So, in Order to Promote a Recession

I heard it on the way home from voting last night and went to search for an article about it this morning, and found this blog entry instead. They missed a point but we'll get to it.

OK, so Bernanke wants to write down the principle on loans, to "help" the "distressed" homebuyers who owe more than their house is worth. You know, when family members do this, a legitimate counselor would call that "enabling" a "self-destructive" behaviour.

You take out a bad loan and don't care
You buy a house for more than it's worth (by financing "stuff" into the mortgage") and don't care
You all of a sudden get gobsmacked by reality and you want the investors to lose principle because all of a sudden you care

Hold on there.

Why should somebody who lent you captial in good faith not be repaid at least the capital that you borrowed? Ok, negotiate on the interest rate with the loan servicing entity. Fine.

But did you know that the loan was sold as an investment to somebody? You are actually stealing money from the investor if you "negotiate" a lower principle after you sign on to the final papers at closing. The bank servicing your loan will eat their own shorts as well.

Sure, blame the banks and investors for going for bad investments. Fine. Read the post I linked to for the other reasons this is stupid, and what it will lead to.

Not everybody gets to own a house folks. It's a privelege that should be reserved for those individuals who have made sound financial decisions in their lives to that point.

On a side note, until the socialists got into the system, it was*. A decade ago, I was wondering how I would save the 25% mortgage down payment that USED to be required for a loan that was a good investment for the lender. I was, mind you, very pleased to get into my house for $500 or so in closing costs. I also didn't get my family in over our heads. You know, it's the craziest thing I did. A mortgage broker qualified us for $170,000. A banker (Lawrence with WaMu) who used to be a broker and hates them now because they are all sleazy approved our loan for a $123k house. Go figure. Then we DIDN'T get $50k worth of junk to fill it with. Huh. We must be bad americans.

Saturday Night Live did a sketch about a financial expert who was explaining how not to be in debt. He was explaining to a rube that if you don't have money, you don't spend it. EVEN if you really REALLY want something.

It used to be a joke.




*Because inner city dwellers in the low rent district were making poor financial decisions, they had a hard time getting loans. They were mostly "minorities". This of course is racist. Also not fair. SO racist pressure groups got congress to pass laws requiring lenders to write loans that were known to be horribly risky investments. And then, go figure, people in bad financial shape got themselves into worse financial shape. Because it wasn't *fair* and "they" did something about it. Bah.