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Reason Magazine: More Fun Than A Teabagger Rally

Started by Disco Pickle, May 26, 2011, 07:02:19 PM

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Disco Pickle

May 26, 2011, 07:02:19 PM
relevant to this thread: http://reason.com/archives/2009/12/10/artificial-housing-respiration

QuoteNo major newspaper seriously questions the truism that foreclosures destroy neighborhoods. No news network doubts that "troubled borrowers" are overwhelmingly good Americans who have been set back by a job loss or medical emergency. And what kind of anti-American Shylock would claim that you shouldn't give bad borrowers government-backed loan modifications, cutting their mortgage payments by 20 percent?

The interesting new wrinkle on those old, false arguments is that real estate interventionists no longer pretend they have any real goal other than keeping house prices inflated. Even a year ago, the arguments for rescuing real estate prices were phrased in broad, spillover-style metaphors—"meltdown," "implosion"—that suggested a concern for the common bystander. Today, the argument is a lot plainer: We need to keep existing homeowners (or home borrowers) from experiencing any further decline in closing prices. When I ask Rep. Brad Sherman (D-Calif.) to explain his support for extending exorbitant Federal Housing Administration loan guarantees even while the real estate market continues to cool, he replies, "The economy of Los Angeles would tank if prices fell another 50 percent." Here's how Rep. Barney Frank (D-Mass.), in an October interview with The New York Times, justified his support for the agency's shoddy lending standards: "I don't think it's a bad thing that the bad loans occurred. It was an effort to keep prices from falling too fast." Economy.com front man Mark Zandi puts it even more bluntly. The housing market, he says, "is showing improvement only because it is on government life support."

Life support is expensive. When that troubled borrower gets a 20 percent haircut, his bank has to take a loss, and the bank is compensated for the loss by you, through the $50 billion Home Affordable Modification Program. The Treasury Department has paid more than $100 billion to allow the failed government-sponsored enterprises Fannie Mae and Freddie Mac to keep on guaranteeing questionable loans. Fannie and Freddie, in turn, have been expanding rather than reducing their loan portfolios—the opposite of what you're supposed to do when you've got an unmanageable debt load.

Sherman is sponsoring legislation that will let the government keep increasing its debt exposure, and on more expensive houses. As an economic emergency measure, Congress raised the limit for the Federal Housing Administration's guarantees in high-cost areas to $729,750 in 2007, up from $625,500. With 20 percent down, that's essentially a $1 million home being funded by a government subsidy for the wealthy. When I raise this point with Sherman, he replies (inaccurately), "Well, you don't live in Southern California."

Interestingly, Sherman opposed the Troubled Asset Relief Program and has taken a fairly courageous stand against the Obama Treasury Department's proposed resolution authority for banks, in both cases out of principled opposition to the too-big-to-fail trend in finance. Yet he sees no contradiction between those stances and his goal of encouraging banks to take on more and bigger taxpayer-guaranteed mortgage loads. Unfortunately, the evidence is clear: Since 2008 the big four banks—Wells Fargo, Citibank, Bank of America, and JPMorgan Chase—have not only grown bigger (they now control 60 percent of American bank business) but have done so by expanding their mortgage portfolios (with $800 billion in first mortgages, 8 percent of the national total).

It's easy to see why interested parties such as the National Association of Realtors would support interventions such as those above and the $8,000 Home Buyer Tax Credit. (It's notable, however, that sales data in the three years since the beginning of the real estate collapse strongly suggest that a low asking price is by far the most important factor in whether a house sells.) What's not as clear is why so many other interventionists are convinced that re-inflating the real estate bubble serves the common good. Frank, Sherman, and others maintain that their efforts are a matter of constituent service. "If you're talking about international economic theory, that's a separate matter," says Sherman. "But there is no practical argument that [underwriting $1 million homes] is not in the interest of the district I represent."

I guess that depends on what the meaning of interest is. If foreclosures really destroyed neighborhoods, we'd expect to see some evidence in, for example, crime rates, which continue to decline around the country. The Washington Post, in a 2008 story on foreclosure-heavy Fairfax County, Virginia, pronounced, "As Foreclosed Homes Empty, Crime Arrives." Yet a year later, year-to-year quarterly statistics from the county's police department show crime down 1.8 percent, with double-digit drops in murder, rape, and robbery.

Meanwhile, according to the Federal Housing Finance Agency, "unemployment" and "illness" account for just 9 percent and 6 percent, respectively, of overall defaults. "Excessive obligations"—which in English means you bought more house than you could afford—causes twice as many defaults as unemployment. And the shockingly high rate of re- defaults on modified loans—more than 60 percent in some classes— argues strongly against loan modification as a public interest.

