I have written a number of times previously about the source of the current economic crisis in the United States. To briefly review, the Congress and Clinton administration created policy which encouraged loans to low income individuals because they thought more home ownership would be good for the country. Freddie Mac and Fannie Mae bought a lot of the loans from primary lenders therefore leading the primary lenders to make more poor loans. The real problem came when Fannie Mae and Freddie Mac created securities based on the value of those bad mortgages and sold hundreds of billions of dollars of the securities to investment banks around the world. The current problem with fixing the problem is that there is no way to determine which mortgages are associated with which securities. Because there is no association, no one can determine how much each security is worth. Therefore, banks who own billions of dollars in those securities don’t have any idea whether they own securities of value or not. They are holding onto the solid money they have because they don’t really know how much they have in those securities. The US government is discussing how to get those “toxic assets”, as they are now known, out of the financial system to try to restore normality to the system. The administration and the Congress are still trying to figure out how to do it.
There are several possible ways to try to value those assets. The grindstone way is to look at every single mortgage which was bought by Fannie Mae and Freddie Mac to determine the value of the mortgage (solid, just getting by, or in default). Even if that monumental task was done (and it would take a long time), the question then becomes how to assign the individual mortgages to the securities. None of the owners of the securities want the worthless mortgages assigned to the securities that they own. In fact, the owners of the securities are looking for the government to get them their money back. That is patently ridiculous. The idea that taxpayers should make up money to speculators who greedily and hungrily bought those securities is insane. If I buy a stock and the value tanks, I don’t expect the government to refund my money. One way to assign mortgages which would seem fairer is to evaluate them all and to use the average value to calculate the value of the securities. That way, every institution that bought those securities will share proportionately in the pain of the downturn of the real estate market and none will be assigned entirely worthless mortgages. The problem with that approach is that a vague average is assigned and not the actual value of the individual mortgage. When assets are not based on a real value, there is a lot of uncertainty in the system. It is that very uncertainty which keeps financial institutions from freeing funds for lending.
The government solution currently seems to be to buy those “toxic assets” from the owners of the securities to resume normal operation of the financial system. There are several problems with this solution. The first is that by spending $750 billion on the first TARP (toxic asset relief program), a $760 billion “stimulus program” which had nothing to do with correcting the problem, a TARP II program, and then a $410 billion omnibus spending bill, the American public has caught on to the fact that the money has to come from somewhere. There is little, if any, patience left for another huge spending bill in addition to President Obama’s proposed 2009-2010 budget. The President is continuing to propose huge spending on social programs which are liberal politics and have nothing to do with fixing the problem. The cost of buying the “toxic assets” is staggering. I believe the current administration has misspent the political capital from the election on the huge liberal spending programs and now will have to deal with the resentment to their spending. The resentment and potential political backlash will likely prevent the spending which should have been the first priority, fixing the mortgage crisis. If the mortgage security problem had been originally addressed, the markets would have fixed themselves and several trillion dollars in government "stimulus" could have been saved. By taking political advantage of the crisis to put liberal social programs in place, there is nothing left with which to fix the crisis. The only option is to borrow from foreign countries and tax the people who actually earn money, therefore leaving them nothing to invest in the markets. It is self-defeating.
My guess is that they will inevitably screw the taxpayers by paying way too much for the assets in order to appear to be doing something and gain political points. The actual value of the assets will eventually declare themselves and the government (taxpayers) will be left holding the empty bag. The government will once again reward the speculators and failures at the expense of the prudent and safe investors. The same congressional representatives who screwed the pooch on oversight, regulation and then on spending will be the ones trying to fix the problem. When the government negotiates with people who are actually smart about financial matters and do it for a living, the government will always get hosed.
