So, as we're nearing the end of the George W. Bush Presidency, I think its time to start reflecting on just how shitty these past eight years have been.
We've been at war in Afghanistan for all but nine months of Bush's Presidency. Unless the next President succeeds in getting us out of there mighty quick, we will eclipse the Soviet occupation of Afghanistan early in his first term.
This, remember, is the first war that Bush got us into that we were supposed to win quickly and be out of by Christmas. I scarcely need mention that there's another little war we started in another Middle Eastern country that we're also not out of yet, do I?
But surely the Republican devotion to laissez-faire capitalism has strengthened our economy, right? It couldn't, say, have created a perfect storm where our skyrocketing national debt weakens the dollar, our international police actions combined with our shortsighted energy policy crafted in large part by oilmen friendly to the Vice President sends oil prices from $20 to $140 (detrimentally affecting EVERY SECTOR of our economy not named Exxon), and our utterly naive belief that industries will TOTALLY police themselves and behave with the public interest in mind have the US circling the economic drain?
This is a President whose domestic policy consists of sticking his fingers in his ears and going "LA LA LA I CAN'T HEAR YOU." He's a President that the moderately competent can't work for, and that even the utterly inept despise as beneath them.
And he's done all this with a backdrop of expanding Presidential power even more, so that he can make ever larger blunders with wider-ranging repercussions. In short, he's managed in his eight disastrous years in office to do what Osama bin Ladin has wet dreams about: he's set the U.S. on a spiral toward ruin.
George W. Bush loves America like OJ loved Nicole.
One Law Student's Quest For Love In A World Gone Mad
(Because I'm not a technical writer anymore.)
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mcsnee- June 27th, 2008
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Let's not forget his most important achievements: He saved American from Pres. Gore and Pres. Kerry!
Nothing to do with him -- that was the Supreme Court and John Kerry himself, respectively.
So, you credit Sen. Kerry for saving America from Pres. Kerry.
Ummmmmmmmm, yeah.
Ummmmmmmmm, yeah.
Yes, because he was such a bad candidate. I thought it was a fairly straightforward humorous statement.
Really, no one destroys the Democrats as effectively as their tireless enemies, the Democrats.
While I'm no fan of the Bush administration, or of the modern incarnation of the Republican party, I would hardly call the economic model that they advocate "laissez-faire capitalism." It's unfair to blame our current economic woes on the free-market system itself, as most of the trouble comes from the irresponsible regulation of the market.
Out of curiosity, how do you feel about Dodd's proposed housing bailout?
Out of curiosity, how do you feel about Dodd's proposed housing bailout?
I think Dodd's plan is among the better of the set of rotten options we have. It's gonna suck if you're a homeowner who tried to do the right thing, though, from what I understand.
It's unfair to blame our current economic woes on the free-market system itself, as most of the trouble comes from the irresponsible regulation of the market.
Really? That's not the way I understand it. Which irresponsible regulations are responsible for this situation?
My understanding is that there are a number of transactions that take place in each of these mortgages and mortgage-backed bonds between a number of different parties, and that any of these transactions could have been made more equitable with judicious regulatory oversight. For example, brokers have little disincentive against encouraging borrowers to overstate their income, and no incentive at all to make sure the borrowers understand the terms of the hundred-page contracts they're signing.
It's unfair to blame our current economic woes on the free-market system itself, as most of the trouble comes from the irresponsible regulation of the market.
Really? That's not the way I understand it. Which irresponsible regulations are responsible for this situation?
My understanding is that there are a number of transactions that take place in each of these mortgages and mortgage-backed bonds between a number of different parties, and that any of these transactions could have been made more equitable with judicious regulatory oversight. For example, brokers have little disincentive against encouraging borrowers to overstate their income, and no incentive at all to make sure the borrowers understand the terms of the hundred-page contracts they're signing.
It's gonna suck if you're a homeowner who tried to do the right thing, though, from what I understand.
Ahhh, the liberal mantra: Let the responsible people pay for the actions of irresponsible people.
My mantra: Let the irresponsible people live with the consequences of their actions. That will discourage future irresponsible behavior, which is better for everyone.
Let the housing market truly bottom out. That way responsible lower-income people will have an opportunity to buy a home. Why keep the irresponsible middle-income people in a home at the low-income person's expense?
For example, brokers have little disincentive against encouraging borrowers to overstate their income,
That's why you shouldn't bail out the banks.
and no incentive at all to make sure the borrowers understand the terms of the hundred-page contracts they're signing.
Reading the contract (or hiring an attorney to read it for you) is the responsibility of the person signing the document, not the responsibility of the person preparing the document.
