Alan Greenspan, Ben Bernanke, and the rest of the crew running economic policy somehow could not see the housing bubble as it grew to more than $8tn. It really should have been hard to miss. ...Dean Baker goes on echo my rants about the financially-unstable FHA.
As a result of this astounding incompetence, we are now living through the worst downturn since the Great Depression. Because Greenspan and Bernanke and the rest messed up, tens of millions of workers are unemployed. ...
Remarkably, the folks in charge seem to have learned zip. They still have no clue about the housing bubble. How else can anyone explain the Obama administration's latest proposal for helping out underwater homeowners?
If the point is to help homeowners then there are two incredibly simple questions that must be asked:
1. Are homeowners paying less under the plan than they would to rent the same place?
2. Are homeowners going to end up with equity in their home?
These are the key questions, because if we can't answer yes to at least one of them, then we are not helping homeowners. If we can't answer yes to at least one of these questions, then taxpayer dollars being put into the programme are helping banks, not homeowners.
Unfortunately, it seems no one in the Obama administration has yet been told about the housing bubble. There is no evidence that they ever considered these questions in designing the latest policy to "help" homeowners.
Wednesday, March 31, 2010
Dean Baker: Obama helping banks, not homeowners
Economist Dean Baker says the latest Obama plan to "help" homeowners will only help banks. I agree.
Subscribe to:
Post Comments (Atom)
Posts
#2 is a divine right in America. We are just in a temporary lull and as long as people stay put they will eventually not only get equity but profit as well. #1 is always, no matter what, throwing money away.
ReplyDeleteThere, I've explained the mentality of the vast majority and why ANYTHING to keep people in their homes is considered a good thing.
They will do anything to help the banks and therefore help housing. The interconnection between the two is sacred. When the foxes are guarding the henhouse, expecting the right thing to be done is unrealistic.
ReplyDeleteThe economy is rebounding. Housing and employment are up again, and so is the stock market. Isn't this clearly a market rebound? Government data seems to suggest we are out of the woods and heading higher.
ReplyDeleteHow's that Hope and Change working out for you? Nothing new here; just the same old transfer of wealth from the citizenry to the REIC, laundered through residential real estate.
ReplyDeleteCan't you just smell the "gravitas" emanating from the "Change Agent?"
Anon 8:11 is correct. The justification for these types of programs is always based on peoples' fears that they will lose equity in their homes. Our masters in the federal government, and their masters in the REIC, have finally figured out that sympathy for deadbeat borrowers doesn’t play with the public. Therefore, the new justification for government interference in the housing market is that, although people who go into foreclosure might not deserve help, we must help them or they’ll drag everyone’s housing values down along with them.
There are a million reasons why this argument is insufficient to support these types of programs, but the argument is difficult to defeat because it is not based on reason. It is, at its heart, an appeal to peoples’ fears of losing something that they believe is theirs by right, i.e. their home equity.
Notice how the benefits of lower housing prices for everyone who either does not own a house or would like to move up some day is totally ignored. Whenever this issue is presented, the proponents of these programs respond with some fuzzy calculus about how inflated asset prices are real wealth and create jobs for renters, etc. Once again, a million reasons why this calculus does not hold water. But a mortal man will never allow the facts to get in the way of his perceived self interest.
Is it right-wing nut, or right-wingnut?...I'm not sure which is the accepted label. Anyway, the latest program aimed at addressing the foreclosure crisis is another attempt to stabilize the housing market. First, keeping those that are temporarily unemployed in their homes keeps their homes from falling into the foreclosure process further depressing the housing market. It's not like they can just put their home (which is likely underwater) up for sale and rent until they find employment. Second, the number of homeowners receiving assistance is not likely to be far reaching just as the previous program. If there are only a relatively few who qualify and receive modification, fine...the rest must not meet the criteria and provide benefits to taxpayers. If you think stabilization of the economy is motivated by self-interest, then you just don't get it and probably never will.
ReplyDeleteTuskenrayder said...
ReplyDelete"Is it right-wing nut, or right-wingnut?"
Dean Baker is no right-winger. Quite the opposite, he leans strongly Democratic.
Tomorrow's post will quote a right-winger.
In case that was directed toward me, I'm not right wing either. On the left/right spectrum I'm a moderate leaning very slightly left. My presidential voting history is: Obama, Kerry, Gore, Clinton.
It's funny Tuskenrayder tries to inject this "right versus left" mentality into the conversation when it seems people from all ranges of the political spectrum agree pretty well that Obama is perpetuating idiotic policies based on the ridiculous notion that everyone should "own" a house, i.e. pay the banks for the privilege to live in their homes.
ReplyDeleteExactly - Tusky is a fool.
ReplyDeleteThis is not a "right/left argument" - it is a "responsible versus irresponsible" argument.
Irresponsible borrowers (NOTICE: THEY ARE NOT HOMEOWNERS, in fact if underwater that own less than zero!) need to be booted to somewhere that they can afford, even if a homeles shelter - and the free market, "propped up" by strict lending criteria, should determine who is responsible enough to apply for a chance at home ownership, at a free market price.
