Help, I've Borrowed And I Can't Get Up

I was going to put up a different posting for the weekend until I saw the Toledo Blade Editor of June 6th "Mortgage aid that would help" (unfortunately, I am not able to provide a link, as none was available for this editorial). Reading it set me off, and changed my plans. In it, the Blade makes the case for the bipartisan bill currently running through the Senate to place up to 500,000 additional mortgages back into play. The Blade seems to feel that it is all right that the lenders would take losses on these loans (after all, they are big business), in spite of the still largely unstable position of the financial industry. Instead, they agree that these mortgages should become government sponsored loans through Fannie Mae and Freddie Mac, who back many of the less speculative homes loans already. This would mean that these mortgages too would now be guaranteed by the American taxpayer.

I mention these less speculative loans because it appears that many of the troubled mortgages were indeed speculation. We need only to look at the case of Rep. Laura Richardson whose three homes and mortgages in California has recently come to light as a shining example of personal fiscal irresponsibility. She ended up defaulting on one of the mortgages, and is still negotiating on the other two properties with the lender, to whom she has not made a payment in some months. 

Set aside her case though, and we can note that some of these houses were purchased by "house flippers", people who purchase houses in marginal condition with the idea of improving the property over a period of mere weeks and selling them at a profit (you may have even seen some of them on TV). Many more of these homes were purchased by people "gambling" on the continuing growth in housing prices and buying much more home than they needed or could afford to purchase. Now with the economy in peril and housing prices down by an average of over 10%, both of these groups find themselves on the wrong side of a market swing and are finding it difficult to make the payments required or sell the properties that they gambled on.

Now just to prove that I am not the heartless and cruel bastard that I appear to be, I will concede that their are people legitimately caught in a situation in which they did no wrong. Loss of a job, an unexpected reduction of income level, or simply personal circumstance has placed the homes of some people in peril. I can only say that while they have my sympathy, they do not however, have a right to my support. (OK, maybe I am a heartless bastard after all.)

My question here is "What's Next"?

Maybe I recently bought a large SUV? The vehicle wasn't cheap to start with and now gas is getting awfully expensive to feed this beast. As a consequence I am now on the edge of financial disaster. Will the government guarantee my car loan or force the lender or dealer to renegotiate?

Maybe I have recently purchased a new big screen TV, a surround sound system, and some comfy chairs to sit in while watching and listening to these two marvels of modern technology. My credit card debt is now becoming quite alarming, I am barely capable of making minimum payments, and with the high interest rates on credit cards, I am sinking deeper in debt every day. Will the government force the banks to give me a lower interest rate or renegotiate the balance on my account?

I know, we are not talking about a TV or a car, we are talking about putting some poor family out on the street. (Well, as the examples listed above have shown, this is what we are doing in at least some cases.) Unfortunately for the the emotional side of this argument, the principle that I have logically established remains the same. What about the people who bought houses and are making their payments, are they deserving of no help because they are meeting their obligations? What about people who haven't bought a house and are living in rental properties, don't they have the right to government help to buy something and join in the game?

If government is obligated to step in for a home loan, then the rest of this is simply quibbling about where we draw the line in the sand. For me, I chose to draw it on the side of no government involvement in the first place. The government that the Founding Fathers designed for us guarantees us an opportunity to succeed, not a guarantee of success. Unless we all draw the line and stop this continuing drive towards government interference and control, there is a great deal more pain and heartache to look forward to.

Fractured Fairy Tales - The Wizard of Oz

I would like to revisit the classic tale in the title of this posting, with a more modern twist, based on recent history. So with apologies to L. Frank Baum for butchering what was and is a wonderful series of 14 books (there's a lot more to this than the story told in the 1939 Victor Fleming film), here is my version of "The Wizard of Oz".

Dorothy finds herself terrified and in trouble. It seems as though she was innocently sitting in her home one day in Kansas, doing nothing more than minding her own business, when disaster struck. Now before I go on, I should tell you that the home Dorothy was in was a house purchased some time back. She got a really good price on this particular piece of property because it was in "Tornado Alley", a place where tornadoes often came. Now she couldn't really afford the house at the time, owning a home in tornado alley was a bit of a risk, and quite frankly it wasn't in very good shape; but it was such a great deal that she couldn't pass it up. Besides, Dorothy had always wanted a piece of the American dream that meant owning a home. You might even say that she felt that she had a "right" to it. So she went ahead and took the plunge regardless of the long term personal consequences. One day a tornado came along (which was no real surprise in Tornado Alley, of course) and lifted Dorothy's house right off of Kansas and sent it flying through the air. In no more than what seemed an instant, Dorothy was whisked away to a far away place known as Oz.

Now Oz was a great place to live. The climate was moderate, the land productive, and the people there were of reasonable temperament and good moral fiber (well, at least as good as they are anywhere). They didn't take too kindly to having a house dropped in the middle of their fair city however. (Then again, who does?) No, there are laws even in Oz, and one of them was that people couldn't just drop houses anywhere that they wanted. Regretfully, Dorothy was told that she was just going to have to move her house. 