Really, this all speaks to my main gripe about modern American liberalism. They dismiss the concept of personal responsibility, and think everything can be fixed by increased government regulation.
Edited at 2008-06-28 06:05 pm (UTC)
Ahhh, the liberal mantra: Let the responsible people pay for the actions of irresponsible people.
My mantra: Let the irresponsible people live with the consequences of their actions. That will discourage future irresponsible behavior, which is better for everyone.
Let the housing market truly bottom out. That way responsible lower-income people will have an opportunity to buy a home. Why keep the irresponsible middle-income people in a home at the low-income person's expense?
For example, brokers have little disincentive against encouraging borrowers to overstate their income,
That's why you shouldn't bail out the banks.
and no incentive at all to make sure the borrowers understand the terms of the hundred-page contracts they're signing.
Reading the contract (or hiring an attorney to read it for you) is the responsibility of the person signing the document, not the responsibility of the person preparing the document.
Really, this all speaks to my main gripe about modern American liberalism. They dismiss the concept of personal responsibility, and think everything can be fixed by increased government regulation.
Edited at 2008-06-28 06:05 pm (UTC)
Let the irresponsible people live with the consequences of their actions.
A hypothetical for you:
X is interested in buying a home. He looks at the housing market and finds a house that is reasonably priced for his area (say $500,000). He carefully charts the real estate prices in the area over the last thirty years; while they have been growing, there is not the precipitate growth other "bubble" areas have seen, so he feels reasonably certain that his investment will be a sound one.
He puts down $100,000, representing 95% of his life savings, obtaining a loan at the market rate for the remaining $400,000.
One year into his mortgage, the housing market tanks, and his house is suddenly worth $300,000, leaving him approximately $100,000 upside-down on his mortgage. The same month, his company outsources his job. He has job offers from other areas of the country, but is unable to get out of his house.
What's his recourse? At what point was he irresponsible?
Now, certainly, we're talking about a lot of homeowners who didn't demonstrate that level of responsibility. We do, however, have a large information gap between borrowers and lenders, and often the conservative argument is that the buyers/borrowers weren't exercising "personal responsibility"--when, in fact, the corporate "person" of the bank is at least as guilty of not behaving responsibly: not sufficiently protecting its own interests by making sure that both parties to the contract are on the same page.
A borrower looking at the real estate market a year ago could be forgiven for thinking, for example, that real estate values always rise, and that, as a result, an adjustable-rate mortgage is an okay idea because it's always possible to refinance. Banks were in much the same situation; their data indicated that the loans they were making carried a certain risk of default, when, in fact, the actual risk was much higher.
This ends up being a situation where a few bad actors have managed to poison much of the home-financing pool for everyone, including those who have behaved responsibly given the information they had.
A hypothetical for you:
X is interested in buying a home. He looks at the housing market and finds a house that is reasonably priced for his area (say $500,000). He carefully charts the real estate prices in the area over the last thirty years; while they have been growing, there is not the precipitate growth other "bubble" areas have seen, so he feels reasonably certain that his investment will be a sound one.
He puts down $100,000, representing 95% of his life savings, obtaining a loan at the market rate for the remaining $400,000.
One year into his mortgage, the housing market tanks, and his house is suddenly worth $300,000, leaving him approximately $100,000 upside-down on his mortgage. The same month, his company outsources his job. He has job offers from other areas of the country, but is unable to get out of his house.
What's his recourse? At what point was he irresponsible?
Now, certainly, we're talking about a lot of homeowners who didn't demonstrate that level of responsibility. We do, however, have a large information gap between borrowers and lenders, and often the conservative argument is that the buyers/borrowers weren't exercising "personal responsibility"--when, in fact, the corporate "person" of the bank is at least as guilty of not behaving responsibly: not sufficiently protecting its own interests by making sure that both parties to the contract are on the same page.
A borrower looking at the real estate market a year ago could be forgiven for thinking, for example, that real estate values always rise, and that, as a result, an adjustable-rate mortgage is an okay idea because it's always possible to refinance. Banks were in much the same situation; their data indicated that the loans they were making carried a certain risk of default, when, in fact, the actual risk was much higher.
This ends up being a situation where a few bad actors have managed to poison much of the home-financing pool for everyone, including those who have behaved responsibly given the information they had.
Mr. X was irresponsible. Buying a home with 95% of your life savings is risky--had he put 10% down, he probably could have weathered the storm with $50k in the bank.
Regardless, bad things sometimes do happen to good people. That, my good man, is called life. Mr. X can either declare bankruptcy, or he can take the other job and see if the bank will give him a $100k loan so he can pay off what he owes.
