Where is the Outrage?

I have been saying this and posting on it for months.

Every day people have no control over the financial system which brought this fiasco to pass....let alone comprehend how it actually functions.

"Paper larceny" is what the "bailout" should be called. The game that was played in the investment world with these mortgages is what the cause of this situation-----

greed.

I think a "Year of Jubilee" may be the only really equitable thing to do and way to solve it.....as long as the paper house keeps being built as is----it will still be paper mache in the end.

Thanks Mandelman----the crisis was not caused by homeownwers----but by mortgage owners.....

the crisis was not caused by homeownwers----but by mortgage owners.....

Very important distinction!

EXCELLENT article!

I also know for a fact that there are mortgage companies TAKING ADVANTAGE of this situation to profit.

Don't believe me?

My friend bought a duplex under 80k.  Been in it a few years.  A few months ago, he started getting foreclosure notices, and said "EXCUSE ME?"  then promptly  contacted the mortgage company, faxed his cancelled checks to them PROVING he was current (they credited it to the wrong account).  He was told BY THE MORTGAGE COMPANY, not to send any more payments on his loan, until they straightened this out.  He would hear from their manager in charge of mortgage disputes soon.

  Being a very busy man...it took 2 months to get in touch with this guy...(in the meantime, my friend held his mortgage payments in a separate account).  At which time, he was told that DESPITE the fact that the lender screwed up his mortgage, it was being RENEGOTIATED to over 10% interest! (A HUGE increase).  He was then told, if he didn't like it...deal with foreclosure (how's that for RENEGOTIATING?)

He did NOTHING WRONG...why is he getting penalized? (he was also told, that his company CHOSE NOT TO participate with federal programs that would help him)

Some of these lenders are just down right crooks...looking to  take advantage of this mess...

WHY ARE WE BAILING OUT EVERYONE BUT THE PEOPLE WHO NEED IT MOST???

I agree.  The buzzword blitz does NOTHING to get at the problem.

But, anyone with HALF a brain can see, using the bailout money to pay off mortgages would free up HUGE amounts of cash RIGHT into the economy!

I mean, what would you do without a mortgage payment?  BUY A CAR (who needs an auto bailout then), add on improvements to your home (building boom?)

It's economics 101...

There is the case where a couple are suing Countrywide. They lost their first home but documented carefully every step of the way. They were told at signing that the ARM was just a quick way to get them in the home and then it would be modified to fixed rate once they were in. Very soon there after, their house payment ballooned by $700 - to $2400 a month on a house that should have had a payment of $1200 at the very most. They tried for two years. He took on a second job, they couldn't get Countrywide to respond to their requests for modification. They eventually lost their home which has been sitting empty since foreclosure and the pipes busted in the winter causing major damage inside. I just can not get over the stupidity of it all. They would have been making payments on that house all this time if Countrywide had played ball and done what they conned this couple into believing they would do when they got them signed. Now both the couple and Countrywide lose. Countrywide's own lawyers stood up in court and said they should not be held accountable for not following through because the modification promise was a marketing gimmick to get people to sign.

Great article! 

Yes, some have complained that John Thain should have been fired rather that allowed to resign after he and all his pals used taxpayer money for their
Golden Parachutes"

Give me a break, he should be in jail for fraud!  These bailouts are stealing the little bit of wealth this country has left from the average struggling Joe, and putting it directly in the hands of the elite executives.

My biggest issue with the bailout was that it was not used the way Paulsen and Bernanke claimed they intended to use it and that there was zero oversight. We had big financial institutions using the money to eliminate competitors, pay huge bonuses when they saw their company was getting ready to go under anyway, decorating offices of CEOs and going on expensive trips. I'm only an LPN and I could have done a better job of keeping that money from being abused than the so-called "experts" did. The way Paulsen and Bernanke mishandled this whole thing makes me wonder just whose interests they were looking out for, considering that Paulsen was soon to be out of his job with the change of administration.

Based on that complete clusterf@ck, the money that is being proposed to stimulate the economy for the mere "common people" (that is the middle and working poor class) is being railed against even louder because of the way the elites on Wall Street were allowed by Paulson and Bernanke to spend our tax dollars any way they d@med well pleased.

Distressed homeowners have bought into the lie that our economic crisis is their fault... and they're some are so deeply ashamed that their killing themselves?  Really?  Well I'm here to tell them otherwise... watch out, 'cause when they figure out they've been lied to they're likely to be pissed.

If they were literaly lied to, told that there adjustable rate motgage would never adjust, you have a good point.  Did the lenders tell them that they would never be laid off, have other financial crisis due to health or death of a spouse?  Is that what really happened here? 

The circumstances leading up to the crisis were most certainly not the fault of the borrowers and completely out of their control.   However, what part of "adjustable" is unclear.  Its a simple math problem to compare what your payment would be at the maximun rate against the maximum  payment you can afford.   At the end of the day, these mortgages should probably not have been signed in the first place.    Buying a house and committing to the huge obligation has never been something to enter into without ones eyes wide open.  It requires careful considerations of all the foreseeable risks like job loss, rate adjustments, maintenance, increases in taxes and insurance.  The transaction itself is complicated and should be accompanied by a lawyer.  When has that all changed?   And how many of these foreclosures were accompanied all the second mortgages and credit card debt to fill those houses and driveways with wants vs. needs.   

The crisis is certainly aided by complicated financial schemes, greedy investors and some unscupulous lenders, but those have always existed in some form or another.  No one was forced to sign a morgage with a gun to their head. 

MB_Wichita I completely agree.  There was a time when people actually saved for a house and put 20% down so they would have a cushion of equity for economic downturns and housing depressions.  Unfortunately, today people want 0% down interest only mortgages, on top of which they can barely make the payments.  While I agree there were a lot of unscrupulous activities going on, someone needs to say "Hey you bought a house you would never have been able to afford with a mortgage that doesn't make mathematical sense.  You need to take some responsibility for choosing to go down that path." 

At the same time, if Congress and the American people agree to provide finiancial support to banks to help homeowners refi and renegotiate their bad loans, that's what the money should be used for!

It should be clear to everyone that those who have made the most profit out of this situation are to blame for it. Those who pushed for deregulation to sate their ravenous hunger for greed and mammon. These fat bloated plutocrats, who hire lobbyists, talk show hosts, and newspaper editors to publicly acquit them of any wrongdoing through their own capitalist propaganda. Meanwhile, we the people are left to eat the proverbial cake, warned daily of the dangers of socialism and sharing the wealth with any but the wealthy, while before our eyes the pillars of capitalism crumble under their own weight.

The only peaceful way to protest the fleecing of our tax dollars is to follow the guiding hand of our founding fathers and not pay our taxes, as the taxes are now unjust. Our leaders have seen fit to give our money, via the $700,000,000,000 bailout, to the people who mismanaged it in the first place. The ones stuffing their pockets with your tax dollars are the very same people who are foreclosing on your homes due to non-payment. Taxation without representation anyone?

Many of these failing banks and companies took billions, and then paid out Christmas bonuses to their CEO/CFOs to the tune of hundreds of millions of dollars. For running their respective businesses into the ground, their reward is more of your money. Someone please explain to me why this should not be considered Feudalism instead of Democracy? It seems to me that the Fortune 500 got prima nocta with our investments...

The ones stuffing their pockets with your tax dollars are the very same people who are foreclosing on your homes due to non-payment. Taxation without representation anyone?

