Flip This House, Congress!

It wasn't that long ago (was it?) that President-elect Barack Obama and every pol in either party was flapping his gums about "a new ethic of responsibility."

Part of the reason this crisis occurred is that everyone was living beyond their means-from Wall Street to Washington to even some on Main Street. CEOs got greedy. Politicians spent money they didn't have. Lenders tricked people into buying homes they couldn't afford and some folks knew they couldn't afford them and bought them anyway.

We've lived through an era of easy money, in which we were allowed and even encouraged to spend without limits.

Yeah, yeah, it was easy credit ripoffs at every level that gave us the bubble, the bust, the bailout, whatever. When I hear the word art responsibility, I reach for my wallet (too late!).

So we all know the solution to this problem, right? Giving people more easy money! Especially to buy houses! New houses! Bigger houses! From a Reuters account of a recent Congressional grilling:

Rep. Maxine Waters, a California Democrat who had supported the $700 billion program, pressed [Treasury official Neel] Kashkari for actions that would throw troubled homeowners a lifeline.

"Please don't come here and ask for another penny because if you do, I'm going to work 24 hours a day with the same people I worked with to support you to make sure that they do not support giving you another dime," she said.

Kashkari defended the Treasury's strategy of first trying to stabilize the financial sector by injecting capital into banks, saying confidence had to return to the system before lending would pick up.

He said the department was looking "very seriously" at a plan that would issue 30-year fixed rate mortgages at 4.5 percent, about a full percentage point below their current level.

"Reducing interest rates to get borrowers off the sidelines so they can afford to buy a home for the first time or afford a bigger home is the only thing that's going to help home prices, so we think it has some merit," Kashkari said.

More here.

Everybody who has a 30-year, fixed-rate mortgage at 4.5 percent, raise your hand! All one of you!

Do you get that? This bailout is truly sickening for reasons that are virtually beyond calculation. But here's a starting point: Why should any of us who rent or own pay our rent or mortgage in a world where by defaulting or being late you can get the best damn deal in town? Or maybe even a "bigger home." Flip this house, Congress, President Bush, President-elect Obama.

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  • The Democratic Republican||

    I am hoping that when Gillespie typed "flip this house" he was raising his middle finger.

  • ||

    Why is keeping home prices high "helping them"? Why are homes different than, say, oil? When oil was over $100/barrel, nobody in Congress was saying we need to "help" oil prices. Nobody says we need to "help" health care costs. Nobody says we need to "help" the prices of any other product. Houses and condos are somehow different. We must do everything we can to price potential buyers out of the market by giving them credit. Isn't that what got us into this mess in the first place?

  • Kolohe||

    When oil was over $100/barrel, nobody in Congress was saying we need to "help" oil prices.

    Actually, it was Congresswoman Waters herself that said the oil companies needed to 'help' oil prices (get lower of course), or Congress would "socialize" them.

  • ||

    The first data are coming in on the first batch of crammed-down mortgage restructurings.

    Guess what? Half the people who had their mortgages restructured went right ahead and defaulted on their new mortgage. Who coulda seen that coming?

    Like I said earlier, the next four years will provide ample opportunity for libertarian "I told you so"s.

  • MAX HATS||

    As a non-homeowner who is partially been waiting for prices to fall, I guess the national consensus is that guys like me deserve to be fucked. Sure, whatever. But I'm leaving the socks on, and I'm going to look bored. Take that, America.

  • Egosumabbas||

    The more I read retarded schemes like this from our congress critters, the more I believe Hans-Hermann Hoppe that monarchy is better than democracy. Any takers for Consul For Life?

  • ||

    Isn't that what got us into this mess in the first place?

    Now you're getting it. The best part of the 800 billion ring circus that is this bailout mania is that it just keeps getting more insane. I'm starting to hope that the insanity never stops and within a year we're all fighting over gas and making speeches from the backs of our death cars over an intercom with an Austrian accent. Just walk away, Congress. Just walk away, and we'll spare your lives.

  • phalkor||

    I read a newspaper today *gasp* and it had a neat little article about how people were becoming purposefully delinquent on their mortagages in order to qualify for this.

    It also said they would evaluate their W-2s and financial records, and *hopefully* some of these people will be fucked.

    I think the people who put their mortgage first and actually were responsible and cut down on expenditure and run on sentences really got screwed in this.

    ass-blastin!

