US situation re mortgages and household debt

[Oblimo]

When in doubt, always check for context:

So you agree that the current debt crisis is the result of creditors taking on too many risky loans?

 

[LadyAria]

I really could care less if the banks are required to disclose how longit takes to pay off a debt with minimum payments. The point I was trying to make is that the educational system is failing the students by not teaching them how to figure that out for themselves.

If the consumers were a little more knowlegable about basic financial practices, -- or evenbasic mathematics -- the loan sharks, payday loan companies, sub-prime lenders et al would be out of business and there would be far fewer high-risk loans for the banks to bundle.
And, no, I didn't go look at the charts, because I have no doubt that there is a credit crisis on a par with October '29 and for much of the same reasons -- consumers looking for a fast buck and financiers looking to make an even faster buck by catering to the consumer's greed.

I agree and disagree. I believe knowledge is power and those who elected to use it would benefit from it. However, I do not believe the most people would even take the time to read it. The more effort it takes, the less likely people who pick up the disclosure and read it.

As for the schools, many, many people just skim by because they need a job. A job takes a high school education. I doubt most of them can tell you what they studied even after they took the test. No, I do not blame the schools when kids don't give a shit. I blame parents who did not make it a core value. Education begins at home. Further to that point, a parent's financial practices and values are passed from generation to generation. If you (general English term not exclusive to an actual individual) want people to value money, don't buy everything and the pony to cram under the Christmas tree with your credit cards, and then wonder why Johnny thinks money falls from the sky.

Also, I do not think this is a class issue. I know and work with many "financial experts" daily in my role. They have the MBAs and work in the market. Guess what? About a half of them are up to their eyeballs in debt. It isn't because they don't know what could happen if life did a jack-knife on them. It is because they believe they can out think the system and make it work to their advantage while they get everything they want.

One gentleman in particular is bring suit about his stock options/restricted stock grants. He was severed because the particular institution had decided after third quarter returns that they no longer require analyst to cover certain markets. Investment Banking as a whole is being reorganized in light of current financial market. He had a fantastic base, he had an even better incentive and his long term deferred compensation plans numbers that would have made my mouth water. He was an exceptional perform that was always making more money. Banks have historically (short term) performed well despite other industries sliding in his work history. He anticipated future income and spent it before it arrived.

So, now, I discussing with this man his claim because he is desperate to find any cash to pay his credit card, that has been paying his interest only mortgage, because he has already liquidated his retirement not to lose his huge ass downtown New York condo. He's spending money he doesn't have on a lawsuit while in the same breath he's telling me he can't pay his son's private tuition. Oh, if you are wondering what the suit is about, he didn't read the related contract terms for his equities and sign it anyway. He then lost everything due to specific time line requirements.

This is from a man who people use to read his opinion to make market decisions. I felt a little sick in the mouth knowing that detail while sharing a table with him.

Anyway, there is a number of reasons people get themselves into more debt then income. It is not exclusive to the ignorant or uneducated. Many wealthy educated people are ego stupid and falling right in with those who did not know better.

I think it is a cultural issue in America that greed is preached as gospel and children are taught at an early age to value people by their assets. This is dangerous to all socio-economic levels because they are overextending themselves to become the "American Dream". They never realize it is like becoming a heroin addict. Consumerism is an addiction that has no end. There will always be something bigger, better and newer your neighbor can buy to one up you on the "keeping with the Jones' race". People just believed the banks were their helping them to achieve those dreams, because they could come up with the money somehow.

In summary, predatory lending practices is wrong. There is individual responsibility that does come into question. Yes, every debtor is a blame to a certain extent. However, there is enough to go around for everyone. Banks do sweeten the sale to the point reality is just a dot in the pot to many of the people blinded by their drive to have what they cannot afford. They want to believe it will all work out for them. People and lenders need to rethink the credit lifestyle and related practices.

 

[cantdog]

The best thing you can do is live debt free, to the extent that you can. When you must take on debt, do not take on debt in Delaware.

 

[trysail]

So you agree that the current debt crisis is the result of creditors taking on too many risky loans?

