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The Obama housing plan is doomed to fail, Martin Feldstein says, because it fails to address...
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Sunday, August 9, 2009, 10:49 AM ETThe Obama housing plan is doomed to fail, Martin Feldstein says, because it fails to address defaults driven by mortgages deeply under water. His solution: Allow homeowners to reduce mortgage principal in exchange for converting their loans to ones that cannot be discharged in bankruptcy.
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This news story has 6 comments:
"Bankruptcy" is just the final legal technicality that confirms the obvious, that the debtor is unable to pay his/her bills. Saying that a debt would survive bankruptcy makes it no more payable. Value doesn't get "invented" just for changing the bankruptcy law.
And, heck, if somebody offered me a refinance at lower principal, but with the stipulation that this debt would carry recourse forever, I'd opt for immediate foreclosure or bankruptcy, instead.
And, who is going to absorb this writeoff in principal? the banks? I don't think so. the taxpayers? sorry, while I may harbor some sympathy for those who made bad investment or purchase decisions, I don't believe it is the responsibility of the American taxpayers to pay their bills.
I read an article last week with a woman that turned down a loan modification from 3500 to 2500 because "she is entitled to more". We can modify loans all we want....those that don't have jobs probably have to leave anyways. And I don't want to modify loans at taxpayer expense for those that can pay but just don't want to because the hypothetical value is less than when the bought the house.
Longer term we aren't endangered by "under water" mortgages.....we are endangered by the sense of entitlement that has become public policy - live as well as you think you should as opposed to living as well as the fruits of your labor allow you.
If I go to Vegas and lose 100 Grand on gambling, women, and wine can I walk across the street to the Government gambling office and say, "hey, I can only afford to lose 5K"...and they make up the difference??? Because this is basically the same thing - I bought a 500K house that is only worth 275K and the government makes up the difference???
"Its really sad that people think the answer to our problems is for the government to "give" things to people. ..we are endangered by the sense of entitlement that has become public policy - live as well as you think you should as opposed to living as well as the fruits of your labor allow you."
Society cannot function when NOBODY takes responsibility for their own actions.
As for US government, it is about to go bankrupt at any moment. US government has crossed the Rubicon, i.e., there is no way back. It will never be able to make good on all its international and domestic debts and obligations.
All these "intellectual" discussions about "new and more advanced" government schemes to promote irresponsible and reckless behavior are just unsubstantiated wishful thinking.
It is of great interest that none of our "great" thinkers offered a time-proven solution: a free-market approach when US government, instead of fighting an inevitable losing war of saving/preserving the already irreversibly failed economic system, will try to concentrate its efforts on just providing some safety net to mitigate excessive pain and suffering.