Tearful and in pain, Dorothy explains to the local media covering the event that it is not her fault that her house fell here, that she has no idea how one would go about moving a house, and that moving a house probably costs a lot of money of which she has none considered local tender in Oz. (Of course actually she has no money good in any land, having spent all of it on the house in the first place, but that's beside the point.) She is merely a victim in this situation, and begs for help. The locals are sympathetic to her plight, but want the house moved never the less. A few of the more compassionate citizens realize however that everyone can be a victim sometimes. They understand her plight, and suggest to her that perhaps she should seek help from one of the three government agents in Oz. Since she feels are no other options (though she hasn't really looked for any), she decides that they are right and that as both a stranger and victim in this strange land, she deserves such help.

First she sees the Tin Man. Now the Tin Man has no heart. (We suspect that he is a closet conservative or perhaps even a whacko Libertarian, but he has neither confirmed or denied such leanings.) He tells her that there is really nothing that he or the government can or should do for her. They didn't cause the tornado, they don't own the land that the house has fallen on, and it isn't the government's responsibility to move houses or to help people who choose to drop in on Oz unannounced (see illegal immigration). He is very sorry, but he considers this a problem of personal responsibility. He would like her to take responsibility for her situation and leave the government out of it.

Next she goes to see the the Scarecrow. Now the Scarecrow has no brain. (I know, a bureaucrat with no brain, who would have believed it.) He tells her that he really doesn't know if the government can do anything for her. Quite frankly there are so many rules in government these days, that these rules are confusing and contradictory, and no one really understands them; least of all the government. He explains that making tough choices like this is ... well tough, and that he will neither support nor deny help to her at this time. He does say however, that he would be happy to initiate a government funded study to help determine why her house fell there, how it might be moved, and ultimately whose responsibility such a move might be. He smilingly says that he thinks that such a study might be able to be completed in as little as 18 months.

Deep in despair now over the inability of anyone to provide the help for her that Dorothy feels that she is owed, she goes to see the Cowardly Lion. Now the Cowardly Lion has no courage. He does however have a really big heart and a modicum of brains. (It has been said that the bureaucratic mentality is the one constant in the universe. I forget by whom.) He listens to Dorothy's story and breaks down into tears upon its completion. Overwhelmed with love and compassion for her and the desperate plight that she faces he promises Dorothy that he, as a representative of the government of Oz, will take care of everything and that she need not worry ever again. Putting the full force of the government bureaucracy to work, he sits down at his desk and draws up a mandate for immediate government funding for the moving of Dorothy's house to a more suitable location (of her choice of course), and while he's at it he has the entire home renovated. He knows and understands that Dorothy is a victim here (as only a government can understand), even if she did make some ill-conceived choices in her past, and even if she is not really a citizen of Oz. He knows that a caring, concerned, and compassionate government must take care of people in need (and sometimes even those not in need) regardless of the cost or the circumstances.

Dorothy is thrilled of course at having someone take over responsibility for her problem, and gladly accepts the assistance (after all, it doesn't cost her anything). She and the Cowardly Lion pick out a lovely site (which the government purchases, again at no charge to Dorothy), arranges for a contractor to move the house, and does a wonderful job in fixing up the place in the process. All of this is lauded in the local media, praising the compassion of the Cowardly Lion, and by silence, condemning the Scarecrow and Tin Man for their lack of support in this crisis. The people of Oz seem content as well. The problem of Dorothy's house is being addressed, and everyone gets to feel a little good about themselves for the government stepping in to save this poor girl. They don't know why they feel good, but they do; and that's enough.

Now just as Dorothy is about to move in to her now beautiful, relocated, and renovated house in a huge ceremony attended by the Cowardly Lion, the adoring media, and even some of the local populace; along comes a Wizard. The Wizard has nothing to do with the government, but he is a Wizard after all. So the media immediately swarm around him, explaining what's has happened and what's going on now, then ask him for his opinion on the whole thing. After assessing the situation for a just couple of minutes, he nods his head sagely (as all wizards do), then shakes it sadly.

"You'll be sorry," he says; and softly shambles away from the gathering, perhaps leaning on his walking stick a bit more heavily than he had before.

THE END

Well of course that can't be the end. (If it was it would be a pretty crappy ending, wouldn't it?) You see, it seems that the money that had been mandated by the Cowardly Lion for the Dorothy bail-out ended up causing a few problems for the government of Oz. Even government money after all, has to come from somewhere (usually it's citizens). But even government money isn't boundless, and in this case Oz was forced to issue a great number of bonds in order to pay for the unfunded mandates of the Cowardly Lion, so much so that the government soon found itself on the verge of bankruptcy. The Wicked Witch of the East, who had been waiting in the wings and had always wanted to take over things in Oz, saw this as the perfect opportunity to do so. She was able to move in and buy up all of the bonds, effectively putting her in control of the government. And the citizens of Oz who just wanted to get a small housing problem off of their back, ... well they lived in debt, fear, and misery for the rest of their days.

REALLY THE END.

Disclaimer:

Any resemblance to political ideologies or parties, current or proposed government policies, or particular politicians is purely accidentally ... maybe.