And, for the record, the only places where house prices are falling 40% in one year (your example) are places where the home values had been recently skyrocketing. Mr. X should have considered this when he bought the "reasonable" $500k house (which undoubtedly was worth around $400k a year earlier).
In other news, you are right in the next paragraph. Both the borrowers and loanmakers were irresponsible. That's why neither should be bailed out by the responsible.
"A borrower looking at the real estate market a year ago could be forgiven for thinking, for example, that real estate values always rise, and that, as a result, an adjustable-rate mortgage is an okay idea because it's always possible to refinance."
Okay. I forgive him for thinking that. But, that doesn't mean I should bail him out. His decision. His problem.
"This ends up being a situation where a few bad actors have managed to poison much of the home-financing pool for everyone, including those who have behaved responsibly given the information they had."
And, the solution is to not bail out the bad actors.
Regardless, bad things sometimes do happen to good people. That, my good man, is called life. Mr. X can either declare bankruptcy, or he can take the other job and see if the bank will give him a $100k loan so he can pay off what he owes.
And, for the record, the only places where house prices are falling 40% in one year (your example) are places where the home values had been recently skyrocketing. Mr. X should have considered this when he bought the "reasonable" $500k house (which undoubtedly was worth around $400k a year earlier).
In other news, you are right in the next paragraph. Both the borrowers and loanmakers were irresponsible. That's why neither should be bailed out by the responsible.
"A borrower looking at the real estate market a year ago could be forgiven for thinking, for example, that real estate values always rise, and that, as a result, an adjustable-rate mortgage is an okay idea because it's always possible to refinance."
Okay. I forgive him for thinking that. But, that doesn't mean I should bail him out. His decision. His problem.
"This ends up being a situation where a few bad actors have managed to poison much of the home-financing pool for everyone, including those who have behaved responsibly given the information they had."
And, the solution is to not bail out the bad actors.
And, for the record, the only places where house prices are falling 40% in one year (your example) are places where the home values had been recently skyrocketing.
For now.
Until the housing market bottoms out, we can only make educated guesses as to where that bottoming-out point will be and how much of the housing sector it will affect--and as we've seen, those educated guesses may or may not be anything like reality. The next point bears on this.
And, the solution is to not bail out the bad actors.
When stated simply like that, it sounds great.
However, when the bad actors are a significant sector of the economy, failing to bail them out hurts everybody--so that what started out as a "subprime" mortgage meltdown has now started affecting prime borrowers and lenders, too; and tightening of the financial market will exert downward pressure on the housing market as money becomes harder to come by and people are forced to sell fairly valued houses well below those values.
The rest of the economy will bear the cost either through lost value or through taxes (for bailouts) or some combination of the two. Either way there will be opportunity costs as well; the question is which option will lead to a sustainable recovery the quickest, and I think that's an open question at this point.
As I said, we're basically presented with a host of rotten options at this point; Dodd's bill is only good in my opinion in comparison with the other rotten options.
For now.
Until the housing market bottoms out, we can only make educated guesses as to where that bottoming-out point will be and how much of the housing sector it will affect--and as we've seen, those educated guesses may or may not be anything like reality. The next point bears on this.
And, the solution is to not bail out the bad actors.
When stated simply like that, it sounds great.
However, when the bad actors are a significant sector of the economy, failing to bail them out hurts everybody--so that what started out as a "subprime" mortgage meltdown has now started affecting prime borrowers and lenders, too; and tightening of the financial market will exert downward pressure on the housing market as money becomes harder to come by and people are forced to sell fairly valued houses well below those values.
The rest of the economy will bear the cost either through lost value or through taxes (for bailouts) or some combination of the two. Either way there will be opportunity costs as well; the question is which option will lead to a sustainable recovery the quickest, and I think that's an open question at this point.
As I said, we're basically presented with a host of rotten options at this point; Dodd's bill is only good in my opinion in comparison with the other rotten options.
Until the housing market bottoms out, we can only make educated guesses as to where that bottoming-out point will be and how much of the housing sector it will affect--and as we've seen, those educated guesses may or may not be anything like reality.
Right. It could be tomorrow. It could be five years from now. When you sign your name on the line, that comes with the territory. Buying a house (or anything) is not a guaranteed investment. There's always a risk. If you don't like those risks, go with the risks associated with renting, or leasing, or living with mom & dad.
However, when the bad actors are a significant sector of the economy, failing to bail them out hurts everybody--so that what started out as a "subprime" mortgage meltdown has now started affecting prime borrowers and lenders, too; and tightening of the financial market will exert downward pressure on the housing market as money becomes harder to come by and people are forced to sell fairly valued houses well below those values.