Got that right. And they were stuffing millions into their pockets while they were snatching peoples' homes away from them for being as little as $5,000 or $10,000 in arrears. Hell, they apparently spend that much on their damned office curtains but it's enough for them to foreclose on your house.

Love your screen name by the way....

Great article clipped to my column !

Great seed mandelman!!  But it goes even further.  Just look at the Bernie Madoff deal.  Where is their outrage.  Not only losing a house but everything you have ever worked for.  Everything you owned.  And yet, silence.  I don't know how our society got here but it truly is amazing.  I, as a normal middle class American even saw this coming.  The politicians surely knew about this crisis years ago but did nothing to stop it.  As a  matter of fact they kept it going.  For the government to throw more money into the mortgage and banking business is a total outrage.  What do we do?  Where do we go?  I called my Congressman before the first bailout and was told that even though 80% of the calls were telling him to vote no he voted yes.  Then got re-elected.  Unbelievable!

People should read that article and come back in here

re: the comment about fuedalism,

This bailout and the continuing separation of those few who have the power, and the rest of us who earn the money they use, also made me realize that we were already in an oligarchy when I saw this...

Just watched it, very good....bookmarked and will be sending to everyone I know.

Thanks mom.

Very good post, average mom. I did know that our system of government is a Republic, yet I used the term Democracy instead, for whatever reason. The video on the site you posted was very informative. After watching it I realized that our government has transitioned from a Republic to an Oligarchy, and not from a Democracy to a Feudal state.

It is only in learning our faults that we may know ourselves at all. This is why I am alway happy to be corrected when a different viewpoint turns out to be a more enlightened one than my original. Thank you.

It should be clear to everyone that those who have made the most profit out of this situation are to blame for it.

This makes no sense.  Because lenders, brokers and other service providers have  profit by selling homes, making loans and servicing them borrowers were forced  to sign a morgage they could not afford.    It's a ridiculous arguement to blame anyone else than the one who signed for debt they could not afford to pay or did not take on with eyes wide open.

Ahh... too bad it requires FLASH since FLASH is a security hazard and I don't allow it on my network (along with a growing number of big corporations).

But I gather from Enlightenme that it is a primer about the forms of government and what used to be basic civics information? And a correction to Enlightenme's post, technically, we are not a "republic" - we are a "Constitutional Republic." There's a difference. And correct - we are NOT supposed to be a "Democracy." I mentally cringe every time I hear a "leader" or politician refer to "our democracy." I don't know where all those 'Democracy" people live, but it's not in the USA. I've been known to correct politicians in front of others on this, and they get a sour expression on their faces and say something snarky or something that shows that if they know the difference, they don't care. And yes - I noticed every time "The Messiah" used the term, and every time John McLame used it. Shortening "constitutional republic" in a speech to "republic" would be acceptable. Using "democracy" is not.

Excellent video.

MB_Wichita - Nope. Wrong. People making home loans tend to be financially unsophisticated. They tend to defer to the "experts" on this subject - the dealer. (Bankers & Etc) If you were buying skis for the first time, would you listen to the ski-sales person if they seemed to know what they were doing? Sure you would. If the skis turned out to be the wrong size and you broke your leg, would you have a tort claim against the store? Sure you would. Same thing here.

And the way the house selling/mortgage system is set up, bankers aren't the only ones to blame here. You have third party originators ( people who just "qualify borrowers" and then sell the mortgage to the banks.) They've been making stuff up to put on the applications, stuff that the borrowers didn't say, in order to get the banks to make the loans. (NoDoc loans). It was largely the 3rd party originators who originated the NINJA loans. Then the banks, surely suspecting or even KNOWING that the borrower was a poor risk, would bundle the bad mortgage together with a few good ones and classify them all as AAA (Highly Secure investment instruments) and pass them along to Freddie or Fanny who really didn't give a rat if they were secure or not 'cause the government backed every piece of paper that came in the door. Then THEY sold these worthless pieces of paper to investors - the Saudis, the Brits, the guy down on the end of your block.

That set up the "housing bubble" and caused increasing prices because every time one of these bad mortgages defaulted, the house would have to be resold, and the 3rd party originator gets a shot at making ANOTHER bad mortgage and getting paid for it... etc. Every time a property was resold, everyone wanted to recoup what they had in it from the first time plus a little so the price went up. And every time someone sold a house they'd bought as an "investment" the price went up.

The NINJAs mostly had NO clue that the 3rd party schmuck was lying to them about their ability to pay for the house. It all seemed so wonderful but so REASONABLE the way it was explained... it's a government program... America is GREAT! And OH! We can have our own HOME!

Yes - sometimes unqualified people reached for the stars and without knowing it counted on inflation to make their payments affordable forgetting the interest hiking part of inflation - and hoped that interest rates wouldn't eat their dream home before they got enough raises at work to be able to cover it - and everyone in the subdivision was there because of debt. That's just the way things are  DONE these days (I actually heard this from people.)

Nope. It was the job of the banks to make sure things were sound. Their fault, their foul, our headache.

Why does this seem to be such a difficult concept to comprehend for a lot of people?

Yes - sometimes unqualified people reached for the stars and without knowing it counted on inflation to make their payments affordable forgetting the interest hiking part of inflation - and hoped that interest rates wouldn't eat their dream home before they got enough raises at work to be able to cover it - and everyone in the subdivision was there because of debt. That's just the way things are  DONE these days (I actually heard this from people.)

No, it is NOT the ways things are done by financially responsible home buyers; it never has been.  Never, never, ever buy anything you can not, or may not, afford to pay back, period.  No matter what someone tells you it is your responsibility to do the due dilligence.   Hope is not a legitimate component of intelligent decision making when you're considering a mortgage, unless you have a plan B, like savings in the bank.

Hope is not a legitimate component of intelligent decision making when you're considering a mortgage,

But it is. One of the first things I learned when I was a Real Estate agent was that buying a home is not a rational decision for most people. It's an emotional decision - like meeting a potential life's partner or picking out a dog at the pound. And we were taught to sell the listings on that basis. Buying a home IS an emotional process for most people - NOT a rational one.

But it is. One of the first things I learned when I was a Real Estate agent was that buying a home is not a rational decision for most people

Of course, as a real estate agent you want it to be as emotional as possible.  No matter what fool decision someone makes in buying a home, you've got your commission and you don't have to give it back if they foreclose.  

Certainly, buying a house is an emotional decision, I agree, but that does not excuse the buyer from making a rational, fact based mathematical assessment about whether you can afford to buy it or not.   That decision is not based on how much profit someone may make on the sale of the home, or the re-marketing of the mortgage, or whether the President of the US loosened the regulations.  The relevant facts are whether you can make the payments, even at the maximun adjusted rate, pay the taxes, insurance and upkeep; period.  Emotions play a role, but responsible behavior whether it about one's finances, relationships or careers requires one to put aside the emotional considerations for a moment and consider the facts and realities.

This entire thread tries to throw fault at everyone down stream from the decision to buy a home that many couldn't afford in the first place.  No one who decided to buy a home they couldn't afford did so because they vetted the mortgage market and believed that no one was going to profit from their mortgage, or that it would be securitized, or that the President loosened the regulations or that they believed every person involved in the transaction, seen or unseen, was altruistic in their intentions.   