I know for a fact that it took a syzygy of dopes doing stuff they didn't understand to bollox up the financial system as well as they've done it this time.

I know that the Rt. Rev. Jesse Jackson and Al Sharpton have been badgering and browbeating banks for decades to lend money to deadbeats. I know that Barney Frank, Teddy-boy Kennedy, Paul Sarbanes, Babs Mikulski, Ms. Pelosi, Ms. Boxer, and Chuckie Schumer are completely and utterly clueless about economics and daily sell their souls for the votes of people who believe in Santa Claus and the tooth fairy.

I know that from late 2001 through 2005, (St.) Alan Greenspan took interest rates to absurd and ridiculously low levels, thereby setting off a drunken binge of borrowing by the naive and foolish. I know that the cocktail party set and the real estate crowd were abuzz with the latest gossip of who made a killing and had infected the credulous and the gullible with a silly belief that the price of real estate only went in one direction.

I know that Moody's and Standard & Poor's can't (and never could) analyze their way out of a paper bag. I've known that for twenty-five years.

I know that the hacks appointed by politicos to manage many state, local and union pension funds are mediocrities who bought a lot of garbage paper manufactured by Wall Street.

I know that Goldman Sucks, Morgan Stupid, Citigroup, Merrill, Bear, and B of A would sell their mother's soul for a buck. Employing rocket scientists to create the artificialities that the world has come to know as MBSs, CDOs, SIVs, they are stewing in their own self-created toilet paper.

I know that the average American is largely illiterate, completely innumerate, believes in instant gratification and has the self-discipline of a two year old. Encouraged by an army of ambulance-chasing, scumbag tort lawyers, demagogic politicians, Hollywood, and an eyeball-desperate media, they are convinced that they are entitled to a life of ease. They are jealous and envious, believing the only reason they're not rich is that they are victims of malicious banks, insurers, oil companies, pharmaceutical companies, hospitals, McDonalds, Philip Morris, globalization, and god-only knows what else.

It is, after all, someone else's fault. We all know it's possible to borrow your way to prosperity, right?

 

[Oblimo]

It is, after all, someone else's fault.

"Fault" lies with the person who has the duty, takes the risk, and causes the harm. Pretty much the definition of "fault," right there.

 

[Weird Harold]

I agree and disagree. I believe knowledge is power and those who elected to use it would benefit from it. However, I do not believe the most people would even take the time to read it. The more effort it takes, the less likely people who pick up the disclosure and read it.

The Truth in Lending Act made the disclosure so intimidating that even people who know better just scan it for a few key phrases. But the Truth In Lending Act is a response to the failure of the eductional system to teach useful applications of mathematics -- like balancing a budget or simple vs compound interest.

It isn't the specific knowledge that is contained in the discloures, but the general knowledge that you have to pay a loan back and how to determine how much the loan is costing you.

As for the schools, many, many people just skim by because they need a job. A job takes a high school education. I doubt most of them can tell you what they studied even after they took the test. No, I do not blame the schools when kids don't give a shit.I blame parents who did not make it a core value.

I agree that there is a problem with students not learning what is offered, but the problem with fiscal irresponsibility is not that what was offered wasn't learned, but that the information is no longer offered in the first place. (except to Special Ed students; my younger daughter had a whole month of "Household Finance" as part of the "Special Ed" path she was on, but the Elder Daughter daughter made it through her entire education without being taught how to balance a checkbook, let alone how to manage a budget.

The Elder Daughter has two daughters of her own mow, and both of them were more fiscally responsible by age 8 than many people are by age 80 -- because my daughter made it a point to make them fiscally knowledgeable and responsible.

Education begins at home. Further to that point, a parent's financial practices and values are passed from generation to generation. If you (general English term not exclusive to an actual individual) want people to value money, don't buy everything and the pony to cram under the Christmas tree with your credit cards, and then wonder why Johnny thinks money falls from the sky.

Good point. My daughter is an exception, even among her circle of friends and acquaintances -- as are my granddaughters among their peers.

Anyway, there is a number of reasons people get themselves into more debt then income. It is not exclusive to the ignorant or uneducated. Many wealthy educated people are ego stupid and falling right in with those who did not know better.

