated by labor that increases the value of infrastructure.

An economy is hampered by:

-Depletion of resources to pay misdirected labor to build worthless infrastructure. (The original cause of all this grief.)

-Redirection of resources that deplete infrastucture or create lesser valued infrastructure.

-Disassembly of an infrastructure to components that add lesser value. (The justification for the last 8 years of corporate welfare to prevent it.)

-Just about everything else.

Only sweat and blood rebuilds an economy. Everything else, such as a fradulent stimulus package, is about making someone else sweat and bleed for it.

 

[WhoWee]

The primary "RESOURCE" being depleted is the US credit line...there IS a limit.

 

[Phrak]

Liquidation.

Without finding an online definition of liquidation, or liquidationism, this is my own definition: "Let failing investments fail, let failing institutions go bankrupt, and let those who can't pay mortgages undergo foreclosure."


Who do you want to prop-up and who would you let liquidate?

In addition, who is going to pay for propping up whom?


And more, does liquidation of category X--in this case recent home per purchasers--harm the overall economies of We-The-People or help us?

Those who say it helps will say it helps in the long term, where short term patches are more costly, and delay economic recovery.

Those who disfavour a particular liquidation would argue that liquidation causes more liquidation in other economic sectors, a domino effect--and delay of economic recovery.

But most arguments are motivated by self interest. If those who didn't know they were accountable for this mess found out, most would conveniently discover a new god.


Keynes was against liquidation. On a web sight in his honor,

http://econ161.berkeley.edu/Economists/keynes.html" ,

Keynes criticizes Treasury Secretary (Harding through Hoover) Andrew Mellon, who stood in favor of liquidation.

Mellon: "[T]he government must keep its hands off and let the slump liquidate itself."

Keynes: "Mr. Mellon had only one formula: "Liquidate labor, liquidate stocks, liquidate the farms, liquidate real estate." He insisted that, when the people get an inflation brainstorm, the only way to get it out of their blood is to let it collapse. He held that even a panic was not altogether a bad thing. He said: "It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people"...

I quote this to round-out the meaning of liquidation.

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mheslep, In case you were wondering why I hadn't responded... I can argue that recent home purchasers are getting unfairly screwed, but I can't argue that renters who pay taxes are getting unfairly screwed by paying for them. That's not right either.

 

[WhoWee]

Are you suggesting a very large expansion of Section 8...or is that too radical?

 

[Astronuc]

Some insight into Home Affordability and Stability.

Elizabeth Warren: Foreclosures Threaten Economy
http://www.npr.org/templates/story/story.php?storyId=101611260

Fresh Air from WHYY, March 9, 2009 · According to a report issued Mar. 6, 2009 by the Congressional Oversight Panel charged with monitoring the use of bailout funds, the rate of home foreclosure is now three times its historic rate — "so large that it threatens the entire economy."

Panel chairwoman Elizabeth Warren joins Fresh Air to discuss the foreclosure problem — and what can be done about it.

. . . .

Warren discusses what the plan covers and what it doesn't.

It looks like bankruptcy is the solution to negative equity, but that doesn't apply to primary resisdence. This will require a change in bankruptcy laws (one is pending in Congress). But there are limitations/restrictions. This however could mean banks take more losses, i.e. some banks would be forced 'underwater'.

Bottom line - we can't pretend anymore that the banks' assets are more than they actually are.

http://cop.senate.gov/documents/cop-030609-report.pdf