Ha! You're missing something - why, toss a little pixie dust on that contract, a little confectioner's sugar, and the buyers will sign anything. As I said upstream - they're generally not experts. When the bank or the mortgage broker tells them that they can afford it, who are they to argue with a financial professional?? (The RE agent doesn't do this part)

When the bank or the mortgage broker tells them that they can afford it, who are they to argue with a financial professional??

Who are they?  They're the ones who must pay it back, they are the one's responsible, period.  This isn't high finance and its not that complicated.  The borrower is responsible for vetting the transaction.   No one buying a home is so ignorant that they can't write two numbers on a piece of paper and see which one is bigger, the payment you can afford and the maximum payment for the mortgage.  

Mandelman, it's hard to know if people saw this coming or not.  I can tell you I know several people that bought more than they should have.  They knew what they were getting into.  We have heard a lot about personal responsibility lately.  This is one area where people should have been more responsible with their decisions.  There are a lot of people out their that should have stayed in a rental instead of buying something they knowingly could not afford.  I am in the finance business (automobiles) and I can tell you first hand,  before the credit crunch, I had people almost daily financing more than they could afford.  I used to laugh when some of the people would ask "how much is my payment" all I could think was, why do you care you're not going to make it anyway.  People were out there buying cars, houses, and many other things like electronics knowingly and willingly even though they could not afford them.  This along with the Democrats like Barney Frank is the reason we are in such a financial mess.  What really sucks, however, it that the people that are responsible are the ones stuck paying the price.

"people bought more than they should have" < notice the morality here? eh, it's about money, it's bound to be tied to emotions.

That is one of the big reasons people are not outraged.Outrage has been muted by shame. If the ownership society hasn't been sufficiently internalized to induce cowering shame there will be family, friends, neighbors or co-workers to step up and declare what a bunch of losers are out there dragging all the good folk down.

Another reason we don't hear more outrageis that once people acknowledge they can't keep up financially with what they havethey likely can find adequate housing elsewhere. There is an oversupply of places to live. There is also a quietoutpouring of sympathy for the shamed. Many people have opened their homes to take in the brother who was overextended or theeldery widow whose social security would no longer cover the cost of living in her modest home.

Perhaps if, everyday, the 6,300 former inhabitants of those homes pitched tents in the public square, squatted along the major thoroughfares,or formed long ques for handouts the general outrage level would rise. Until then the primary reactions are fear, loathing andshame.

WB_Wichita:

Are you independently wealthy? Did you inherit enough money to pay cash for your first home? Or did you get a mortgage?

If you got a mortgage, what was it based on? Your income? Your expectation of a continued paycheck and the health needed to work and continue caring for your family? How irresponsible of you! there is no guarantee of keeping your job, there is no guarantee of your health and ability to work, and there is no guarantee that even with a fixed rate mortgage, your other living expenses (like gas and health care: necessary to keep your job) won't increase by 50% or more within 1-2 years.

I scrimped and saved and put down 40% on my first home, took a 15 year fixed mortgage, and paid it off in 5. Whenever I am tempted to feel pissed about the fact that almost half of my neighbors have driven away (in cars nicer and newer than mine -sometimes purchased on HELOCS) and cut their losses, while my home has lost 50% of it's value this year, I stop and count my blessings. I have my job, my home, my health, and my dignity. Some of my dear friends have lost them all.

Funny thing, my old mortgage company has started calling offering to refinance. When I tell them there is nothing to refinance, they turn the page of their sales script and try to sell me a HELOC... I have gotten 5-10 mortgage re-fi (cash out) or heloc offers per week for the past 5 years. "Pay off your high interest loans and get a tax deducution" they scream. We all know that us 'younger generations' haven't been taught much about saving or waiting for things -in fact our baby boomer parents want/encourage us to "have it all now" rather than make the choices that they did.

Some of the hardest hit areas (like mine) were based on a "growth" economy. Almost everyone is tied to the construction/development industry in some way and the income started drying up as the rates started to rise. Most are self-employed or small businesses, and health care costs are often more than most mortgage payments now.

David: your question in #1.30?...compassion (or lack thereof)

I'd put my money on the rating people - the ones who were handing out the AAA debt ratings like candy to the toilet paper-that-passed-for-securities. they undermined the whole system.

WB_Wichita:

Are you independently wealthy? Did you inherit enough money to pay cash for your first home? Or did you get a mortgage?

No, we're not; we work extremely hard for every penny. And yes we have a motgage. But we prudently had no expectation that nothing bad was ever going to happen in our lives. We assumed we may lose jobs, or get sick or injured and acted and planned accordingly. We bought a house that could be sustained with the lowest of our two incomes or part time incomes. We have adequate life insurance to protect each other, disability insurance to protect our incomes and a cushion in the bank. We planned for life's bad things at the expense of the the things we "want". We didn't invent this life style, this is nothing new. Planning for life's uncertancies and living within one's means is nothing new. But you probably right, maybe there is a lack of financial literacy. But I think it's mostly common sense.

MB... do you really think that people moved into homes with total disregard for the monthly payment? I've worked with exceptionally poor and uneducated people in ghettos... and they could tell you how much their rent is. Isn't it more likely that people didn't see The Great Depression II around the corner?

This isn't about the ability to forecast a recession. Prudent financial behavior includes planning for potential job loss or income loss due to health or injury. Isn't it more like some people made some big financial mistakes? Aren't most of the foreclosures aided by all the other debt piled on top of the mortgages? Isn't it also true that despite the huge increase in the number of foreclosures it's a very very small percentage of the total of all the mortgages in the country. What are the facts? This isn't just about mortgages, it's also about how some people choose to live their lives.

MB,

Well said. I bought my house, which is paid for now, and did exactly as you said i planned my purchase over what could happen and not the fantasy that everything is going to remain the same or get better. My parents taught me that. I now have a nice home that is mine and I could care less what it is valued at because i owe nothing on it. My father always taught me that it was better to wait and save for what you wanted and after many years of not listening to that advise, I finally started doing that around 7 years ago. In that time my hourly rate has gone from $6.25 per hour to $11.00 per hour now. I have 2 cars and a home now and all are paid for....I also have managed to save over 1 years salary in case of some unexpected thing happening to me. I really get tired of listening to all this blame game going around with people trying to blame their mistakes on someone else. If I can do it anyone can. I got what i have today by sacrificing what i wanted for what i needed and put the rest to savings. And this recession isn't bothering me now and even if I lose my job I still have what i worked and saved for and I don't care what they are worth on paper...they are still mine.

MB,

"Isn't it also true that despite the huge increase in the number of foreclosures it's a very very small percentage "

Yes you are right again. Total foreclosures as per a post in this thread somewhere shows it is still less than 2% of total mortgages. This is just a matter of a small percentage of people who made bad decisions for whatever reason and are wanting those of us (the other 98%) who made good decisions to bail them out. i was against the bank bailout also but just because we made one mistake in my opinion then we should not reward more bad behavior.

bilbob: Exactly what my parents taught me and echoed by my grandparents who lived through the depression.

And this recession isn't bothering me now and even if I lose my job I still have what i worked and saved for and I don't care what they are worth on paper...they are still mine.

Bilbob:

Bingo! All the complaining about what happened to the mortgage and credits markets after people signed the mortgage are irrelevant if they had borrowed responsibly. And that means, as you put it "I planned my purchase over what could happen and not the fantasy".