I suppose where we disagree is in our definition of "Educated" -- a diploma or degree does not necessarily equate to "educated" in my mind; it used to when I was younger to some extent, but when I was younger "peer promotion" was still a controversial and untested Child Psychology theory. Now that it has been tested to destruction (of the educational system) a dipl;oma and increasingly a college degree is simply a "certificate of attendance."

An MBA just means that the graduate has learned the Jargon. It doesn't the graduate understands the principles or even the underlying foundation of the subject.

I think it is a cultural issue in America that greed is preached as gospel and children are taught at an early age to value people by their assets. This is dangerous to all socio-economic levels because they are overextending themselves to become the "American Dream".

The "American Dream" when I was growing up in the 1950's and 1960's was to own a home and car, free and clear. "Mortgage Burning" Parties were a big deal for my parent's generation when a home was finally paid off and the proud owners got a clear title.

I'm not quite sure when the "American Dream" began to define a house as an investment instead of a home or when leasing a car became preferable to owning one. "Renters" used to be looked down upon because they weren't making a commitment to their future or were too "dirt poor" to aspire to home ownership.

I do know that the "credit problems" arose and grew into the crisis of today over roughly the same time frame as debt-free ownership faded from the American Dream -- and that in turn coincides with the decline in educational standards.

 

[Pure]

note regarding 'try'

Huck: //Where is the evidence for the repeated assertions that this is largely the fault of irresponsible consumers borrowing more than they can afford? //

try: Ummm...., errr....., uh......., delinquencies, repossessions and defaults?

mr try needs to read a bit about the Great Depression, although, no doubt, that is the fault of liberals and minorites of the time.

it's amazing how most of the 'personal responsibility' folks, with exceptions such as Weird Harold, are mainly fronting for their own or others' predatory practices, such as loan sharking, 'revolving' charge accounts for the poor, etc, stock frauds, etc. a bit like how the "values" and "morality" folks are usually fucking the page boy/girl or the secretary of the organization.

 

[Weird Harold]

it's amazing how most of the 'personal responsibility' folks, with exceptions such as Weird Harold, are mainly fronting for their own or others' predatory practices, ...

The first step in dealing with surviving the predators is to learn that there ARE predators; when a shark offers you a coupon for a free dinner, it probably means you're on the menu if you accept.

 

[Boxlicker101]

The Truth in Lending Act made the disclosure so intimidating that even people who know better just scan it for a few key phrases. But the Truth In Lending Act is a response to the failure of the eductional system to teach useful applications of mathematics -- like balancing a budget or simple vs compound interest.

It isn't the specific knowledge that is contained in the discloures, but the general knowledge that you have to pay a loan back and how to determine how much the loan is costing you.



I agree that there is a problem with students not learning what is offered, but the problem with fiscal irresponsibility is not that what was offered wasn't learned, but that the information is no longer offered in the first place. (except to Special Ed students; my younger daughter had a whole month of "Household Finance" as part of the "Special Ed" path she was on, but the Elder Daughter daughter made it through her entire education without being taught how to balance a checkbook, let alone how to manage a budget.

The Elder Daughter has two daughters of her own mow, and both of them were more fiscally responsible by age 8 than many people are by age 80 -- because my daughter made it a point to make them fiscally knowledgeable and responsible.




Good point. My daughter is an exception, even among her circle of friends and acquaintances -- as are my granddaughters among their peers.



I suppose where we disagree is in our definition of "Educated" -- a diploma or degree does not necessarily equate to "educated" in my mind; it used to when I was younger to some extent, but when I was younger "peer promotion" was still a controversial and untested Child Psychology theory. Now that it has been tested to destruction (of the educational system) a dipl;oma and increasingly a college degree is simply a "certificate of attendance."

An MBA just means that the graduate has learned the Jargon. It doesn't the graduate understands the principles or even the underlying foundation of the subject.



The "American Dream" when I was growing up in the 1950's and 1960's was to own a home and car, free and clear. "Mortgage Burning" Parties were a big deal for my parent's generation when a home was finally paid off and the proud owners got a clear title.