Showing posts with label housing crisis. Show all posts
Showing posts with label housing crisis. Show all posts
Sunday, March 15, 2009
Friday, February 20, 2009
Complaining About the Inevitable Results of Your Choices
One of the silver linings of the re-election of Marion Barry as Washington, DC Mayor a few years ago after his crack cocaine bust was that the whole DC statehood issue went away. After all, could folks who elect a crack head as mayor possibly be reputable voters? The issue has recently reared its ugly head again but only because the Democrats want to try to have more seats in Congress. It has nothing to do with fairness or people’s rights. In addition, the Democratic White House wants to manipulate the 2010 census numbers to increase Democratic seats in Congress and funding to Democratic districts. President Obama may become “Papa Doc” Obama if Rahm Emmanuel is unchecked in his power to skew the census. It got me thinking of a broader set of issues which have to do with complaints about the results of knowing choices. The theme will emerge as we look at some seemingly disparate issues.
When you become a resident of Washington, DC, you do so knowing that since the advent of the city, it was meant to be and still is a federal territory providing a location for the federal government. It was created from land ceded to the federal government from Maryland and Virginia for specifically that purpose. The Virginia side was returned to the state in 1846. People have suggested all kind of options: making the District of Colombia a state, ceding it back to Maryland, etc. I suppose it is appropriate to point out that the establishment of the District of Columbia as a federal territory is mandated in the Constitution Article I, Section 8, Clause 17 and specifically argued for in Federalist No. 43. It was a sensitive issue after Continental soldiers marched on Philadelphia when it was the capitol and caused the Congress to flee to New Jersey. The point I am making is that when you move to a federal territory and then complain about living within the rules of a federal territory, you are an idiot. That is like moving from one state to another state by choice and complaining about the new home state’s sales tax. You moved there, suck it up.
In Virginia Beach, Virginia, the Oceana Naval Air Station has been an active home to many US Navy fighter and bomber jet squadrons for many years. As the city allowed development to sprawl because of the housing boom and their desire for tax revenue, developments of housing encroached closer and closer to the air station. A couple of years ago, there were many outcries from people who bought homes and lived near the air station complaining about the noise from the fighter jet engines as they passed overhead. It is funny how when the Navy proposed to move the entire base to Florida, taking hundreds of millions of tax dollars from Virginia Beach, all of a sudden everybody LOVED jet noise. If they had built the air station after you already lived there, you would have had a valid complaint. If you bought a house at the end of an existing runway and then complain about jet engine noise, you are an idiot. You moved there, suck it up.
If you live in a Democratic controlled state and you complain about the lack of tort reform, higher taxes, unfriendly atmosphere toward business, companies leaving the state, or social programs for illegal aliens funded out of your tax money, you should move or vote for someone else. Those are bedrock principles of the Democratic Party. The largest single contributor to the Democratic Party is the Trial Lawyers Association. If you think the Democrats will ever pass a law which costs lawyers money, you are smoking crack. Liberals always think the government knows more about what you need than you do. Other huge contributors to the Democratic Party are labor unions. Business is evil to liberals. Business is evil to labor unions. Therefore, a perfect marriage: liberals and labor unions. If you continue to vote those folks into office, businesses cannot prosper and go to where they can prosper, taxes stay high because the businesses leave, causing more to leave. What you end up with is Michigan. If you live in a place like that and support the liberals, you deserve what you get. You live there, suck it up.
I remember several young women in the US Air Force who were on CNN at the beginning of the first gulf war with their parents complaining about the war. These two “rocket scientists” actually had the gall to say, “We joined the Air Force to get a college education, not to go to war”. They might as well have “idiot” tattooed across their respective foreheads. If you join a military organization, you might find yourself doing military things. I have heard Sailors complaining about being at sea. In fact, it is said that a Sailor is never happy except when complaining. I suppose if you join the Navy, you should probably be aware that the Navy has ships which sail on and under the oceans. If you join the Army or Marine Corps, you should expect to spend some time with a rifle. If you join the Air Force, you might find yourself in an aircraft. Anyone who can’t figure out those things is an idiot. The American military is an all volunteer force. No one is drafted. You joined the service; suck it up.