Now, in spite of all my comments on this thread about financial responsibility, I do believe something needs to be done to provide some relief. I believe firmly that our democracy will not survive until more people begin living more behaviorally and financially responsible lives. However, I also believe it also won't survive if we just throw people under the train when they make mistakes in their lives. Freedoms and rights are not only accompanied by responsibilities and obligations, but by compassion as well. But, along with compassion its OK to hold people accountable and expect a change in their behavior. Most of the comments in this thread are all about avoiding accountability.

We bought a house that could be sustained with the lowest of our two incomes or part time incomes.

Very wise advice.

What would you recommend in a area where the cheapest houses, even financed 30 yrs at 6%, still have $1000K/mortgages? 2 bedroom rentals are about the same-but there is little to no regulation over the rental industry, and renting often ends up costing more due to shady, unethical owners.

Is $3000/month part-time income for you? If so, please be aware that you are blessed! Considering average household income in the US is about $42 k, do you think this describes most people? The maximum unemployment check is $240 per week, so that is not an adequate safety net either. With $240/week income, a small family would be ineligible for foodstamps (and there are still utilities, taxes etc.) If they had the recommended 6-9 month savings to supplement the unemployment, they would be ineligible for all state and federal aid programs, including medical assistance. The average COBRA payments are around $1200/month.

You obviously have a lot of wisdom and experience. What to you recommend to a generation who come of age in a time where housing expenses far exceeded incomes?

Average mom,

I don't know where you live but 3000 per month is more than I make now. I still manage to make ends meet and have some nice things. i don't want to say this in a way that sounds sarcastic or uncaring but maybe you could look into another area. when I bought my home, I bought it 45 miles from where my family lives just for the same reasons you stated above. I sang that same song that i deserve more because the area i lived on took so much to just get by. I know its not fair but we can't generalize and think it is the same everywhere. Housing expenses in SC don't exeed incomes. Where I live is not where I wanted to but it is a nice area and real estate was reasonable there. If i told you my whole story you'd be shocked...but that is a different subject all together. The fact is I lived like most do today by spending all I had on foolish things when I had no business doing it.......a little over 7 years ago I finally took my father's advise and lived BELOW my means....it was tough....we made a lot of sacrifices but today I am so grateful I did it because this recession is just a bump in the road to me.....I have been called lucky on this thread but it has nothing to do with luck and everything to do with sacrificing now for the future....it is hard but it can be done.....

Bilbob, I am not struggling, but thanks for the efforts to be kind. I used $3000 based on the standard that a mortgage should be only about 30-35 % of income, since we were discussing "responsible borrowing". I too live far below my means, and have few non-essential expenses.

In my state, I don't know of homes that have sold for less than $120-150k in the past 5-10 years. Even these "rock bottom" prices were found far outside of the places where people worked and played, creating isolated "bedroom communities" There is no infrastructure for these families to get to work on decent roads, without corporate taxes, the counties raised taxes to levels 200-300% of the urban areas. Lax utility regulation has the developers to maintain a monopoly on the utilities, and these rates have also risen about 50%. These communities have been the hardest hit and have vacancy/foreclosure rates of 50-60%.

It's pretty hard to keep hearing the pride and arrogance of those who have not been hurt (yet?) as they point fingers at those that have. It is possible to admit and acknowledge compassion, without advocating for bailouts. We have to take our hands out of our own pockets to reach out to others. Many are looking for a hug, not necessarily a handout.

There, but for the Grace of God, go I.

What would you recommend in a area where the cheapest houses, even financed 30 yrs at 6%, still have $1000K/mortgages?

Average Mom:

You raise a very good point. Some parts of the country are obscenely expensive and usually the ones hurt are the ones from those places. We lived in San Jose for 5 years and we returned back to the Midwest because we knew we could not afford to live the life we wanted to in that plce. We had friends who grew up there that were forced to leave because they simply could afford a one bedroom fixer-upper that cost $200,000; and that was 20 years ago. I don't know what the answer is to that problem, but I do know its not to ignore the reality and borrow what you can't afford to pay back. In the case of my friends, they had to make a difficult decision and move. It wasn't "fair", but nothing ever will be.

Is $3000/month part-time income for you? If so, please be aware that you are blessed! Considering average household income in the US is about $42 k, do you think this describes most people?

No, it's less. My wife has worked part time after we had children and it's less than that. As I mentioned earlier though, we based our mortgage on the ability to survive off the lowest of our two incomes, which is hers.

Many time before I've heard that we are "blessed" implying that our realtively good situation was because we we won some kind of life-lotterry. Well, yes I realize that I'm blessed; but we didn't sqaunder our blessings, as too many people do. Also, per the census bureau, the 2007 median household income was $50,200. I realize that that it's not a lot of income anymore compared to what it takes to live. What that means though is that people have to be even smarter about how they live their lives. And Its not just about buying a house; its also about their decisions about post high school education and training or when to have children and when not to have children (I could start a whole new thread on that point) and its about knowing the difference between a want and a need.

Average Mom,

I hope it doesn't sound as if i am pointing fingers or bragging about my situation. That is not my intention at all. I do feel for the people who have gotten caught up in this mess. I have 3 friends who are facing foreclosure...2 have been my best friends since high school....but when they blame the mortgage company or the government for something they signed for it does make me wonder about people today...it was still them who got caught up in this frenzy and now they are "reaping what they sowed" as Mandelman put it above. This is a little off topic but it is related to what is happening now....One of my best friends has had 4 houses in the last 10 years....It seems in the late 90's that our great all knowing government decided to take away the capital gains tax on a house if you owned it for I think it was 2.5 years....well my friend got caught up in this and started buying his houses making money....spending most of the profit and buying another house etc.....Now he is about to lose everything...he blames the mortgage companies and anybody else..it is sad because he is the one who got himself in the mess he was in.....he just lost his job also and like mandelman he has an arm..he took it because of the low rate for a limited time and thought he would get that low rate and then resell or finance again at a fixed rate...now it is coming back to haunt him....he foolishly didn't want to pay the insurance that would be making the payments for him now since he lost his job....I do feel sorry for him and am even helping him in many ways....but blaming the mortgage company and the government and saying that they bailed out the banks and now they should bail me out is just ignorant in my opinion..

the reason they are called 'predatory loans' is because they target prey, not willing participants.

but blaming the mortgage company and the government and saying that they bailed out the banks and now they should bail me out is just ignorant in my opinion..

lets not confuse our terms. when we say that "they" are bailing out the banks, the truth is that we are bailing out the banks. the people who lost their homes and their jobs are bailing out the banks to whom they already owe money. the bailout money is OUR money.

so, even if your perspective is accurate, that it is the homeowners who are more responsible for the exploitive loans than the banks who wrote the loans and the banks who then knowingly bought the loans, those homeowners are giving banks more of their money so that the banks dont suffer from the mutual partnership of the loan.

if no one were being bailed out, that is one thing. but we are supporting an artificial and corrupt and exploitive and FAILED system at the expense of people who have already paid for whatever mistakes they may have made.

:)

"the reason they are called 'predatory loans' is because they target prey, not willing participants."

Ok, I'll have to ask where were these people hijacked from and forced to take out loans...that is a crime...lets get the police involved....to incinuate that a person was a victim of a "predatory loan" and as per your definition a "not willing participant" then that suggests that someone forced them to take out a loan.....I don't remember seeing any news about the gangs rounding up people to "force them to buy a home or take out a second mortgage"..please show me a link I would be very interested in seeing that.