  • Egosumabbas||

    "As a non-homeowner who is partially been waiting for prices to fall, I guess the national consensus is that guys like me deserve to be fucked."

    I guess I'm not the only "jealous bitter renter" here then. Sometimes I think the baby boomer's new motto is "trust no one under thirty", since arguably they're the ones who are behind the bailout. The whole purpose is to keep stocks and home values inflated at any cost--even if it means their grandchildren will be perpetual renters.

  • ||

    Easy credit rip-offs,
    Good Times.

  • ed||

    Somewhat off-topic, but I just watched a very angry Congress-thug on C-SPAN vent his impotency at Kashkari during yet another show-hearing, grilling him mercilessly about AIG bonuses, trying to pigeon-hole him (Kashkari) into stating that the bonuses should be revoked. Again and again he asked Kashkari if he understood how upset his constituents were, and Kashkari attempted to explain, only to be interrupted by the angry Congress-thug.

    If Kashkari had any balls, his response, finally, would have been: "I understand that you are looking for a scapegoat for the financial mess in which you and others in Congress are culpable, and that you are creating juicy sound-bites for the evening news." Alas, he hadn't the wit or balls to say it, though I believe he wanted to.

    Watch for those sound-bites at 6:30 P.M. Eastern time. Check your local listings.

  • squarooticus||

    Why is keeping home prices high "helping them"?


    The Austrians have been telling you the answer repeatedly, but none of you listen: higher home prices have become a requirement to perpetuate the consumer-oriented, credit-based economy that nearly the entire world has succumbed to. Without constantly rising home prices, people can't borrow and spend, which leads to dropping demand for consumer goods, which leads to unemployment, which leads to further reductions in the ability of people to borrow and spend. Repeat ad nauseam. This would lead to a consumer-led depression, the first stages of which we are seeing right now.

    The existing economic order is entirely broken as a result of this house of cards built on a shaky foundation. The financial crisis was the trigger, but it isn't just the big bankers who are going to get screwed.

    The way Bernanke, Paulson, et al. are going to "solve" this problem is by reinflating the credit bubble with newly-printed money. This will unfortunately result in massive inflation the magnitude of which no one can really predict today, because it depends on how the Mexican standoff between US Treasury holders goes. Either way, though, strongly fiat currency-linked assets (fixed-benefit pensions, loans, fixed-rate long-term bonds, corporations that rely on consumption) are going to dramatically fall in real value and everything with intrinsic value (natural resources, precious metals, etc.) will have to go through the roof in nominal price simply to stay constant in real value.

    This stuff really isn't rocket science, but it takes letting go of assumptions about economic downturns and government- and establishment media-fuelled propaganda about greedy bankers "causing" this problem and how the economy is really "fundamentally sound." I don't understand how anyone---ANYONE---who investigates this stuff even on a hobbyist level (as I do) can conclude anything but that a massive bust in virtual wealth is currently occurring, and that the only choice the central bankers have to avoid a depression is to inflate, inflate, inflate.

  • ||

    15-year fixed rate 5.75%, bitches.

  • ||

    JUNKIE ECONOMY!
    JUNKIE ECONOMY!
    JUNKIE ECONOMY!


    Learn it, know it, live it.

  • phalkor||

    Girl, you thought you found the answer on that magic carpet ride last night
    But when you wake up in the mornin' the world still gets you uptight
    Well, there's nothin' that you ain't tried
    To fill the emptiness inside
    But when you come back down, girl
    Still ain't feelin' right

    Chorus:
    (And don't it seem like)
    Kicks just keep gettin' harder to find
    And all your kicks ain't bringin' you peace of mind
    Before you find out it's too late, girl
    You better get straight

  • ||

    phalkor,

    Perhaps I (and Nick) was too subtle:

    Good Times.
    Any time you meet a payment.
    Good Times.
    Any time you need a friend.
    Good Times.
    Any time you're out from under.

    Not getting hastled, not getting hustled.
    Keepin' your head above water,
    Making a wave when you can.

    Temporary lay offs.
    Good Times.
    Easy credit rip offs.
    Good Times.
    Scratchin' and surviving.
    Good Times.
    Hangin in a chow line
    Good Times.
    Ain't we lucky we got 'em
    Good Times.

  • ||

    J sub D | September 6, 2007, 10:53am |

    Who am I supposed to bail out? People who took mortages out on houses they couldn't afford, or those who gave them the mortages? To both groups my response is "You made your bed, now lie in it."