More to the point, keeping real estate inflated is not an abstract public choice experiment, in which the benefits are concentrated and the costs distributed. The policy has a very discernable victim class: would-be home buyers, whose interests are served not by tax credits or massive debt commitments but by lower asking prices. Perversely, foreclosures are the highest they've ever been in American history, yet it's harder than ever to buy a house. According to the National Association of Realtors, the median down payment by first-time buyers, even after a three-year, debt-driven economic shock, is just 4 percent. One-third of homes are still being purchased with no money down. As we learned (or thought we learned) in 2006, numbers like these are a recipe for cascading misfortunes. Renters should be angrier than ever.

Imagine a yard sale outside the biggest, fanciest house in town. You get there early, eager to buy cool stuff cheap. But every time you see something you like, a police officer comes along with a Sharpie, crosses out the price, and writes in another number that's two or three times higher. Scale that up a bit, and you have the Obama housing plan.

The prevailing idea that any market led deflation of value or any deflation of value at all really, will always be worse than artificial inflation and should be prevented at all costs is, IMO, the biggest part of the problem.

It will continue to create bubbles and lead to more recessions and their spacing will get closer and closer together.
"Events in the past may be roughly divided into those which probably never happened and those which do not matter." --William Ralph Inge

"sometimes someone confesses a sin in order to take credit for it." -- John Von Neumann

The Good Reverend Roger

#1
May 26, 2011, 07:06:45 PM
Reason.com.

:lulz:

You ever SEE an empty neighborhood?  They listed the crimes that don't have any correllation.

They haven't listed trespassing, meth labs, vandalism and arson.  I wonder why that is?

And I wonder what will happen to the crime rates when the "entitlements" that the libertarians bitch about so much go unfunded?
" It's just that Depeche Mode were a bunch of optimistic loveburgers."
- TGRR, shaming himself forever, 7/8/2017

"Billy, when I say that ethics is our number one priority and safety is also our number one priority, you should take that to mean exactly what I said. Also quality. That's our number one priority as well. Don't look at me that way, you're in the corporate world now and this is how it works."
- TGRR, raising the bar at work.

LMNO

#2
May 26, 2011, 07:09:14 PM
I guess screwing the existing home owners isn't of much of a concern to you, Pickle.

Cain

#3
May 26, 2011, 07:09:19 PM
Quote from: The Good Reverend Roger on May 26, 2011, 06:54:36 PM
I think Cain may be a tad optimistic.

To be fair, I meant 19th century Ireland.  Around 1845 or so.

The Good Reverend Roger

#4
May 26, 2011, 07:09:45 PM
Quote from: Cain on May 26, 2011, 07:09:19 PM
Quote from: The Good Reverend Roger on May 26, 2011, 06:54:36 PM
I think Cain may be a tad optimistic.

To be fair, I meant 19th century Ireland.  Around 1845 or so.

Okay, I can see that.
" It's just that Depeche Mode were a bunch of optimistic loveburgers."
- TGRR, shaming himself forever, 7/8/2017

"Billy, when I say that ethics is our number one priority and safety is also our number one priority, you should take that to mean exactly what I said. Also quality. That's our number one priority as well. Don't look at me that way, you're in the corporate world now and this is how it works."
- TGRR, raising the bar at work.

The Good Reverend Roger

#5
May 26, 2011, 07:11:25 PM
Quote from: LMNO, PhD on May 26, 2011, 07:09:14 PM
I guess screwing the existing home owners isn't of much of a concern to you, Pickle.



Only corporations matter, LMNO.

Because they're not stupid and inefficient, like the government.   :lulz:

And because the purpose of society is to keep the shareholders happy.  That is THE only thing that matters in 21st century America.  It is the sole reason for civilization.

And it never, ever causes problems.  If it did, that's your fault.
" It's just that Depeche Mode were a bunch of optimistic loveburgers."
- TGRR, shaming himself forever, 7/8/2017

"Billy, when I say that ethics is our number one priority and safety is also our number one priority, you should take that to mean exactly what I said. Also quality. That's our number one priority as well. Don't look at me that way, you're in the corporate world now and this is how it works."
- TGRR, raising the bar at work.

LMNO

#6
May 26, 2011, 07:18:20 PM
Oh yeah.  I forgot.

The Private Bank serves the interests of the People, who are entitled to redress.  Of course.

The Good Reverend Roger

#7
May 26, 2011, 07:18:36 PM
I just hopped over to reason.com.

The ad banner at the top is for government grants.   :lulz:
" It's just that Depeche Mode were a bunch of optimistic loveburgers."
- TGRR, shaming himself forever, 7/8/2017

"Billy, when I say that ethics is our number one priority and safety is also our number one priority, you should take that to mean exactly what I said. Also quality. That's our number one priority as well. Don't look at me that way, you're in the corporate world now and this is how it works."
- TGRR, raising the bar at work.

