Tuesday, February 24, 2009

A rant against the poor

As a new first time home owner part of me isn't sympathetic to those who bought larger than they could afford. But then we were told that America was supposed to be an ownership society. The economy seemed to be heading endlessly upward. The Dow reached nearly 15000. Bank stocks, two of which we owned, were heading upwards. We continued renting because buying in Santa Barbara is an impossibility for the middle class. The 40 year old 1500 square foot house we were renting would have gone for probably 800,000 as a fixer upper.

We bought at just the right time, when prices were tumbling but the credit had yet to freeze. We refinanced because the value of our house remained stable, but had you bought a house, lets say 2 years ago, the value of your house may have dropped 30 or 40%. You can't refinance, because the house isn't worth what you paid for it. If you lost your job, how do you make the payments? I'm fortunate. I have a stable job that pays enough to pay the house payment.

I write this as context. I didn't see the Rick Santelli rant against Barack Obama's housing program, which suggested that Obama would reward losers for making bad decisions. I hear it was quite popular. Indeed, as I read the comments to a Chicago Sun Times essay written by my friend Diana Butler Bass in response to Santelli, I saw little sympathy or support. Diana told the story of a widow, who had been suckered into a bad mortgage refinancing that allowed her to pay off bills, but when the economy went south she became in danger of losing everything.

Diana writes:

Mary is not a loser. Mary is a victim of the greed of members of Santelli's business class -- people who made money off the plight of a grieving widow and, as I can only imagine, thousands and thousands of good people like her. People who believed that if they worked hard, one day their neighbors might take care of them if they were in need -- people who both made and believed in the American dream.

These are difficult times. I recognize that many people made bad choices, some of which were based on promises sold to them by unscrupulous folk. Of course, some of those who sold the products themselves believed that the sky was the limit. Then the bubble burst and everyone is suffering.

Perhaps it's time for a bit of empathy, not just sympathy. Perhaps it's time to come together as a nation and find a solution. It won't be easy. Sacrifices will have to be made. But can't we find a way to help people stay in their homes. Foreclosed homes don't help the banks nor do they help the property values of the rest of us. Let's come and reason together!

1 comment:

Anonymous said...

As an evil banker and Christian, here is my perspective for whatever its worth.

First, I saw Rick Santelli and actually I have always been a fan of his. He is on a program where most people are salesman or "talking heads", spouting off ideas with no real consequence. Rick reports out of the bond pits, he is a former trader that works with people betting their own money every day. Rick was showboating, but the point is simple. When people fail to feel pain, they will simply keep doing the wrong thing. The comment was made about a "moral hazard".. what that means is when people learn that someone will bail them out, they keeping doing the same behavior. A simple example might be.. if you found that if you speed, the police won't give you a ticket, you will probably keep going faster and faster b/c there is no responsibility.

As to the "widow", the obvious response is you can't make the exception the rule. The Bible might say she should look to her family first before going to the state. However, if there is a poor old woman who can't make payment, I think were are ok with that idea. Its the massive scale that gets everyone excited. Its the beginning of a class warfare where half the population is paying for the other half.

So.. what do I think needs to happen. I think banks have to suffer and homewoners. Banks make a bet on you when they make a loan. They risk grade you, the charge a rate based on that rate, they look at the collateral and make the loan. If you can't pay, the bank has to take the hit. On the flip side, if you can't pay for you house, you can't stay in it. These evil speculators are exactly who you need right now to buy the foreclosed house and clean out inventory. Its tough, its harsh.. but we have to rip the band aid off. House prices have to return to normal levels, otherwise we are supporting a false price level and will fail. The Bible is dead on about moths eating treasures and sadly that is where we are.

Sorry for the length

Chuck