    Apparently I'm supposed to bail out every-fucking-body involed and nobody has to lie in a bed of their own making.

    @&%$#|!

  • phalkor||

    I'm sorry I just can't relate to the themes in a sitcom that ended 10 years before I was born.

    Apparently that was way back when people could say "I ain't acceptin' no handouts!" with pride and actually mean it. Completely foreign to me and the culture I grew up in, sorry.

  • Reformed Republican||

    Doesn't a plan to maintain/increase home prices make them less affordable? How does that help people get into a house.

    Let the housing prices crash, and then you will make it easier for people to get into new and bigger homes.

  • ||

    Girl, you thought you found the answer on that magic carpet ride last night
    But when you wake up in the mornin' the world still gets you uptight


    You just won 15 points for a relevant Paul Revere and the Raiders reference.

  • nothing to lose but loss itsel||

    This will unfortunately result in massive inflation the magnitude of which no one can really predict today

    One can only hope. As someone with almost no assets that could be wiped out but a substantial student loan balance, weighing on me like a millstone around my neck, the thought of paying it off with massively inflated dollars is the one bright spot in this whole depressing fiasco. I look forward to the opportunity to take my wheelbarrow full of beer money for the night to the bank instead and say "here ya go!"

  • squarooticus||

    Let the housing prices crash, and then you will make it easier for people to get into new and bigger homes.


    Remember Hazlitt's one lesson:

    The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.



    Your proposal sounds great until you consider that the resulting depression from the disappearance of all that equity formerly used for consumer consumption means that all of those people to whom you refer would be out of work and unable to afford any place to live, much less buy a house discounted by 60%.

    Here are the potential "solutions" as I see them:

    (1) Do nothing, and a depression results, but at least the currency and savings become worth something
    (2) Reinflate the credit bubble, and massive (super?) inflation results, with hyperinflation as a possibility
    (3) Drop money from helicopters (e.g., eliminate all income taxes, issue tax credits to everyone, etc.), and hyperinflation results as Treasury holders step over each other to sell

    Does anyone else have another to offer? All of these seem bad, but (1) certainly seems the least evil overall, even though a second Great Depression would suck for many years.

  • <b>Herman Goering</b>||

    Whenever I hear the word meperidine I reach for my hypodermic.

  • ||

    Screw this nonsense. I don't think I'll get another mortgage after this. It's just not worth the trouble.

    If I rent, I can change where I live at the end of the lease, instead of when I can find someone to buy my house AND I can find another one to buy at the same time. Assuming I can find the money and time to make my house sellable, which it isn't now.

    And, I won't need to spend 6 large on new windows either, or rake the leaves, or cut the grass, or clean the gutters, or fix the leaky pipes, or fix the cranky furnace. I'll just have the building/owner do it.

    Yeah, I know renting is no paradise either, been there too many time to count, but the ONLY upside to owning a home is the equity and even that is too open to being fucked with by the political class.

    Congress. The ultimate Money Pit.™

  • ||

    We're reaching Balseraph levels of insanity. At least mouthpieces of the Soviet Union have the excuse that they were forced to claim that up was down on threat of immediate death. We have no such excuse.

  • robc||

    SugarFree,

    15-year fixed rate 5.75%, bitches.

    Im refi-ing to 30 year 5.375%.

    Suck it right back.

  • ||

    Lenders tricked people into buying homes they couldn't afford

    How often did this really happen? I know lots of people bought homes they couldn't afford because they thought prices would skyrocket forever, and they'd be able to sell at a profit before the ARM kicked in. But I don't have a lot of sympathy for the "but I never read the fine print" excuse on a purchase like this. Home-buying takes weeks; you have time to read everything and do the calculations.

    Besides, if people really were tricked, wouldn't a civil or criminal case be better than a huge bailout?

    Re The Coming Inflation: I'm not arguing for these bailouts, but would they necessarily cause huge inflation? Could they just cancel out (more or less) the huge deflation/asset value collapse that seems to be happening?

  • ||

    Now you're getting it. The best part of the 800 billion ring circus that is this bailout mania is that it just keeps getting more insane. I'm starting to hope that the insanity never stops and within a year we're all fighting over gas and making speeches from the backs of our death cars over an intercom with an Austrian accent. Just walk away, Congress. Just walk away, and we'll spare your lives.