I'm not quite sure when the "American Dream" began to define a house as an investment instead of a home or when leasing a car became preferable to owning one. "Renters" used to be looked down upon because they weren't making a commitment to their future or were too "dirt poor" to aspire to home ownership.

I do know that the "credit problems" arose and grew into the crisis of today over roughly the same time frame as debt-free ownership faded from the American Dream -- and that in turn coincides with the decline in educational standards.

My parents paid off their house. I don'r know if they had a mortgage burning ceremony or not. They never mentioned it. Most people now never pay off their mortgage like that, but that's not necessarily a bad thing. A young family sometimes buys a small house and lives there several years before selling it and buying a better one. They usually have some equity in the small house, and it has usually appreciated in value, and they use the profit for a down payment on the better place. Eventually, they no longer need that large a place, so they sell it, bank some of the proceeds and buy a condo or a bungalow for cash or rent an apartment. The first two mortgages get paid off, but out of the proceeds of the sales.

Of course, to do this, they must stay married and be able to make steady mortgage payments. Many people are able to do this, and it's better than staying in the same house for all their married lives.

 

[elsol]

it's amazing how most of the 'personal responsibility' folks, with exceptions such as Weird Harold, are mainly fronting for their own or others' predatory practices, such as loan sharking, 'revolving' charge accounts for the poor, etc, stock frauds, etc. a bit like how the "values" and "morality" folks are usually fucking the page boy/girl or the secretary of the organization.

Nah... actually, 'personal responsibility' is tightwad code for 'fucking idiots'.

 

[Weird Harold]

My parents paid off their house. I don'r know if they had a mortgage burning ceremony or not. They never mentioned it. Most people now never pay off their mortgage like that, but that's not necessarily a bad thing. A young family sometimes buys a small house and lives there several years before selling it and buying a better one. ,,,

That's really the phenomenon I was talking about -- seeing a house as an investment instead of as purchasing a home.

A certain percentage of young families have always started small and traded up, but in the past, they usually didn't borrow against the equity except in cases of extreme need and often they could pay "cash" for the place "big enough to raise the kids in" and keep it, debt free, for longer than most modern mortgages run. In the fifties and sixties, mortgages ran 10-20 years; today 30 years is standard and I'm hearing ads with "special offers" for forty and fifty year fixed rate mortgages on the radio -- they sound like the proverbial "offer too good to be true so it probably isn't."

But people are flocking to companies like that because it lowers the mortgage payment and most aren't considering that the total cost of the loan is much higher than a conventional shorter term loan. Without digging out the calculator and making up some numbers, I'll just say that thirty years at 7% APR is probably less total interest than fifty years at 5% APR.

 

[elsol]

Without digging out the calculator and making up some numbers, I'll just say that thirty years at 7% APR is probably less total interest than fifty years at 5% APR.

For a 200K loan, it comes out to 70K less for the thirty year 7%.

In case anyone was wondering.

 

[trysail]

mr try needs to read a bit about the Great Depression, although, no doubt, that is the fault of liberals and minorites of the time.

it's amazing how most of the 'personal responsibility' folks... are mainly fronting for their own or others' predatory practices, such as loan sharking, 'revolving' charge accounts for the poor, etc, stock frauds, etc. a bit like how the "values" and "morality" folks are usually fucking the page boy/girl or the secretary of the organization.

I can't help but note Pure's repeated employment of the forensics tactics of a nine year old. To wit: the repeated, malicious practice of putting words in my mouth that were never stated. It is an infantile, duplicitous and sleazy practice.

In point of fact, I have yet to touch upon the subject of the depression of 1929-1941. Business cycles have existed from time immemorial and are part and parcel of economic activity. They are a natural phenomena and their causes are inextricably intertwined with elements of human nature: greed, fear, excess and the madness of crowds. By many accounts the economic downturns heralded by the Panics of 1873 and 1893 were equal or worse than that of the '30s.

 

[Pure]

again,

Huck: //Where is the evidence for the repeated assertions that this is largely the fault of irresponsible consumers borrowing more than they can afford? //

trysail: Ummm...., errr....., uh......., delinquencies, repossessions and defaults?