Disco Pickle

#8
May 26, 2011, 07:21:52 PM
Quote from: LMNO, PhD on May 26, 2011, 07:09:14 PM
I guess screwing the existing home owners isn't of much of a concern to you, Pickle.



The values in 2008 were completely inflated.  Existing homeowners got screwed when it burst.  Trying to artificially inflate the value back to what it was before it burst prevents new people from coming in and buying a house they can afford.  
"Events in the past may be roughly divided into those which probably never happened and those which do not matter." --William Ralph Inge

"sometimes someone confesses a sin in order to take credit for it." -- John Von Neumann

The Good Reverend Roger

#9
May 26, 2011, 07:23:09 PM
Oh, wow!  A straw poll!

Palin
Gingrich
Romney
Paul
Pawlenty
Huckabee
Bolton
Johnson

In that order.   :lulz:

Good thing its not a wingnut site.

Also, a pile of polls that agree in all ways with the libertards, with no methodology shown.  Loads of interviews with teabaggers, and a bunch of shit about why the elderly & poor should be left out to die (TBH, it's worded that they should have "choice" in health care, and we all know that code word by now).
" It's just that Depeche Mode were a bunch of optimistic loveburgers."
- TGRR, shaming himself forever, 7/8/2017

"Billy, when I say that ethics is our number one priority and safety is also our number one priority, you should take that to mean exactly what I said. Also quality. That's our number one priority as well. Don't look at me that way, you're in the corporate world now and this is how it works."
- TGRR, raising the bar at work.

The Good Reverend Roger

#10
May 26, 2011, 07:24:15 PM
Hey!  It's also, it seems, un-American to point out that living on fast food makes you fat.

:lulz:

Not "legislation", mind you, but merely pointing out the fact.
" It's just that Depeche Mode were a bunch of optimistic loveburgers."
- TGRR, shaming himself forever, 7/8/2017

"Billy, when I say that ethics is our number one priority and safety is also our number one priority, you should take that to mean exactly what I said. Also quality. That's our number one priority as well. Don't look at me that way, you're in the corporate world now and this is how it works."
- TGRR, raising the bar at work.

Freeky

#11
May 26, 2011, 07:25:10 PM
Quote from: The Good Reverend Roger on May 26, 2011, 07:23:09 PM
Oh, wow!  A straw poll!

Palin
Gingrich
Romney
Paul
Pawlenty
Huckabee
Bolton
Johnson

In that order.   :lulz:

Good thing its not a wingnut site.

Also, a pile of polls that agree in all ways with the libertards, with no methodology shown.  Loads of interviews with teabaggers, and a bunch of shit about why the elderly & poor should be left out to die (TBH, it's worded that they should have "choice" in health care, and we all know that code word by now).
Quote from: The Good Reverend Roger on May 26, 2011, 07:24:15 PM
Hey!  It's also, it seems, un-American to point out that living on fast food makes you fat.

:lulz:

Not "legislation", mind you, but merely pointing out the fact.
:retard:

The Good Reverend Roger

#12
May 26, 2011, 07:25:37 PM
Apparently Rand Paul is something of a hero, there.

Must be an Appalachia thing, I think.  Curbstomping an uppity woman = Instant Cred.
" It's just that Depeche Mode were a bunch of optimistic loveburgers."
- TGRR, shaming himself forever, 7/8/2017

"Billy, when I say that ethics is our number one priority and safety is also our number one priority, you should take that to mean exactly what I said. Also quality. That's our number one priority as well. Don't look at me that way, you're in the corporate world now and this is how it works."
- TGRR, raising the bar at work.

The Good Reverend Roger

#13
May 26, 2011, 07:28:24 PM
WOOOOOOOOOO

http://reason.com/blog#article_149664  <--- The video clip at the top.

Also, Fox News is now a credible news agency.
" It's just that Depeche Mode were a bunch of optimistic loveburgers."
- TGRR, shaming himself forever, 7/8/2017

"Billy, when I say that ethics is our number one priority and safety is also our number one priority, you should take that to mean exactly what I said. Also quality. That's our number one priority as well. Don't look at me that way, you're in the corporate world now and this is how it works."
- TGRR, raising the bar at work.

The Good Reverend Roger

#14
May 26, 2011, 07:29:48 PM Last Edit: May 26, 2011, 07:31:54 PM by The Good Reverend Roger
" It's just that Depeche Mode were a bunch of optimistic loveburgers."
- TGRR, shaming himself forever, 7/8/2017

"Billy, when I say that ethics is our number one priority and safety is also our number one priority, you should take that to mean exactly what I said. Also quality. That's our number one priority as well. Don't look at me that way, you're in the corporate world now and this is how it works."
- TGRR, raising the bar at work.
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