"when we say that "they" are bailing out the banks, the truth is that we are bailing out the banks. the people who lost their homes and their jobs are bailing out the banks to whom they already owe money. the bailout money is OUR money. "

While you are technically correct....it is ALL of us...the ones who have paid for thier homes and have jobs who are bailing out these banks are in this also, that is the 98% of us who have not defaulted...I don't think we will find one politician who will say it is our money they are using...government is currupt...we are not giving the banks our money as most of us are and were against it...the government is taking our money and doing with it what they want...that is the problem....

Ok, I'll have to ask where were these people hijacked from and forced to take out loans...that is a crime...lets get the police involved....to incinuate that a person was a victim of a "predatory loan" and as per your definition a "not willing participant" then that suggests that someone forced them to take out a loan.....I don't remember seeing any news about the gangs rounding up people to "force them to buy a home or take out a second mortgage"..please show me a link I would be very interested in seeing that.

Dead bang on Bilbob! While there are certainly predatory business people, it is not an excuse to do the due diligence, especially on something like a mortgage. The process to obtain and do the due diligence on the purchase of a home isn't a new concept. For $1,000 a lawyer and an accontant can look at the contracts and the transaction and explain the transaction and lay out the financial facts. That's only 1% on a $100,000 house.

While you are technically correct....it is ALL of us...the ones who have paid for thier homes and have jobs who are bailing out these banks are in this also, that is the 98% of us who have not defaulted

you're right. most of the people paying for the relationship between the FAILED banks and the defaulted customers are the ones who had nothing to do with it (other than to continue to operate within the corrupt system, thus feeding it). how does that feel?

I don't think we will find one politician who will say it is our money they are using...government is currupt...we are not giving the banks our money as most of us are and were against it...the government is taking our money and doing with it what they want...that is the problem....

again, correct. that is the problem. note that the problem is NOT the fact that some people signed bad loans, or that some people didnt. i'm not sure how it's relevant that politicians arent going to describe the bailout as OUR money. it is still our money.

as far as the "prey" analogy, i'll admit it's not precise, but it is still meaningful. in the wild, the prey goes to water even though it knows that it risks death by doing so. but what of it? it still needs water. and people may have signed a bad loan, but they still needed housing.

and you acknowledge that the system is corrupt, or, rather, that the govt is corrupt. i hope it's not a stretch to include the banking system in that statement, because the two are profoundly linked, and that link is why the bailout is happening and why the govt isnt describing the bailout money as OUR money.

so, we have a corrupt system. was the system corrupt before the bad loans began? or did the banks' customers cause the corruption? i'm not sure how the latter can be true. while it is technically true that each signer of a contract is equally responsible for entering into the agreement, on a practical level, it is absolutely not true. the lender writes the loans. the lender writes the terms. the lender has invested impossibly huge amounts of money to lobby the govt to write laws which favor it at every step of the way.

and part of the corruption is the fact that the banking, and credit, industries, were the ones who categorized certain people into a group defined by its limited options in terms of housing - the banks were the ones who decided that these people could only afford a loan with horrible terms. and for those people, yes, they had available to them lawyers, appraisers, insurance companies, etc., but the very nature of their industry-determined identity made those options vastly more expensive, in ratio to their resources, than other people and the banks themselves. the banks have lawyers, insurance company deals, appraisers, etc., included in their overhead, in their business model.

so now when something unexpected happens, like a homeowner loses his job, he's @!$%#ed. but when something unexpected happens to the banks, like a customer defaults, the bank retains the property (and its value), punishes the customer with its credit programs and legal options, and then gets a lump sum payment funded by the taxes that customer and all the rest of us have paid.

so, yes, the customers retain some responsibility. but i'm not sure why it is important to focus on that, especially when the system was corrupt before these lending practices even began, and when we are sacrificing due attention paid towards the calculated, deliberate and immoral responsibility of the banks. the customers made a mistake, but the banks created the environment for the mistake, took advantage of the mistake, and are now not paying for the mistake.

I'm still lurking here and the circular arguments are dizzying. The proposition that the good, hard-working, responsible folk are propping up the unfortunate slugs and dregs might be an accessible rationale for handy scapegoating but it is just wrong.

The global financial system is in melt down. The core banking business model has failed at it's hub. This is where derivatives, insurance products, and speculative trading ballooned and then exploded. The air that was the value of those financial instruments has dissipated into the atmosphere and that is left are scraps of paper that at once promised value. Ordinary banking consumers were on the periphery of that explosion. The retail bank services like clearing and posting checks or posting debt receipts to your credit card or mortgage carried on while the muckity-mucks at the hub took the blasts. This is happening to financial centers and real estate values all over the globe.

The muckity-mucks at the failed banking hubs told their governments what a mess they were in with the explosions and the governments (not just the US gov't) have been handing over billions in currency to make sure the bankers can keep the lights on, make the electronic transfers and post transactions so we all don't have to go back to trading beads or what-have-you until they figure out how to remake the financial system at it's hub. The governments have been making deals for what they can get from a system that is basically intangible, based on trust and confidence. The US government (and you by proxy) are new owners of a bunch of stuff the value of which is yet to be determined.

Right now there are meetings of the super-mucked to sort out what might happen next. The foremost meeting is being held now in Davos, Switzerland. Relative to the major re-structuring of the global financial system temporary inconveniences of those too close to the blasts (including folks losing their homes) or the fear of economic uncertainty is dwarfed.

Get some perspective on this problem and quit picking on your neighbor.

Get some perspective on this problem and quit picking on your neighbor.

amen!

we're all in this together. the market either works or doesnt work for ALL OF US.

to be objective about any group effect, you have to throw out the statistics on both extremes. the system didnt fail because of a small percentage of defaulted loans, and it cant be expected to succeed based on the small number of people who are completely unaffected by it.

it failed because it doesnt work.

Mandelman,

i do hope those people get their issue resolved but I think that article just makes my point more valid. here is someone, who recognized a mistake in the contract and went ahead with signing...the addendum I hope will allow them to prevail in their lawsuit but the problem is still squarely on the borrowers shoulders...all that couple had to do is stop and not sign the contract and insist on a new contract...but they proceeded anyway with full knowledge of a mistake on the contract...they should have stopped and waited to get a new contract with no prepayment penalty like they wanted and there would have been no problem.....

here is someone, who recognized a mistake in the contract and went ahead with signing

so the customer thought that what she was doing was risky.

the bank knew what it was doing was not only risky, but profit-driven.

the gain for the customer was a new place to live.

the gain for the bank was profit. and they knew that they were then going to sell that loan to another bank. for profit.

i guess having a place to live can be a strong motivator to make mistakes. but we can be sure that the bank spent a lot more time with that conract than the customer did, and the customer needed the benefit of the deal much more than the bank did.

i get it - you feel the defaulted customers are responsible. but - seriously - they are relatively more responsible than the bank?

if no one were being bailed out, that is one thing. but we are supporting an artificial and corrupt and exploitive and FAILED system at the expense of people who have already paid for whatever mistakes they may have made.

Firsty, thank you. Yes, this is what I am trying to get at. It's funny, of the families (several) that I know that are losing, or have lost their homes, not one is blaming anyone but themselves. Don't believe the sensationalized sob stories in the media -I even seeded on to my column that I thought purposely made the homeowner look like an irresponsible idiot, while ostensibly sharing their "plight".