The overwhelming majority of Americans are associated with some religion. The founding fathers did not want religious groups taking over the government and imposing their views on others who did not share the same views. That is the Islamic state model. In contrast to what is being espoused by some recently, the founding fathers were not against religion. In reading the writings of Alexander Hamilton, Thomas Jefferson, George Washington, James Madison, John Jay, and on and on, there was a common thought that the freedoms sought after in this country were of divine origin and that divine providence was part of the very formation of the nation. Currently, the American Civil Liberties Union wants to remove all reference to religion from everything the government touches. With the Democrats now controlling all three branches of government and expanding greatly on the Republican mistakes of late 2008, the US government is rapidly getting involved in the financial system, automobile manufacturing, the housing market, and other private industries. There will soon be nothing that the government does not touch. Therefore, there will be no place for religion in the nation. That is clearly not what the founding fathers intended. If you elect leaders who agree with this philosophy and who appoint judges who agree, you deserve what you get. If you elected them: don’t complain, suck it up.
The goofy woman who had eight embryos implanted and ended up with fourteen children despite being uneducated, unemployed and living in her parent’s home made a selfish choice. She is banking on the state of California welfare and Medicaid system to pay for her children. People will argue that you shouldn’t punish the children for the idiocy of the mother. I agree. Take the children and put them in proper homes. They are doomed with this incompetent arrogant fool as a parent. She made the choice to have them. She can either find a way to adequately care for them or lose them. The taxpayers have big hearts and have no problem helping distressed children. However, they have no obligation to help the mother. She made the choice; she can suck it up.
Most people who work for a living have a fairly good idea how much money they earn. Knowing that information is fairly important in determining how much stuff you can buy. I recently bought a house. Before I did so, I sat down and spent a great deal of time determining if I could afford the payments on the house. That is apparently a novel idea to some people. Because I did figure out how much I could afford, the current downturn in home values would only affect me greatly if I had to move anytime soon. Therefore, I do not plan on doing so. In fairness, I should point out that this does not apply to you if you lost your job in a lay off. I also saved some money just in case of hard times, another old school idea. Thank you for teaching me that lesson, Dad. There has been a recent wave of conspicuous consumption. Everyone has to have the biggest car, a huge plasma television, and the list goes on and on. Apparently, everyone wants to be on MTV Cribs. I am currently driving my well-maintained 2001 vehicle, watching my normal television, and not wearing ridiculously priced clothing. I do not run up tens of thousands of dollars in credit card debt which I cannot pay back. Therefore, if you do spend a lot more than you earn, I have no obligation whatsoever to bail you out. You spent the money; watch the bad economic news on your giant screen plasma television and suck it up.
In a much larger version of the same theme, California has for years passed ridiculous anti-business laws and watched the businesses flee from the state. California gives health care and free public education to illegal aliens. California passes liberal policies which cost fortunes and environmental policies which raise costs. California is sitting on billions of dollars in off shore oil and natural gas but won’t allow it to be tapped. To expect the other states which act responsibly to bail California out for its inane policies and irresponsible spending plans is idiotic. The people of California voted in that lame government, let them live with it. Other states are under no obligation to allow the state of California to continue with their insipid policies. California spent the money; they can suck it up.
There is an axiom that insanity is performing the same act over and over again and expecting a different result. Electing liberal politicians inevitably results in higher taxes, more intrusive government, disparagement of religion, discouragement of business, artificial inflation of wages for union workers, more money for attorneys resulting in increased insurance premiums, and less incentive to work. In the liberal world, nothing is ever anyone’s fault. Everyone is a victim of circumstance. A famous golfer once said that the harder he practiced, the luckier he became. Making any choice for which the outcome is inherently obvious and then complaining about that inevitable outcome and expecting someone else to come to your rescue for your foolish choice is shirking responsibility and idiotic. You live with the result of your choices. That is why they should be taken seriously.
When you become a resident of Washington, DC, you do so knowing that since the advent of the city, it was meant to be and still is a federal territory providing a location for the federal government. It was created from land ceded to the federal government from Maryland and Virginia for specifically that purpose. The Virginia side was returned to the state in 1846. People have suggested all kind of options: making the District of Colombia a state, ceding it back to Maryland, etc. I suppose it is appropriate to point out that the establishment of the District of Columbia as a federal territory is mandated in the Constitution Article I, Section 8, Clause 17 and specifically argued for in Federalist No. 43. It was a sensitive issue after Continental soldiers marched on Philadelphia when it was the capitol and caused the Congress to flee to New Jersey. The point I am making is that when you move to a federal territory and then complain about living within the rules of a federal territory, you are an idiot. That is like moving from one state to another state by choice and complaining about the new home state’s sales tax. You moved there, suck it up.