There is no such thing as a "fairly valued house". The value of a house is what the buyer and seller agree to. I know this from house sales (and purchases) of my own in the past. The value is determined by how badly the buyer wants the home, and how badly the seller wants to sell.
Yes, there will be pain involved in letting the bad actors live with the consequences of their actions. However, that pain is nothing compared to the chaos that will ensue in the future if we decide to guarantee home prices in a down market.
The first problem with this is that you are screwing the honest little guy...hard, and without so much as a kiss on the cheek. Let's suppose that homes that cost $500k in what was essentially play money in 2007 is worth $300k today, and will be worth $100k in 2009. (Note: Ridiculously extreme example, so plus in whatever numbers make you comfortable)
Many people who have worked hard but don't have a lot of money, but can afford $100k homes, will now be able to buy homes they previously couldn't afford. They'll be buying them from people who weren't wise with their money (including your Mr. X, who didn't prepare himself for any contingency, making himself dangerously cash-poor).
But, if you bail out the bad actors, the little guy is screwed. The bad actors learn that there will be no consequences to their actions. And, we all know what that means--they bad actors will do exactly the same thing again, knowing that the good actors will bail them out.
And I will share a bit of personal experience on this. Right now, I'm about $300k down in a real estate investment that seemed like a great idea at the time. And, when I say $300k down, I mean I have $300k less than when I started, so it's a real $300k. Do I believe anyone should bail me out? Absolutely not. I made a mistake, and I will live with the consequences of my error. I can tell you that it will make me more wary next time, and that's exactly the reason I shouldn't be bailed out!
We all need to learn lessons, especially when we get greedy. Sometimes they're painful, and it's often the most painful lessons that we learn most effectively.
Edited at 2008-06-28 10:44 pm (UTC)
Right. It could be tomorrow. It could be five years from now. When you sign your name on the line, that comes with the territory. Buying a house (or anything) is not a guaranteed investment. There's always a risk. If you don't like those risks, go with the risks associated with renting, or leasing, or living with mom & dad.
However, when the bad actors are a significant sector of the economy, failing to bail them out hurts everybody--so that what started out as a "subprime" mortgage meltdown has now started affecting prime borrowers and lenders, too; and tightening of the financial market will exert downward pressure on the housing market as money becomes harder to come by and people are forced to sell fairly valued houses well below those values.
There is no such thing as a "fairly valued house". The value of a house is what the buyer and seller agree to. I know this from house sales (and purchases) of my own in the past. The value is determined by how badly the buyer wants the home, and how badly the seller wants to sell.
Yes, there will be pain involved in letting the bad actors live with the consequences of their actions. However, that pain is nothing compared to the chaos that will ensue in the future if we decide to guarantee home prices in a down market.
The first problem with this is that you are screwing the honest little guy...hard, and without so much as a kiss on the cheek. Let's suppose that homes that cost $500k in what was essentially play money in 2007 is worth $300k today, and will be worth $100k in 2009. (Note: Ridiculously extreme example, so plus in whatever numbers make you comfortable)
Many people who have worked hard but don't have a lot of money, but can afford $100k homes, will now be able to buy homes they previously couldn't afford. They'll be buying them from people who weren't wise with their money (including your Mr. X, who didn't prepare himself for any contingency, making himself dangerously cash-poor).
But, if you bail out the bad actors, the little guy is screwed. The bad actors learn that there will be no consequences to their actions. And, we all know what that means--they bad actors will do exactly the same thing again, knowing that the good actors will bail them out.
And I will share a bit of personal experience on this. Right now, I'm about $300k down in a real estate investment that seemed like a great idea at the time. And, when I say $300k down, I mean I have $300k less than when I started, so it's a real $300k. Do I believe anyone should bail me out? Absolutely not. I made a mistake, and I will live with the consequences of my error. I can tell you that it will make me more wary next time, and that's exactly the reason I shouldn't be bailed out!
We all need to learn lessons, especially when we get greedy. Sometimes they're painful, and it's often the most painful lessons that we learn most effectively.
Edited at 2008-06-28 10:44 pm (UTC)
I went out of town this weekend and was worried I wouldn't get to make my point about the dangers of market intervention. Thanks, you've done a lovely job for me. :)
Worse than OJ loved Nicole, actually -- OJ was never charged with stealing her purse, after all.
--m4
--m4
Amazing that we ducked out on our responsibilities in the war where we WERE greeted as liberators.
2008-06-28 04:54 am (UTC)