Some parts of the country are obscenely expensive and usually the ones hurt are the ones from those places. We lived in San Jose for 5 years and we returned back to the Midwest because we knew we could not afford to live the life we wanted to in that plce. We had friends who grew up there that were forced to leave because they simply could afford a one bedroom fixer-upper that cost $200,000; and that was 20 years ago

Nothing in my post addressed anything that this would apply to. I am not talking about "obscenely expensive" homes on the coasts, but cheap, starter tract homes in the middle of the desert! By your standards, teachers, firemen, policemen, socialworkers, etc. should never "take on" homeownership, because to save $30k for a down payment, and then save adequate resources to invest (securely) and make $1000/month interest would take 40-50 years. Not everyone has the benefit of 2 working spouses. Many families feel it is important for a parent to raise children, not a daycare worker. Many adults wait for a lifelong partner, rather than enter a series of 'convenient' arrangements to consolodate funds. Even in a marriage, spouses walk out, or die young...

bilbob: I admire your willingness to stand by your friend. It sounds like he got caught up in money and things -he was greedy. Some people are. Just not the majority, and not the one's I've seen.

Meloney; spot on! This is a worldwide problem. Hard to believe John and Jane down the street who cashed out their home equity to take a vacation last year caused it.

How far you go in life depends on you being tender with the young, compassionate with the aged, sympathetic with the striving and tolerant of the weak and the strong. Because someday in life you will have been all of these. George Washington Carver

$25,000 might seem like a small pittance to a multi-billion corporation like Countrywide, to us it represented not only 1/16^th of our combined annual income it also represented the difference between getting a better loan on our home and not-qualifying because it caused us to exceed the loan to value amount. Considering the exorbitant salaries of the Countrywide Corporate Executives, writing off a meager amount like $25,000 would not have even been a drop in Countrywide’s billion dollar bucket, and it would have salvaged a good customer.

Please tell me I am misreading this, or it is a typo? If a couple is making $400k per year, they could not come up with $25000 over a 9 month period? To save their home? And they want it "written off"?

A little closer to reality --say at a $40k/yr income, if I needed an additional $2500 to re-fi out of an ARM because I had spent my equity on home improvements and was close to upside down in my home, I should have at least 2-3 times that in an emergency savings. At the very worst, put it on a 0% interest card and pay $500/month for 5 months. A temporary 15-20% cut in spending (discretionary, savings, retirement contributions) should be relatively painless to avoid the spiral mentioned here. And here is where I'd agree with WB - if you don't have discretionary or savings income to cut, you are living beyond your means.

No Mandleman, I wouldn't consider her irresponsible either for her actions and decisions. They seem absolutely reasonable, as you said, considering this was unprecidented and unexpected. There was no precedence for what happened to the market. Maybe less conservative...but we've already discussed the undeniable merits of risk taking.

What threw me, whether the income was $40k or $400K/year, was the attitude expressed that "$25k was a pittance to a big bank, why couldn't they write it off?" to me this is indicative of a larger societal issue that IMHO HAS contributed to this downfall. The entitlement expectation, the lack of acceptance of any personal liability and natural consequences for the ups and downs of life, the inability to graciously deal with failure and setbacks.

Granted, taken in light of, or in response to the idea of bailouts for the banks, this comment takes on a different significance. We're all tepmted to wonder, briefly, where's my share of the $700B pie? And if that's all it was, fine. But if this was her reaction back in August (or actually 12/07?) then I don't think it shows irresponsibility, but a lack of character.

Are we going to do a personal character analysis on 2.3 million people? How dare we? And how dare we consider helping the wealthy or even middle class maintain something similar to their current lifestyle, when we have children who have no beds or shoes? Families who are feeding kids dog food just to maintain a roof over their heads? Children who are dying of a simple skin infection because they cannot see a doctor? Homes that have had not utilities or water since September?

Honestly, I don't have any answer or suggestion for homeowner bailouts ( and I've never supported the industry ones) but that is probably more due to my lack of confidence in the government to spend my money wisely and ethically. I can tell you that while others are saving and stockpiling money, I have been making significant personal contributions to friends in need. Maybe in 6 months people will call me the irresponsible one. Charity needs to be close to home, and the accountability will take care of itself. Giving should be an act of love, not compulsion or fear.

Mandelman,

this is my main point to what you are saying.....

"And none moved in with total disregard of the monthly payment... they believed that if rates started to rise they could refinance at a fixed rate, which was not an unreasonable assumption by the way as it had been the case for as long as I can remember. "

these people were taking a gamble.....they thought they had a way around the system...either by their own fault or by listening to a sales pitch....but when you sign a contract you should be prepared to fullfill THAT contract and not depend on being able to get around it......this goes to my core point here....when a person signs a contract THEY are responsible for fulfilling that contract and should be prepared to do so....

Now, there are some people who need help and i agree we need some kind of program or bailout or whatever to help them ( like the case above you mentioned)...but there are a lot who are just riding this out to get out of bad decisions..these are the people i have a hard time with just bailing out. I didn't agree with bailing out the financial institutions either in the general way it was done.......

Firsty,

in response to post 1.65.

When I bought my first car....I didn't listen to my father...I went out on my own and made a big mistake because I let the dealer dupe me into paying way too much and financing at a high interest rate....yes the dealer was corrupt in taking advantage of me...but it was totally my fault because i didn't do my homework....i wanted a new car so badly that I made a mistake...i couldn't resell the car because i owed too much on it and had to live with it or risk ruining my credit by defaulting on the loan...to me a house purchase is the same thing...to me there is no difference when i hear the excuse that "I didn't know the credit market would dry up or I could have refinanced at a fixed rate" or " I didn't know the economy was going to go bad and I would lose my job". When you sign a contract it is your obligation to be able to fullfill it. There is insurance that will make payments for you if you lose your job or are injured or even die....this should have been thought of BEFORE taking the step of signing the contract. It is the buyers responsibility to think of these things and not go blindly into a contract thinking every thing remains the same or nobody is trying to make money off of me. Yes banks made a lot of money off of this and they were greedy....but banks are a business and that is what businesses do...make money for shareholders...if they are unscrupulous, then don't do business with them..if you made the mistake and did get duped by them, move on...life is no guarantee....we cannot use the argument that we bailed out the banks so now we have to bail out the homeowners....that is just as irresponsible as the people and businesses who let themselves get into this mess....

bilbob, you just keep repeating the same message. the problem i have with that is this (as i've already stated):

so what? as you yourself pointed out, the banks are corrupt. there were some people who made mistakes, some people who didnt, some people who are floating by, some people hoping to get out of their situation, some people — it goes on and on.

these details are irrelevant to the issue, which is that it was the banks who created the environment. whatever mistakes anyone made (and whatever good decisions anyone made) were made within the context of a corrupt system. you completely ignore my point that, while, technically, each person in a contract is responsible, but it is the banks who really control the game, which is supported by laws written by a government those banks bought off. you dont think that has ANY affect on the way the contracts work for the average person?

so — what is the point of pointing out that some people were irresponsible? where does that fit in the big scheme of things? why are you more worried about pointing out a small portion of customers who may have made irresponsible choices when the issue is affecting the entire economy and is controlled by corrupt banks who bought favorable laws with our money?

you seem to be writing off the bailout as something none of us agree on, but you arent writing off the fact that some mistakes were made by consumers. NO mistakes were made by banks? why mention one and not the other? and why have you apparently accepted the bailout as wrong, but have gone back to a position of, "well, the solution is wrong, and i feel bad for all those people, but they deserved what they got."

if you think the bailout is wrong, and you're not doing anything about it, what separates you from the customers who made irresponsible choices with their money? arent you making irresponsible choices with your money (and ours) by not fighting this and just scapegoating the very small number of people who might have made bad housing choices?

i just fail to understand why anything your saying has any appreciable impact on the issue. i dont see much difference between your statements and saying that the katrina victims had it coming because they knew they lived in a flood plain and they hadnt made travel arrangements to get out in the case of a storm. and, yours is worse, because to apply your argument to the katrina analogy, you would only be referring to a tiny portion of those affected by the storm, and using that as some strange excuse for not worrying very much about the aftermath of the hurricane.

what is the point?