In Virginia Beach, Virginia, the Oceana Naval Air Station has been an active home to many US Navy fighter and bomber jet squadrons for many years. As the city allowed development to sprawl because of the housing boom and their desire for tax revenue, developments of housing encroached closer and closer to the air station. A couple of years ago, there were many outcries from people who bought homes and lived near the air station complaining about the noise from the fighter jet engines as they passed overhead. It is funny how when the Navy proposed to move the entire base to Florida, taking hundreds of millions of tax dollars from Virginia Beach, all of a sudden everybody LOVED jet noise. If they had built the air station after you already lived there, you would have had a valid complaint. If you bought a house at the end of an existing runway and then complain about jet engine noise, you are an idiot. You moved there, suck it up.
If you live in a Democratic controlled state and you complain about the lack of tort reform, higher taxes, unfriendly atmosphere toward business, companies leaving the state, or social programs for illegal aliens funded out of your tax money, you should move or vote for someone else. Those are bedrock principles of the Democratic Party. The largest single contributor to the Democratic Party is the Trial Lawyers Association. If you think the Democrats will ever pass a law which costs lawyers money, you are smoking crack. Liberals always think the government knows more about what you need than you do. Other huge contributors to the Democratic Party are labor unions. Business is evil to liberals. Business is evil to labor unions. Therefore, a perfect marriage: liberals and labor unions. If you continue to vote those folks into office, businesses cannot prosper and go to where they can prosper, taxes stay high because the businesses leave, causing more to leave. What you end up with is Michigan. If you live in a place like that and support the liberals, you deserve what you get. You live there, suck it up.
I remember several young women in the US Air Force who were on CNN at the beginning of the first gulf war with their parents complaining about the war. These two “rocket scientists” actually had the gall to say, “We joined the Air Force to get a college education, not to go to war”. They might as well have “idiot” tattooed across their respective foreheads. If you join a military organization, you might find yourself doing military things. I have heard Sailors complaining about being at sea. In fact, it is said that a Sailor is never happy except when complaining. I suppose if you join the Navy, you should probably be aware that the Navy has ships which sail on and under the oceans. If you join the Army or Marine Corps, you should expect to spend some time with a rifle. If you join the Air Force, you might find yourself in an aircraft. Anyone who can’t figure out those things is an idiot. The American military is an all volunteer force. No one is drafted. You joined the service; suck it up.
The overwhelming majority of Americans are associated with some religion. The founding fathers did not want religious groups taking over the government and imposing their views on others who did not share the same views. That is the Islamic state model. In contrast to what is being espoused by some recently, the founding fathers were not against religion. In reading the writings of Alexander Hamilton, Thomas Jefferson, George Washington, James Madison, John Jay, and on and on, there was a common thought that the freedoms sought after in this country were of divine origin and that divine providence was part of the very formation of the nation. Currently, the American Civil Liberties Union wants to remove all reference to religion from everything the government touches. With the Democrats now controlling all three branches of government and expanding greatly on the Republican mistakes of late 2008, the US government is rapidly getting involved in the financial system, automobile manufacturing, the housing market, and other private industries. There will soon be nothing that the government does not touch. Therefore, there will be no place for religion in the nation. That is clearly not what the founding fathers intended. If you elect leaders who agree with this philosophy and who appoint judges who agree, you deserve what you get. If you elected them: don’t complain, suck it up.