    Weird. I just bought Road Warrior the other day on blu-ray. Which I have to say I was amazed at how good it looks. Like it was filmed yesterday.

  • Zeb||

    Everyone seems to accept that the housing market, is/has been in a bubble type situation. But most of these people seem to have forgotten why it is called a bubble: because it will pop sooner or later. Housing prices have to fall.

  • robc||

    (1) Do nothing

    Ive been suggesting this for a while now. Crash and burn! Cleanse.

  • ||

    Weird. I just bought Road Warrior the other day on blu-ray. Which I have to say I was amazed at how good it looks. Like it was filmed yesterday.

    It was filmed in anamorphic 35mm by a good cinematographer, and besides, when a movie gets remastered well these days, it looks unbelievable.

  • squarooticus||

    Could they just cancel out (more or less) the huge deflation/asset value collapse that seems to be happening?


    (1) Yes, because I'm sure the all-knowing, all-seeing Bernanke and Paulson will know exactly how much money to inject in order to get back to where we were.

    (2) It isn't just the amount of money that's the problem: it's where that money is.

  • Egosumabbas||

    "Re The Coming Inflation: I'm not arguing for these bailouts, but would they necessarily cause huge inflation? Could they just cancel out (more or less) the huge deflation/asset value collapse that seems to be happening?"

    The only way they could do that is through massive wealth redistribution, like 80% income tax brackets. Any attempt to inflate asset prices to satisfy the baby boomer electorate will just cause another bubble as the pumped money will go where its least expected... like pets.com, miami condos, and oil futures.

  • Gilbert Martin||

    "It wasn't that long ago (was it?) that President-elect Barack Obama and every pol in either party was flapping his gums about "a new ethic of responsibility."

    Yes but the only "responsibilty" that Obama was talking about was the responsibilty of "the rich" to pay more taxes to subsidize everybody else. As bigmouth Biden said, it's a patriotic duty.

  • ||

    Lamar,

    To be fair, the same people who want to "help" home prices want to "help" the value of labor by raising the minimum wage or pushing for a living wage. I assert these are part and parcel of the same mindset - but it's at least consistent.

  • Egosumabbas||

    "because it will pop sooner or later. Housing prices have to fall."

    In real terms yes. But our betters in Washington DC only care that the value in dollars remains the same. They don't care about dollar devaluation, and it's likely Joe Sixpack will even notice unless he's been watching Ron Paul's youtube channel.

  • Paul||

    Housing prices are rising! LIfe is good.

    Zen master: We'll see.

    Housing bubble burst, houses are getting cheaper! This is terrible.

    Zen master: We'll see.

    But wait, it looks like poor people will finally be able to afford a new home! This is great!

    Zen master: We'll see.

  • ||

    He said the department was looking "very seriously" at a plan that would issue 30-year fixed rate mortgages at 4.5 percent, about a full percentage point below their current level.

    That's nice. Isn't a guy who works at the Treasury supposed to know that bond prices move relative to effective interest rates?

  • ||

    Here is the logic: Lower interest rates on homes, so that home prices will go up.

    That way, you will spend less money paying off interest on a larger princpal.

    Makes PERFECT sense to me.

  • ||

    The Dow goes up.
    The Dow goes down.
    But who can understand
    The Way of the Dow?
    --Zen master

  • Lord Humungous||

    I'm starting to hope that the insanity never stops and within a year we're all fighting over gas and making speeches from the backs of our death cars over an intercom with an Austrian accent.



    Excuse me?

  • ||

    From the Dow Te Ching:

    The Dow is like a well:
    used but never used up.
    It is like the eternal void:
    filled with infinite possibilities.

    It is hidden but always present.
    I don't know who gave birth to it.
    It is older than God.

  • ||

    OK, I'm raising my hand. Through pure luck, fortuitous timing and a damn good mortgage broker I re-fied in July 2003 at 4.5%, 30 years fixed.

    I guess I won't be able to brag about it any more....

  • Bingo||

    Beers on Bill!

  • Formerly Jennifer||

    Thank goodness we didn't listen to the broker who told we could get a loan for 750K!

    We bought for ~530K, and put 1/4 on an equity line that got paid down within a year.

  • ||

    Pro L:

    Ah yes, the Dow Cha-Ching

  • ||

    Malto Dextrin,

    You are, of course, correct.

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