'zactly! Thank you firsty.

firsty,

"

if you think the bailout is wrong, and you're not doing anything about it, what separates you from the customers who made irresponsible choices with their money? arent you making irresponsible choices with your money (and ours) by not fighting this and just scapegoating the very small number of people who might have made bad housing choices? "

I have writtien my congressmen and letters to Nancy Pelosi and Harry Reid and any other lawmaker whose email addres i can find.....I am against using this second 350 billion just as I was against the first one...

"i just fail to understand why anything your saying has any appreciable impact on the issue"

correct me if I am wrong here but the issue in this article was where is the outrage because less than 2% of homes are being foreclosed on...the author uses figures make us think it is a huge problem but if you look at foreclosures then you will see it is not even 2%....so why is that a problem? Mandelman (correct me if I am wrong here) wrote this article because he is outraged at the way the credit market is frozen up...he had taken out a loan (or just used an example as stated in the article) that had a varialble interst rate thinking he would be able to refinance later at a fixed rate....now since the market has crashed he cannot get the loan and is stuck in his arm and the payments on that loan will get unsustainable for him....this is not the banks fault but the borrowers...that is my point and what i believed to be the point of the article...he uses the suicide example to get sympathy....another tactic to get me to be sympathetic for bad decision making...and now it has morphed into it is the banks fault because they are corrupt....so what if they are...people still went by their own free will and made these decisions....and it is less than 2%....so why should I be outraged? That is the point.

and now it has morphed into it is the banks fault because they are corrupt....so what if they are

well, i happen to think it's a big deal that banks are corrupt.

harping on instances of personal irresponsibility is useless. personal responsibility is part of human nature. sometimes, some people make bad choices.

p.s. writing your congressperson is about as useful as writing here. this is bigger than any congressperson and the govt is incapable of changing the environment because it is part of the environment. you might as well write letters to banks asking them to be responsible with their bailout cash.

Firsty,

"harping on instances of personal irresponsibility is useless. personal responsibility is part of human nature. sometimes, some people make bad choices. "

yes people make bad choices and with every bad choice made there is a consequence to that choice. Bailing out people for making bad choices will just enable them to go and make more bad choices.....

"p.s. writing your congressperson is about as useful as writing here. "

ok...i agree...i will listen to any suggestions on how we can do more....but i don't know what else we can do...congress takes our money and does with it what THEY want....

Mandelman,

In 1.77......i don't care if it was prime or sub prime....defaults are defaults....I mean call me crazy here but am I the only person in this country who thought enough to take out mortgage insurance? am i the only one who did not fall for the low teaser rates thinking I'll just refinance in a few years and save some money? Imean please explainwhy it matters....

"And I hate to say it, but we're going to "bail out" the banks again now... no choice at this point, we simply have to. They're in worse shape than they were in September, only now we've got $350 billion invested in them."

yes, i agree this is wrong the way they are doing it....but look at it the other way...if we bail out these few homeowners who are defaulting then in a few months or years they will be back again with their hand out again saying I messed up again help me out of this......somewhere this cycle has to stop....we can't just keep throwing money down bottomless holes.......

if we bail out these few homeowners who are defaulting then in a few months or years they will be back again with their hand out again saying I messed up again help me out of this

if we bail out the banks they will continue with their failed business model and 2 years, 5 years, 10 years, or 20 years from now we'll be giving them 2 trillion dollars.

which is more expensive? the "handout" thing is tired, though - it's like blaming people on welfare for being on welfare. people, in general, are good and decent and do their best. for every person with bad credit who spent without reason there are hundreds with bad credit because of unforeseen and uncontrollable issues, like medical costs, layoffs, unexpected repairs, etc.

i will listen to any suggestions on how we can do more

what we can to is immediately abandon all credit card debt. it is unsecured debt and the banks cant do anything to get it from you except force you into the also corrupt credit industry. if even 5 or 10% of credit card holders abandoned their debt, it would cause a collapse that no bailout could solve, and the legal system could never handle it. in fact, the system isnt designed to go after that money in court, because it knows that the defaulters on credit card bills dont have any money or significant property to take away. their SOLUTION is to put customers into the endless cycle of piling credit onto credit, with increasingly high interest rates.

what we've already paid in taxpayer money and what we are going to pay in taxpayer money more than makes up for our share of personal debt, and this would be like deciding to stop paying the mafia to let you run your business in their town. yes, you may "owe" them money, but we've already paid more than enough into a corrupt system, and if we all just have the wherewithall and the determination to work together, then the mafia - the banking system - will dissolve into the artificial nothingness it already is. it can only affect us one by one. the credit rating corruption is relative. cc debt abandonment could alter the entire landscape of banking and credit within 6 months or a year.

we can do this now, or do it later after more harm has been done. the govt is incapable of solving the problem because it is part of the problem. there is no other peaceful solution.

firsty,

now that is a very drastic measure...not sure whether it would work though...but you see, I couldn't do that because I don't have or use credit cards...i only use my debit card....I guess that is why I am so against rewarding bad behavior....I am totally debt free...everything I own is paid for...call me lucky or whatever but I did it through sacrifice and prudent plannning...not taking risks....stock market did not hurt me because i had my money in regular savings... I made a lot less than a lot of my friends but i am not crying now because all their investments have crashed and mine is still fine...i guess you can call me prejudiced in this matter because of that....when my friends were going on vacations..I stayed home and saved....my job takes me away from mywife for months at a time...I own a home and cars...and even my wife cannot live in them..but that is another story about immigration law.....i believe we should save for the future first and not spend frivolessly....

what we can to is immediately abandon all credit card debt. it is unsecured debt and the banks cant do anything to get it from you except force you into the also corrupt credit industry

wait, wait, wait! i pay mine off every month in full, have never paid a dime of revolving interest in 10 years and love the reward points!

Darn it, if we're going to do this, I'm going shopping first! There are several big purchases that I've put off, or put on a "want list". OOOh , I gotta take a trip first too, because I'll never be able to get a credit card again...

Firsty, you and Bilbob are both taking the extremes on each side. There is much truth in BOTH of your positions. It's not an either/or situation.

If the school of hard knocks only knocks softly, do we still earn a degree?

Interesting parallel that comes to mind, the payday loan industry. They target the poor and minorities, and charge 500-600% interest. Voters in my state overwhelmingly supported a measure to allow their licence to expire in 2010 without renewal, but legislators are already discussing 'compromises' under the premise that 'poor people need this, especially in this economy'.

To me, this can only be explained in 3 ways. None good.

1. There is an individual financial stake for these politicians
2. The powerful cannot conceive or believe in the ability of the poor to climb an extra rung on the ladder.
3. Those in power are interested in maintaining the existing social heirarchy by condoning and perpetuating oppressive usury of the poor.

None of this negates the fact that IMHO, anyone who takes out a 500% payday loan is an idiot.