The goofy woman who had eight embryos implanted and ended up with fourteen children despite being uneducated, unemployed and living in her parent’s home made a selfish choice. She is banking on the state of California welfare and Medicaid system to pay for her children. People will argue that you shouldn’t punish the children for the idiocy of the mother. I agree. Take the children and put them in proper homes. They are doomed with this incompetent arrogant fool as a parent. She made the choice to have them. She can either find a way to adequately care for them or lose them. The taxpayers have big hearts and have no problem helping distressed children. However, they have no obligation to help the mother. She made the choice; she can suck it up.
Most people who work for a living have a fairly good idea how much money they earn. Knowing that information is fairly important in determining how much stuff you can buy. I recently bought a house. Before I did so, I sat down and spent a great deal of time determining if I could afford the payments on the house. That is apparently a novel idea to some people. Because I did figure out how much I could afford, the current downturn in home values would only affect me greatly if I had to move anytime soon. Therefore, I do not plan on doing so. In fairness, I should point out that this does not apply to you if you lost your job in a lay off. I also saved some money just in case of hard times, another old school idea. Thank you for teaching me that lesson, Dad. There has been a recent wave of conspicuous consumption. Everyone has to have the biggest car, a huge plasma television, and the list goes on and on. Apparently, everyone wants to be on MTV Cribs. I am currently driving my well-maintained 2001 vehicle, watching my normal television, and not wearing ridiculously priced clothing. I do not run up tens of thousands of dollars in credit card debt which I cannot pay back. Therefore, if you do spend a lot more than you earn, I have no obligation whatsoever to bail you out. You spent the money; watch the bad economic news on your giant screen plasma television and suck it up.
In a much larger version of the same theme, California has for years passed ridiculous anti-business laws and watched the businesses flee from the state. California gives health care and free public education to illegal aliens. California passes liberal policies which cost fortunes and environmental policies which raise costs. California is sitting on billions of dollars in off shore oil and natural gas but won’t allow it to be tapped. To expect the other states which act responsibly to bail California out for its inane policies and irresponsible spending plans is idiotic. The people of California voted in that lame government, let them live with it. Other states are under no obligation to allow the state of California to continue with their insipid policies. California spent the money; they can suck it up.
There is an axiom that insanity is performing the same act over and over again and expecting a different result. Electing liberal politicians inevitably results in higher taxes, more intrusive government, disparagement of religion, discouragement of business, artificial inflation of wages for union workers, more money for attorneys resulting in increased insurance premiums, and less incentive to work. In the liberal world, nothing is ever anyone’s fault. Everyone is a victim of circumstance. A famous golfer once said that the harder he practiced, the luckier he became. Making any choice for which the outcome is inherently obvious and then complaining about that inevitable outcome and expecting someone else to come to your rescue for your foolish choice is shirking responsibility and idiotic. You live with the result of your choices. That is why they should be taken seriously.
Wednesday, February 18, 2009
Another Day, Another Stimulus Hose Job
Well, here comes another “stimulus package”. This time it is $75 billion for troubled mortgages. Of course, there is no reduction in mortgage rates for anyone who is currently paying their mortgage on time. Is anyone else seeing the trend in all of these stimulus and bail out packages? Let’s see if we can spot a common theme in these packages.
In the case of the bank bail out, the Treasury Department takes money from the general revenue fund and “infuses it” into banks that are in trouble. Banks that did not engage in questionable lending practices do not receive any help and just get to pay their taxes on time. The successful banks are having their money taken to support the unsuccessful banks. It seems a little counterproductive. With the Federal Deposit Insurance Corporation guaranteeing that depositors would not lose money, banks that go under would be replaced by other successful banks rapidly and individuals would not lose any deposits less than $250,000.
In the case of the automobile manufacturers, there is no help for any of the successful companies in Tennessee, South Carolina, or Texas. The provision to give tax credits for all automobile purchases was stripped from the bill. Therefore, the only help is going to the automobile manufacturers in Michigan which have United Auto Workers Union plants. What a coincidence. Therefore, tax money from auto workers in the south who earn about $45 an hour is being used to prop up wages for union auto workers in Michigan who earn about $71 an hour. The successful companies are having their money taken away to support the unsuccessful companies. If the Michigan-based automobile companies stopped making cars, would everyone stop driving? I think not. People would buy cars and trucks from the more successful and better-run companies. The Democrats say the answer is more union involvement when the very millstone around the neck of the auto industry is the United Auto Workers.