---
i'm reminded of John McCain's remarks about an opponent using smear tactics. "Never wrestle with a pig. You get dirty. And the pig enjoys it."

 

[trysail]

Huck: //Where is the evidence for the repeated assertions that this is largely the fault of irresponsible consumers borrowing more than they can afford? //

trysail: Ummm...., errr....., uh......., delinquencies, repossessions and defaults?

I will attempt to make this as as irreducible as possible for the benefit of the simple. How can one tell if a debtor has borrowed more than he can repay?

 

[Weird Harold]

For a 200K loan, it comes out to 70K less for the thirty year 7%.

In case anyone was wondering.

Thanks for doing the math.

 

[Boxlicker101]

That's really the phenomenon I was talking about -- seeing a house as an investment instead of as purchasing a home.

A certain percentage of young families have always started small and traded up, but in the past, they usually didn't borrow against the equity except in cases of extreme need and often they could pay "cash" for the place "big enough to raise the kids in" and keep it, debt free, for longer than most modern mortgages run. In the fifties and sixties, mortgages ran 10-20 years; today 30 years is standard and I'm hearing ads with "special offers" for forty and fifty year fixed rate mortgages on the radio -- they sound like the proverbial "offer too good to be true so it probably isn't."

But people are flocking to companies like that because it lowers the mortgage payment and most aren't considering that the total cost of the loan is much higher than a conventional shorter term loan. Without digging out the calculator and making up some numbers, I'll just say that thirty years at 7% APR is probably less total interest than fifty years at 5% APR.

Actually, it's doing both. The young family lives in the house while making payments and, when the time comes they decide to get a better place, they do so, using the equity in the first house as a down payment. A growing family might well want a larger place, in a better neighborhood and, assuming they are also advancing in their careers and able to afford it, they go for it.

 

[Weird Harold]

Actually, it's doing both. The young family lives in the house while making payments and, when the time comes they decide to get a better place, they do so, using the equity in the first house as a down payment. A growing family might well want a larger place, in a better neighborhood and, assuming they are also advancing in their careers and able to afford it, they go for it.

Box, I think you're missing the point that it's how people think about the house/mortgage rather than the process of trading up that has changed.

Longer mortgages on "starter homes" are more common now not entirely because housing costs have inflated more than incomes, but because people aren't looking for the mortgage deal that will let them pay off the mortgage as quickly as possible.

People used to opt for the higher payments of a ten year and scrimp on other parts of the budget because it let them accrue equity faster so that they either could own the house free and clear when it came time to sell it (and thus reap the full profit of any appreciation) or so that they could at least lower the payments on the next house with their equity in the old house.

Today, the longer (more expensive) mortgages are more popiular because there is never any intention to pay them off -- they're treated like savings accounts towards a bigger, better, more expensive mortgage (without considering that they're a "savings account" with a negative net interest rate.)

 

[trysail]

A bunch of fuckin' whores, hypocrites, and crybabies.
______________________

Wall Street Embraces Government to Avoid Recession
By Kathleen M. Howley

Feb. 1 (Bloomberg) -- With U.S. mortgage foreclosures set to top 1 million this year and home prices falling at the fastest pace since the Great Depression, Lehman Brothers Holdings Inc. Vice Chairman Thomas Russo says the government must take action to prevent a recession.

``The direction we are heading in isn't a good one,'' Russo said in an interview. ``We need significant fiscal and monetary intervention.''

The worst drop in new home sales on record has turned financial leaders into champions of big government with everyone from Russo to executives at Citigroup Inc. and JPMorgan Chase & Co. supporting public measures to keep the housing market from sinking the economy. It's a change from Wall Street's usual stance that markets work best without government interference.

``Sentiment can change when there's money on the line, even in an industry that up to now has been doctrinally opposed to government having a role in the markets,'' said Thomas Schelling, a Nobel laureate in economics who taught at Harvard University for 30 years.

Wall Street fueled the growth of subprime lending by packaging home loans into securities and marketing them as low- risk investments. As demand rose, lending standards dropped, driving the homeownership rate to an all-time high of 69.2 percent in 2004. The median U.S. home price reached a record $230,200 in July 2006. Last month it was $208,400.

