Government says "NO" to Personal Responsibility - "We will do everything in our power to help those persons who didn't read the fine print"
As you probably know, President Bush spoke this morning on the 'mortgage issues' this country is running into. Then I had the 'pleasure' to hear the HUD secretary speak as I was starting to type on my computer. More on that fine bureaucrat later.
This country has 'lost it'. There are no consequences for making bad decisions anymore. Build in the flood plains and don't buy flood insurance, don't worry, the government (read: taxpayers) will take care of you. Same thing applies now to housing. Don't read the fine print, don't understand what you are signing, didn't get rich with 'no money down' real estate, no problem. We will create even more taxpayer funded bureaucracy by having some bureaucrats write some convoluted mortgage legislation that will dictate who gets help and who doesn't. Like our current tax code (we need the fair tax), this legislation will be poorly worded and have more 'holes' and 'gray areas' than the moon. It will be rushed out to the market and it will feel 'good' for the politicians helping out and obviously for the people that get to keep their homes with OPM (other people's money - IE the taxpayers). How are you going to determine who 'knew' what they were doing, and those who 'didn't'? I'm sure everybody will be 'honest' and the people that 'knew' they couldn't afford their loans will step forward and take their lumps and not try to take advantage of the 'special' government program. Are you kidding me???
In one breath Bush says 'no bailout', but I guess 'bailout' only means 'direct grants to homeowners' as proposed by the likes of Hillary and her other Democratic counterparts. Using legislation and creating special government backed loans (all backed and funded by the taxpayers) to help people refinance apparently is not bailing people out. Reforming the tax code so that when lenders 'write down' the mortgage on properties that have declined in value, that won't be taxed as income anymore.
Quick example: you buy 450k home. You have trouble making payments. You refi or negotiate with lender and the property is now worth 350k. That 100k that the lender 'forgave' is currently taxable as income. But under the proposed change, that would be a free '100k'. I know that taxes are a pain (see FairTax.org) but why should somebody get a 'free' 100k or whatever the amount is, and not have to pay ANYTHING on it. Again, it is another 'reward' for making bad financial decisions.
I'm sorry, but listen to me VERY CLEARLY here: THIS THING IS FAR FROM OVER. THIS IS WAY WORSE THAN JUST 'SUBPRIME' LOANS. NONE OF THESE BANDAID SOLUTIONS ARE GOING TO HELP THIS PROBLEM THAT HAS BEEN CREATED. These politicians and analysts have NO IDEA what went on the past 5-6 years and the sad thing is, they think they averted disaster.
This was evident when the HUD Secretary Alphonso Jackson spoke on CNBC (PLEASE WATCH THIS VIDEO from CNBC). After listenting to this guy, I was NOT impressed one bit with our government. I read Alphonso's biography, I was left wondering why somebody with a financial background isn't the HUD Secretary. He has political science undergrad, masters in education administration, and then he got his law degree at some point. Anyway, PLEASE watch the video above. Here are few choice quotes I got from the HUD Secretary:
"We will do everything in our power to help those persons who didn't read the fine print"
"We have been discussing this for months, we believe we caught this in time"
"We got it and corrected it in time, if this had gone into 2007/2008 we would have a more extensive problem." (we ARE in 2007 there Mr. Secretary!!)
"I still believe we are going to have a soft landing".
Maybe I don't know how to read a calendar, but I am pretty darn sure that we are about 2/3 of the way through 2007!!! So, yeah, I would say we already have an extensive problem and governement is doing what governement does best...REACTING late with a legislative, burearucratic, tax-payer funded solution.
ARGH...as I'm typing this, it just flashed up that congress is proposing a 300 million dollar bailout.
I WILL BE posting more on this topic. These 'experts' and politicians are saying so many incorrect things, I don't know where to start right now. Either way, just think about this: what happens when the alt-a, a-paper, and OPTION ARM loans start to default? It is coming, it will just be later on in 2008-2009. Mark my words...this mess is way worse than just 'subprime'.
Sorry, no bailout for Wall Street, or homeowners. No bureaucratic legislation either. The FREE MARKET has, and will fix this problem. If Wall Street can't make money from the loans, they won't make them!! Once this thing runs it's course, people WILL be more responsible next time around. PAIN has a funny way of helping people learn from their mistakes, but if there is no PAIN, there is no lesson. Wall Street made billions for a few years there, now they need to 'give it back' so to speak. AGAIN, NO BAILOUT FOR HOMEOWNERS, OR WALL STREET!
Have a nice LABOR DAY weekend. Something to think about: how many people that are having trouble with their mortgages will be working on Monday to help pay the bills versus just taking the day off?? I'm sure the 'bailout' talk is really motivating people to work hard and make their mortgage payments.
Stay tuned...it is going to be a bumpy road for the next few YEARS!