And we should tax obesity too.
Homeowners, many who LIED about their incomes, are being allowed to stay WITHOUT MAKING PAYMENTS FOR AS MUCH AS 30 MONTHS! This, and all the programs allow banks to NOT MARK DOWN BAD LOANS! That's the goal, mark to fantasy, all delay tactics, and it should be criminal! These people should be renting! 60% re-default on workouts. This, while savers are punished (ZERO INTEREST) while the Primary Dealer Scumbags borrow and SPECULATE! That's the greatest transfer of wealth in US history, most Americans are oblivious to it, they're all dumbass debtors.
ReplyDeleteThe left used to primarily care about helping the poor, but in Tuskenrayder's world it's all about helping upper-middle class homeowners.
ReplyDelete"How's that Hope and Change working out for you? Nothing new here; just the same old transfer of wealth from the citizenry to the REIC, laundered through residential real estate.
ReplyDeleteCan't you just smell the "gravitas" emanating from the "Change Agent?"
Maybe I'm wrong, but this sure sounds like the language being used by the right-wing nutjobs
I think what many of you fail to realize, that the upper middle-class educated elites like myself understand, is that we live in a (sometimes) functioning society. The benefits of a stable economy far outweigh any need for punishing those who took excessive risk. Regulation should address the conditions that led us to this path. If poor people have to lose their homes because they made bad choices, so be it. If poor people receive assistance from the tax paying upper middle-class and filthy rich to stabilize the economy, who cares?
ReplyDeleteI dispute the idea that prolonging a market correction stabilizes the economy. If something is overpriced, you don't help the economy by keeping it overpriced.
ReplyDeleteTuskenrayder: "...upper middle-class educated elites like myself understand..."
ReplyDeleteWhy do I get the funny feeling you were being serious when you typed this?
Tuskenrayder: "The benefits of a stable economy far outweigh any need for punishing those who took excessive risk."
ReplyDeleteI have not seen a comment as foolish as this. Since when is letting individuals/entities default for taking excessive risk a punitive measure? The ones punished are the individuals forced to pay for bad choices of others. To quote your buddy Barney Frank: "Just what planet are you from?"
"Since when is letting individuals/entities default for taking excessive risk a punitive measure?"
ReplyDeleteForeclosure is the punishment, defaulting is act that individuals/entities are being punished for...which I have no problems with, it just doesn't that high on my list of priority in stabilizing the economy.
"The ones punished are the individuals forced to pay for bad choices of others. To quote your buddy Barney Frank: "Just what planet are you from?"
First, how did you know I was an admirer of Barney Frank? Second, I agree, the future taxpayers have been punished for the misdeeds of those responsible for almost driving the economy of the cliff. If you're under the illusion that current taxpayers are picking up the tab, then I ask, "what planet are you from?"
"I dispute the idea that prolonging a market correction stabilizes the economy. If something is overpriced, you don't help the economy by keeping it overpriced."
ReplyDeleteJames: I don't look at a home as merely an asset. That it's become viewed as an investment is one of the reasons for the bubble. When my grandparents invested in real estate, it meant something different than it does now. They purchased land and developed it with multi-family and sometimes single-family dwellings. They actually added value. Recently, we had rampant flipping or even buying of property to rent out and later cashing-in on unsustainable appreciation. What value was added in this...isn't it just another Ponzi scheme?
Back to your point about market correction. At least we both agree that the market is in the middle of a correction and that government policies are preventing the correction from submiting to the powers of the free market. But, if you insist on viewing a home as an asset, you must consider it in terms of being an illiquid asset (and usely a highly leveraged one at that). The free markets are just one very large part of the economic engine. There are a myriad of other moving parts in this engine and if any one of them fail to function, the whole system fails to perform optimally or even not at all.
"Second, I agree, the future taxpayers have been punished for the misdeeds of those responsible for almost driving the economy of the cliff. If you're under the illusion that current taxpayers are picking up the tab, then I ask, "what planet are you from?""
ReplyDelete- - - - - - -
WTF!!!???
So it is different or somehow acceptable to screw future generations, as long as the current taxpayers don't have to pay? You must be an elected official - your logic is perfect for the job!
Tuskenrayder said...
ReplyDelete"Maybe I'm wrong, but this sure sounds like the language being used by the right-wing nutjobs."
-----------------------------------
Did they ever teach you the meaning of "ad hominem" at whatever elite school you attended?
Anyway, I'm not saying that this administration is any worse than the last with respect to interference in the housing market. I'm saying that it's carrying on the same policies of every administration in my lifetime. Thus, no real change. Certainly no help for the poor, as the poor are being priced out of the housing market by bank subsidies.
Really, my comment was directed at myopes like you who seem to think that our D politicians are better than our R politicians or vice versa.
Again, you keep trying to make this partisan. I am not. I think that we need term limits and a reset - vote 'em all out, except for Ron Paul.
ReplyDeleteSo you're obviously sharing the same planet as Ron Paul...now I get it.
ReplyDeleteYup - a planet for responsible individuals. We believe in the US Constitution.
ReplyDelete