In the case of the bail out to the states, tax money from states with responsible governments like Texas is used to bail out irresponsible state governments like California and will only encourage more bogus spending and will delay the state legislature making the appropriate decisions to balance their spending and income. California refuses to secure the Mexican border and continues to provide free health care and public education to illegal aliens. Should it surprise anyone that their budget is screwed up? The successful states are therefore being screwed to reward the unsuccessful states. Irresponsible governors like Schwarzenegger are not held responsible for their actions.
In the case of the mortgage bail out, tax money is being used to refinance mortgages of people who, in many cases, should have never qualified for a mortgage in the first place. Will those people suddenly be flush with money? What is always failed to be mentioned is that the mortgage lenders will have to make their money back somehow. Let’s see… how will they do it? They will increase the rates on newer mortgages. Who will receive those mortgages? Only those people who are well-qualified will receive them because the mortgages lenders have been burned once and won’t do it again. Therefore, money will be taken from successful home buyers to bail out unsuccessful home buyers. At least this one has a logical argument in that preventing foreclosures reduces inventory of existing homes and stabilizes home prices. It does hurt the rental market. In listening to President Obama today, to his credit, it seemed that at least someone has put some thought into this package. That is a refreshing change from "You have to sign it now or the Earth will explode" spending packages.
Did anyone notice that Senator Harry Reid snuck a hand-written amendment of five billion dollars in the stimulus bill for a light rail system from Los Angeles to Las Vegas? Bernie Madoff is a small-time operator next to Harry Reid. The worst part is that no other Senator will point out how crooked that is. Five billion dollars without a hearing, without oversight, without anything but a pen. It makes you want to vomit.
The common thread throughout the processes is obviously to reward the unsuccessful and sometimes criminal at the expense of the successful and responsible. It is economic redistribution which rewards bad behavior. In time, people who are responsible will either stop producing because it won’t be in their best interest to produce or everyone will jump on the bandwagon and just start behaving badly to get on the gravy train. The problem there is that someone has to pay for that gravy train because it is a government-sponsored Ponzi scheme. When enough people stop putting money in, the whole thing will crash. That is where we are heading with these “stimulus” packages. All they had to do was stabilize the housing market and let people keep more of their money and the problem would have corrected itself. Every time the new administration interferes, the stock market dips lower because smart business people recognize where this is headed. It is nice to finally see some effort to do something about housing. In this case, it seems the right thing to do.
In the case of the bank bail out, the Treasury Department takes money from the general revenue fund and “infuses it” into banks that are in trouble. Banks that did not engage in questionable lending practices do not receive any help and just get to pay their taxes on time. The successful banks are having their money taken to support the unsuccessful banks. It seems a little counterproductive. With the Federal Deposit Insurance Corporation guaranteeing that depositors would not lose money, banks that go under would be replaced by other successful banks rapidly and individuals would not lose any deposits less than $250,000.
In the case of the automobile manufacturers, there is no help for any of the successful companies in Tennessee, South Carolina, or Texas. The provision to give tax credits for all automobile purchases was stripped from the bill. Therefore, the only help is going to the automobile manufacturers in Michigan which have United Auto Workers Union plants. What a coincidence. Therefore, tax money from auto workers in the south who earn about $45 an hour is being used to prop up wages for union auto workers in Michigan who earn about $71 an hour. The successful companies are having their money taken away to support the unsuccessful companies. If the Michigan-based automobile companies stopped making cars, would everyone stop driving? I think not. People would buy cars and trucks from the more successful and better-run companies. The Democrats say the answer is more union involvement when the very millstone around the neck of the auto industry is the United Auto Workers.
In the case of the bail out to the states, tax money from states with responsible governments like Texas is used to bail out irresponsible state governments like California and will only encourage more bogus spending and will delay the state legislature making the appropriate decisions to balance their spending and income. California refuses to secure the Mexican border and continues to provide free health care and public education to illegal aliens. Should it surprise anyone that their budget is screwed up? The successful states are therefore being screwed to reward the unsuccessful states. Irresponsible governors like Schwarzenegger are not held responsible for their actions.