Maybe off topic...but maybe not. ;0)

i guess you can call me prejudiced in this matter because of that

i think i can. we need to be conscious that it is the responsibility of all citizens to protect and support and fight for the rights and the protections of all of us. personal responsibility is a very real thing, but our society isnt based on the idea that defects in personal responsibility ought to leave people vulnerable to being exploited.

the idea of exploitation or abuse isnt an alternative between slavery, in which the exploited are entirely innocent, and utter freedom, where everything a person does has a direct correlation to their lives, where each positive action has an equal positive result. there are stages of exploitation, and part of the human experience is making mistakes. to have a productive and just society, we simply cannot allow the powerful to be sheltered from failure simply by virtue of their power, and we cannot, likewise, allow the vulnerable to be exposed to failure simply by virtue of their vulnerability.

our society, and, by extension, our government, is in control of these systems. it is also in control of the welfare programs that are required to counter the effect of those systems. investing only in welfare programs is counter-productive, of course. it would be more productive to revise the system in such a profound way as to not need the welfare programs.

but - no matter how you look at it, the government is not meeting the needs of its people and, in fact, is actively contributing to the problem. so, again - i get that you feel a certain way towards people who have made mistakes, but, seriously, thats not even close to the point. we dont build a government so that the only people with a decent chance of simply surviving, of having a place to live and a way to feed their families, are those who happen to make no mistakes and also happen to stumble into good fortune in terms of health, employment, education, etc., including the timing of each.

you arent promoting bad values, but you're promoting values that arent exclusively consistent with good civics. helping the people who have lost their homes can be looked at as "rewarding good behavior," but it's also common sense for people who happen to live in an interconnected community like we do. "bad behavior" is rewarded all the time, and a hell of a lot of our money is being given to people in the banking industry who were involved in some very serious bad behavior. there are many ways to look at what it would mean to assist those who have lost their homes, and "rewarding bad behavior," i suppose, is one of them. but it's not the only one, by far, and it's not entirely fair, and, so, yes, i do think that it reflects a certain bias on your part. it would make sense that you feel superior to those who made mistakes you saw coming, or that you would feel justifiably envious that they might reach a similar level of comfort despite having made a mistake in the kind of loan they took out. but those arent really very good reasons for supporting or objecting to certain policies. they are understandable emotional reasons, but when it comes to promoting a productive society as free as possible from categorically corrupt systems, it is nothing short of insanely neglectful. because YOUR community depends on the well-being of all your neighbors, not just the ones who happened to only take risks you personally agreed with.

Firsty, you and Bilbob are both taking the extremes on each side. There is much truth in BOTH of your positions. It's not an either/or situation.

if you have a better idea, i'd be thrilled to promote it. but as it stands, you are about to pay $2500 in taxes to fund a bailout plan that will forgive the perpetrators of the problem and inflicted a double-penalty on the individual defaulters.

and the system will continue. we will continue to feed the beast. the business model that has not only failed but has also been rewarded for its failure by taking money from the people it took advantage of will continue doing business the way it's done business.

i dont see my proposal as extreme at all. in fact, bilbob's ideas arent extreme, either, in the sense that they are right in line for the bailout itself. it may not be the best idea, he says, but it's the only idea we got. what i'm proposing is peaceful, ethically MUCH MORE valid than what the banks are doing and, especially so since it has the possibility of ending the corruption, which is something that is durably valuable for all of us. it is a matter of the consumers simply stepping out of the artificial circle of corruption that we are trapped in.

when we have a system like we have, that is so ingrained in our government and commerce, it doesnt - it CANT POSSIBLY - change with policy or law changes. these things dont change like that. they usually change with violent revolutions or coups. but we can affect a huge and important and productive and morally sound change by simply backing away.

if we accept that the system is corrupt, the ONLY next question is how it can change. i have come to believe that it can change in one of two general ways — by being physically dismantled or by being starved to death. to physically dismantle it, it would require things like stopping the government, actively sabotaging its people, structures, technology, etc. but to starve it do death all we need to do is: step slowly away from the scene. thats all it would take, and that is all i'm proposing.

it's not our fault, really, that the system has gotten to this point. i mean, it is our fault, in the sense that we are all responsible for all the actions of our government. and we have all participated in this commercial corruption. but it's not about material things. hopefully we can all agree on the fact that life isnt about material things. and this problem isnt truly about the fact that the banks have more money than the people. the problem is that, because they have all that money, they have ALL THE POWER.

but it has gotten to a point where the options we have to get rid of it are naturally limited. if we wanted a different, "easier" solution, we really should have thought of that back in the 50s and 60s while our corporations were building this thing. but we didnt. the best way to stop a train is to apply the brake. but if it's going as fast as this train is going, we can either run it into a wall or just cut the power. we have lost the option to apply the brakes. in fact, our only "acceptable solution" is to give it more power, because we're so used to it running that we think we cant survive without it. but we can, and we have to, because if we dont stop it now, our children will be charged with stopping it, or having a worse outcome, and if not them, then their children, and the recurring problem will get so bad that cutting the power will be meaningless, too.

this really isnt all that wild a suggestion. it is simply a peaceful turning away - turning our backs on it. it's not a big bad monster. the only way it can hurt us is if we keep it going.

forcing the system to die would produce a kind of environment where housing would be available and inexpensive.

there are already some groups forming which are working to organize new homeless into foreclosed and vacant homes, as a kind of organized squatting effort. that there are vacant homes and homeless people in our society is harshly unethical. worse - there are people who dont have a house anymore because the bank would rather no one live in a house and collect no money than collect no money and provide shelter. i'm not saying that the banks should have a business model which provides free housing, but they are taking huge losses on homes just so they could foreclose. the resulting losses are diminishing the values to such a degree that the original homeowner should have been given the chance to meet that new value. again - not as a business model, but as a flexible and temporary adjustment to the problems shared by all of us within the economy, banks and customers included.

And even more importantly... since you and I both know that in reality we're NOT going to stop our runaway train

honestly, if i believed that, then i wouldnt be promoting a peaceful and civil action to stop it. i would be planning something else. because i cannot accept a society that allows the most corrupt and the most powerful to control the very lives of ALL of its citizens. if we dont stop it, then someone else will. i would rather be part of a small group that failed than a large group that didnt try, because, eventually, it's going to change. no economy has ever lasted forever. the logical conclusion of this is a true disaster. you can only keep taking money from people for so long - eventually the money runs out - this simply cannot continue. the train WILL crash.

we really have to get outside of oureselves to see this, but it's still possible. we can either be part of the problem or part of the solution. as far as working to solve the immediate problems of housing, there are ways to do that. i live in a crappy 2 bedroom apt with my wife and two young sons. i can say for sure that if i lived in a house like many people i know, one of those suburban 4-bedroom colonials with finished basements and huge garages and backyards, i would be hosting a homeless family. why arent people doing that? why dont we have a sense of community? why do we insist on applying the worse possible attributes to the entire group of people most affected by thie very real and complicated crisis?

the most marginalized - the ones who feel this and understand it most intimately - are inherently unable to do much about it. they NEED other people to do everything they can. they need people to transcend their biases and fears and get to work on creating very possible, very easy, but very fundamental change.

dont think of the system as unstoppable. that is only an illusion. any system ever created is inherently stoppable - they have all stopped. once we accept it as an illusion, we are freed from its control over us, and the easy ways to stop it become clear.