DCM

A Self-Serving Non-Solution to Negative Equity in America

Mr. Shedlock, your attitude is as self-serving as Mr. Ross’s! You don’t want to make any sacrifice for someone else’s misfortune. If someone else got screwed over, that’s their problem; they should have known better. If someone is homeless, well, they deserve to be; all they need to do is get a good job. If some child goes hungry – tough luck, their parents should be better providers. We can go on and on but at the end of the day, it’s all about the haves and the have nots.

Given this popular self-serving mentality found in America today, it comes as no surprise that any solution to this uniquely profound mess were in, will always meet resistance from the haves. To quote Shedlock, “The real problem in the US is that home prices are still too high and those prices need to come down, not propped up by self serving bailouts.” Mr. Ross’s solution may be self-serving but it may also serve the needs of millions of Americans. I think there is a better solution but to denounce it because it is self-serving is irresponsible. You would think it would be clear by now, that if a solution is not found for this unprecedented economic fiasco, the fallout is going to grow even more painful and become more protracted. Letting the market work it out and not doing anything for millions of Americans is totally irresponsible. If this market is left to work itself out, the damage is going to be a hundred times more horrific than Katrina.

Mr. Shedlock, I have for you and your ilk, the same disgust as you do for the “self-serving” Mr. Ross. You’re just as self-serving! You oppose a taxpayer bailout. “What's unreasonable is to expect those not in trouble to bail out those in trouble.” I would suggest that this country is in great economic trouble and it is affecting most Americans. All too many people have this attitude of protecting their own at the expense of all others. Since Katrina, the attitude of most in the country is that “those people” had no business building homes below sea level, and they should not expect to be bailed out because they did not have insurance to cover their loss. The attitude of it's their problem, don't look to me for help only pushes more people into economic distress which the taxpayer ultimately pays for.

I hope baby boomers nearing retirement are paying close attention to the self-serving attitudes of Mr. Shedlock and his kind. For most of you, your primary retirement nest egg is evaporating by the minute. “Analysts have forecast that by June 30, 10.6m families will have either no equity in their homes or a negative equity.” This is an alarming statistic given that about 70% of the 80 million families in America own a home and that this situation is forecasted to get much worse. We could have one in four families with no or negative equity in their homes. What about the people that lost only 50 to 100% of their equity? For those of you in your 20’s, 30’s or even 40’s, a 50% to 100% decrease in equity may seem like no big deal as there will be time to recover. However, how can you assume that prices will bounce back? Is it because they have before? Our country has never experienced an economy like today’s nor a housing bubble of this magnitude. All the circumstances that led us to this point have never been experienced before. As long as we have more homes than buyers, mortgage debt greater than home values, and an illiquid marketplace, it is hard to imagine how home values could increase across the board until these dynamics change.

Maybe Mr. Ross’s solution is the wrong one but it is not wrong because it is self-serving. The wealth in this country has never been more disproportionate. The people who benefited from the housing bubble (investors, lenders, builders, and all the ancillary real estate actors) are not being held accountable for their greedy and self-serving actions. Punishing people foolish enough to pursue the dream of homeownership and those gawd awful small time home flippers is not the answer. You keep pushing these people lower on the food chain and I promise you, the taxpayer's bill will only go up. The government needs to step in and take steps to reallocate wealth in America because our free market capitalism is darn sure not going to do it.

The Fed is Terrified

There is only one solution to our economic dilemma - redistribution of the wealth. It is both absurd and crass that 10% of the population holds 90% of the wealth.

I suggest that for those of you that think that the answer is to punish all the people who have been living beyond their means, you can rest easy, as that is exactly what is happening and is certain to continue. By one estimate, at least $2 trillion of equity will be eradicated as the result of this housing bust. Will the market come back? Will housing prices increase? Maybe someday but given the systemic problems in the lending system that led to this bust, it is unlikely that credit will be eased and even if it were, will there be investors willing to buy sub-prime mortgages again? The only way home equity will increase will be as mortgage principal is paid down. With retirement looming, many of us baby boomers, who have endured many inflationary periods since entering the work force and who have seen a large percentage of our jobs and careers lost and/or outsourced to high tech and third world countries, now face the prospect of little or no retirement savings, social security nor equity from our homes. Given the foreseeable future, we are in for hyperinflationary times and with no medical safety net until we qualify for Medicare and how long or to what level will that remain intact?

A large percentage of the baby boom generation is going to get completely screwed over. But, I am sure some of you think, we are just being whiney! The irony here is that many of you are the offspring of baby boomers and we brought you into this world, raised you and educated you. It is true we borrowed a lot of money and often lived beyond our means but we also became two income families and took second jobs to raise a family and have some comforts. Now that our kids are adults and prospering in this new high-tech economy, you are ready and willing to throw us under the bus for our errs.

UBS: U.S. Bailout for Homeowners Will Arrive by October

I am sitting here thinking, I didn't do anything to cause this mess. Yet, my single largest equity position (my home) has dwindled to near zero. To add insult to injury, I have put a lot of money into maintaining and improving my home which is now apparently for the lender's financial benefit. The stock market has tumbled as the result of this financial meltdown (I don’t even own any financial stocks) and the value of my stocks are negative from what I paid. The credit card companies (banks) are taking unusual steps to increase revenues by jacking interest rates and fees whenever possible even on their best customers. This recession or however you want to describe it is taking a huge toll on honest hardworking middle class Americans, not to mention those less fortunate.

In the past 2 years my financial position is in the toilet because of this entire housing/sub-prime/cred... crunch crisis. I am approaching retirement and right now I cannot afford to retire. I did nothing wrong and held up my end of every financial obligation I entered into. Yet, a few extremely wealthy people are getting away Scott free having received billions of dollars in compensation (salary and bonuses) for getting us into this mess. Greed is rampant and unchecked in our capitalistic society. I am all for getting ahead, but not at the expense of my fellow Americans. The monetary policy of this country amounts to trying to put out a raging inferno by pissing on it. Now the taxpayer is going to subsidize all these transgressions by the wealthy; the rich will keep their billions; and, I guarantee you, they will be in position to capitalize on these down markets and get even richer in the years to come. Of course, Congress and whoever’s President will be paid off to protect their wealthy patrons. And, the corporate owned mainstream media will cleverly cast this all so that the wealthy are not implicated by blaming people for taking out mortgages they cannot afford. We are screwed!!