In the case of the mortgage bail out, tax money is being used to refinance mortgages of people who, in many cases, should have never qualified for a mortgage in the first place. Will those people suddenly be flush with money? What is always failed to be mentioned is that the mortgage lenders will have to make their money back somehow. Let’s see… how will they do it? They will increase the rates on newer mortgages. Who will receive those mortgages? Only those people who are well-qualified will receive them because the mortgages lenders have been burned once and won’t do it again. Therefore, money will be taken from successful home buyers to bail out unsuccessful home buyers. At least this one has a logical argument in that preventing foreclosures reduces inventory of existing homes and stabilizes home prices. It does hurt the rental market. In listening to President Obama today, to his credit, it seemed that at least someone has put some thought into this package. That is a refreshing change from "You have to sign it now or the Earth will explode" spending packages.
Did anyone notice that Senator Harry Reid snuck a hand-written amendment of five billion dollars in the stimulus bill for a light rail system from Los Angeles to Las Vegas? Bernie Madoff is a small-time operator next to Harry Reid. The worst part is that no other Senator will point out how crooked that is. Five billion dollars without a hearing, without oversight, without anything but a pen. It makes you want to vomit.
The common thread throughout the processes is obviously to reward the unsuccessful and sometimes criminal at the expense of the successful and responsible. It is economic redistribution which rewards bad behavior. In time, people who are responsible will either stop producing because it won’t be in their best interest to produce or everyone will jump on the bandwagon and just start behaving badly to get on the gravy train. The problem there is that someone has to pay for that gravy train because it is a government-sponsored Ponzi scheme. When enough people stop putting money in, the whole thing will crash. That is where we are heading with these “stimulus” packages. All they had to do was stabilize the housing market and let people keep more of their money and the problem would have corrected itself. Every time the new administration interferes, the stock market dips lower because smart business people recognize where this is headed. It is nice to finally see some effort to do something about housing. In this case, it seems the right thing to do.
Wednesday, February 27, 2008
Self-Reliance and Accountability
The liberal philosophy forgives everything. Nothing is anyone's fault. Anything bad which happens is clearly the result of evil forces, never a bad judgment on anyone's part. I wonder if that has anything to do with the Trial Lawyers Association basically owning the Democratic Party. If everything is someone else's fault, there is always a reason for a plaintiff's attorney to file for damages. No one ever does anything wrong but instead has situations foisted upon them... unless, of course, you are a Republican. In that case, you clearly are evil and it is only through fortunate circumstance that you are exposed.
Most people find over their lifetime that other than their parents, no one is ever really looking out for your best interests. The may SAY they are, but they aren't really. If your best interests happen to coincide with theirs, then okay, but when given a choice, they will always go with their own. That is a stone cold truth. The object lesson there is that you better wake up and pay attention because if you don't look out for yourself, you are going to get hosed.
There are, of course, no people more self-serving and full to their necks with fecal matter than professional politicians. Their whole goal in life is to convince people that they are looking out for the people but sooner or later, their true colors are exposed. The House of Representatives is a group of politicians who essentially continually run for office and occasionally vote on something. The Senate is a group that does mostly lip-flapping and wallow in their self-importance.
This wasn't originally about politics. What inspired me to write this time was the current housing "crisis". Recently, I have heard Hillary Clinton propose a moratorium on foreclosures. Barrack Obama has also promised help. It is an interesting problem to deal with. There is no way to correctly separate: 1) people (novices or not really smart people) who were given loans by predatory lenders and didn't bother to figure out if they could make the payments when the interest rates went up from 2) the much larger group of real estate speculators. I known what you are thinking, "These are people in their primary residences". True, but most of the people I know who overbought in the last few years did it as an investment figuring the way housing was rising in prices, they could make money by living in the house a couple of years and unloading it and taking their profit. I like to give people the benefit of the doubt so I think the group of morons (read "victims" if you are a liberal) is a minor population compared to the investment crowd. That brings in some harsh reality. If I bought Google at $200 and the stock tanked, would I be asking the government to bail me out? Most would think I was crazy for trying. That is what investing is all about. You take a risk after looking at the cost/benefit scenario. Sometimes you make money and sometimes you lose money. These people for the most part are not the victims of lenders as much as they are victims of a mob rush to make money in real estate. They gambled and they lost. I never saw a form in Las Vegas that you fill out to allow you not to pay the casino after you lose.