Countrywide's Loss
Now, many of the same people who profited by putting buyers into properties they couldn't afford are advocating federal help to manage the bust.

Their demands were answered this week when the House and the Senate Finance Committee approved economic stimulus plans worth $146 billion to $157 billion. The Senate version includes a tax break for banks and lenders. Losses from investments in subprime mortgages may total as much as $400 billion worldwide, Deutsche Bank AG said in November.

Angelo Mozilo, chief executive officer of Countrywide Financial Corp., supports the government's Hope Now program, a coalition of mortgage companies aimed at preventing foreclosures by freezing adjustable rates or refinancing loans of subprime borrowers.

That type of loan increased Countrywide's net income to almost $2.7 billion in 2006 when it was the biggest U.S. subprime lender. Mozilo earned $48 million that year. Countrywide reported a net loss of $703.5 million in 2007, dragged down by loans to people with bad credit, and the Calabasas, California-based company agreed Jan. 11 to be acquired by Charlotte, North Carolina-based Bank of America Corp. for about $4 billion.

`Amazing Hit'
Hope Now is being pushed by Treasury Secretary Henry Paulson, former chairman of Goldman Sachs Group Inc., and backed by firms such as New York-based Citigroup, led by Chief Executive Officer Vikram Pandit, and JPMorgan, headed by CEO Jamie Dimon.

In addition, the government expanded Federal Housing Administration mortgage funding in August to help subprime borrowers and President George W. Bush has proposed using tax- exempt bonds to refinance mortgages. Those programs won't help homeowners who have seen their property values drop below their loan balances.

The measures aren't enough, Russo said.

``The whole financial system has taken an amazing hit already and the bulk of the mortgage rate resets are still to come,'' Russo, 64, said.

Without additional government action, declining home values will prompt people to snap their wallets shut, choking the 70 percent of the economy that's driven by consumer spending, Russo said in a paper he presented at the World Economic Forum in Davos, Switzerland, last week. Russo said the paper reflected his own views and analysis, not those of New York-based Lehman, the fourth-biggest U.S. securities firm by market value.

Russo's Proposals
About $550 billion of subprime loans will reset before 2009, Russo said. Most of those borrowers will have no option except to walk away from their properties because the drop in home prices and an increase in lending standards will prevent them from refinancing or selling, he said.

Russo, in the paper originally written for the Group of Thirty, a research group led by former Federal Reserve Chairman Paul Volcker, proposes giving government-backed loans to homeowners with adjustable-rate mortgages, whether prime or subprime, in danger of default. He also supports a tax credit for people who buy homes in 2008 that would roughly triple the current tax benefits given to mortgage holders.

In addition, the Federal Reserve needs to cut its benchmark rate to 2 percent, reduce the discount rate to match it, and ``broaden access'' to the discount window where banks get government-subsidized temporary loans, he said. The Fed lowered the benchmark interest rate to 3 percent on Jan. 30, the second cut in nine days.

Quick Action
Those measures surpass the Hope Now program and the stimulus plans that passed this week. A provision in the House measure would temporarily increase in the size of loans that can be bought by Fannie Mae and Freddie Mac, the largest U.S. mortgage-finance companies.

``To be useful, a fiscal stimulus package should be implemented quickly and structured so that its effects on aggregate spending are felt as much as possible within the next 12 months or so,'' Fed Chairman Ben Bernanke said in Jan. 17 testimony to Congress.

In backing government action, Bernanke broke from the creed of Milton Friedman, the free-market champion who said such programs don't work. Bernanke described Friedman in a 2002 speech as the man who inspired his interest in monetary policy when he was a college student.

While top regulators and executives are demanding help, some of their colleagues are shaking their heads in disbelief.

Mark Kiesel of Pacific Investment Management Co., the world's largest bond fund manager, said rescuing borrowers will worsen the economic misery for everyone. Kiesel helps oversee more than $700 billion of fixed-income investments at Pimco.