Last year, I found a house that was too good to pass up and paid off my 4.375% mortgage on my first home (sadly, I miss it) and bought a new house at 6.0%. My mortgage payment doubled. Before I bought the house, I did something apparently novel... I figured out if I could afford it. I also did not get an adjustable rate mortgage and spend my evenings praying interest rates wouldn't rise. Let me summarize: I bought a house I could afford and got a mortgage I could pay. I know it sounds simple but apparently it is genius to some. Senator Dick Durbin wants to allow bankruptcy judges to be able to adjust mortgages. The reason first home mortgage rates are lower than second homes, yachts, etc. is precisely because that CANNOT happen. If he succeeds in passing the legislation, people who pay their mortgages and buy houses they can afford will have to subsidize the speculators and ignorant people who buy over their heads.
But of course, it isn't their fault. It is always someone else's fault.
Most people find over their lifetime that other than their parents, no one is ever really looking out for your best interests. The may SAY they are, but they aren't really. If your best interests happen to coincide with theirs, then okay, but when given a choice, they will always go with their own. That is a stone cold truth. The object lesson there is that you better wake up and pay attention because if you don't look out for yourself, you are going to get hosed.
There are, of course, no people more self-serving and full to their necks with fecal matter than professional politicians. Their whole goal in life is to convince people that they are looking out for the people but sooner or later, their true colors are exposed. The House of Representatives is a group of politicians who essentially continually run for office and occasionally vote on something. The Senate is a group that does mostly lip-flapping and wallow in their self-importance.
This wasn't originally about politics. What inspired me to write this time was the current housing "crisis". Recently, I have heard Hillary Clinton propose a moratorium on foreclosures. Barrack Obama has also promised help. It is an interesting problem to deal with. There is no way to correctly separate: 1) people (novices or not really smart people) who were given loans by predatory lenders and didn't bother to figure out if they could make the payments when the interest rates went up from 2) the much larger group of real estate speculators. I known what you are thinking, "These are people in their primary residences". True, but most of the people I know who overbought in the last few years did it as an investment figuring the way housing was rising in prices, they could make money by living in the house a couple of years and unloading it and taking their profit. I like to give people the benefit of the doubt so I think the group of morons (read "victims" if you are a liberal) is a minor population compared to the investment crowd. That brings in some harsh reality. If I bought Google at $200 and the stock tanked, would I be asking the government to bail me out? Most would think I was crazy for trying. That is what investing is all about. You take a risk after looking at the cost/benefit scenario. Sometimes you make money and sometimes you lose money. These people for the most part are not the victims of lenders as much as they are victims of a mob rush to make money in real estate. They gambled and they lost. I never saw a form in Las Vegas that you fill out to allow you not to pay the casino after you lose.
Last year, I found a house that was too good to pass up and paid off my 4.375% mortgage on my first home (sadly, I miss it) and bought a new house at 6.0%. My mortgage payment doubled. Before I bought the house, I did something apparently novel... I figured out if I could afford it. I also did not get an adjustable rate mortgage and spend my evenings praying interest rates wouldn't rise. Let me summarize: I bought a house I could afford and got a mortgage I could pay. I know it sounds simple but apparently it is genius to some. Senator Dick Durbin wants to allow bankruptcy judges to be able to adjust mortgages. The reason first home mortgage rates are lower than second homes, yachts, etc. is precisely because that CANNOT happen. If he succeeds in passing the legislation, people who pay their mortgages and buy houses they can afford will have to subsidize the speculators and ignorant people who buy over their heads.
But of course, it isn't their fault. It is always someone else's fault.
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