`Blunt Instrument'
``Keeping the market from correcting itself only prolongs the problem,'' he said. ``It helps a couple hundred thousand people stay in their homes a little longer, but it also may have the unintended consequence of lifting mortgage rates for everyone because if you're going to be changing the rules, investors will need to be compensated for that risk.''

David Henderson, an economist at the Hoover Institution at Stanford University in Stanford, California, agrees.

``Government intervention is a blunt instrument aimed at a particular problem that ends up hitting all of us,'' Henderson said. ``Let the housing problem work itself out.''

The camp that favors government action is growing.

Growing Group
``We look forward to continuing our work with the administration, Congress, state and local officials'' to limit the number of foreclosures, Washington Mutual's Schneider said in a statement last month in support of the Hope Now program. The Seattle-based company, the largest U.S. savings and loan, on Jan. 17 reported a fourth-quarter loss of $1.87 billion after writing down the value of its home mortgage unit.

Alex Pollock, former president of the Federal Home Loan Bank of Chicago, urges the creation of a federal lending agency based on the Home Owners Loan Corp., or HOLC, created by Congress during the Great Depression.

Robert Kuttner, co-founder of the Washington-based Economic Policy Institute, Senate Banking Committee Chairman Christopher Dodd and others have proposed similar ideas.

Many who are calling for action point to the 1930s, the last time the U.S. national median home price fell, as an example of what government should do.

Great Depression
During the worst economic slump of the 20th century, HOLC issued tax-exempt bonds and used the proceeds for below-market- rate mortgages. It refinanced one-fifth of U.S. homes between 1933 and 1936 after negotiating with the original lenders to accept less than the amount owed on the defaulted mortgage.

Former Treasury Secretary Edward Carter Glass opposed President Franklin D. Roosevelt's expansion of government after the 1929 stock market crash. Senator Robert Taft, a critic, said it was socialism. Most Americans supported Roosevelt and his ``New Deal'' plan. He won every state except Maine and Vermont when he ran for re-election in 1936.

In the 1930s, lenders were seizing homes at an average rate of 3,000 a day, adjusted for today's housing stock size. In the fourth quarter of 2007, new foreclosures averaged 2,939 a day, double the pace of a year earlier, according to RealtyTrac Inc., an Irvine, California-based real estate data company.

Statistics like these are managing to change even the most ardent opponents of big government. William McCarthy, a mortgage broker in Parker, Colorado, said he has been against federal intervention his entire life. Now 62 and facing eviction Feb. 11 after his lender foreclosed on his $199,200 mortgage, he said the government has to take action.

Suicides and Bankruptcy
``This has reached the point of being catastrophic,'' said McCarthy, who declared bankruptcy in July when his business failed after 18 years. ``I had a client who called me sobbing because his wife committed suicide rather than face eviction. Something's got to be done to help people.''

McCarthy said he took an interest-only adjustable-rate mortgage in 2005 when he and his wife, Janna, bought a 1,680- square-foot, ranch-style retirement home in Littleton, Colorado. His wife has a heart condition and needs a home without stairs, McCarthy said. They planned to sell their primary residence and refinance the ranch's interest-only loan before it reset, he said.

Risk Taking
They didn't act fast enough. In March 2006, U.S. home sales began the biggest decline in 26 years, according to data compiled by the Chicago-based National Association of Realtors. The house didn't sell. Now, they are losing both properties.

``My wife goes to bed crying every night, and there's nothing I can do,'' McCarthy said. ``The bank won't even return my calls.''

Bailing out borrowers who take risks creates a ``moral hazard'' that leads to riskier behavior as people assume the government will step in to save them, said Kiesel. In March 2006 Kiesel sold his house near Pimco's headquarters in Newport Beach, California, and rented a home in anticipation of the housing slump.

``The housing market will find its own bottom, without a government bailout,'' Kiesel said.

 

[Pure]

up in canada, it's called corporate welfare. an old custom.

american businees has been totally corrupted by govt since at least the second world war.

it might be mentioned that businesses have always, and by nature sought 'unfair advantage,' e.g. the Hudson Bay Company. exlusive territories, governnent 'ins' etc, the "royal approval".

 

[rgraham666]

I don't know whether to laugh or cry.