Would Solomon Rescue Mortgage Debtors?

The Government under the new guy has recently announced another program to help those who are behind in their mortgage payments and to prevent foreclosure for those who aren’t paying or can’t pay their debt due.   This one is going to cost 275 billion.  That is in addition to the billions put up for the same objective just last fall.  No doubt that 275 billion will not be the last trip to the well anymore than the Big Three have made their last trip to the water trough with their latest formal request for another 20 billion or so.  It is already speculated that the total package for them will be more like 130 billion.   Most people are familar with the comments of Rick Santelli last week questioning the fairness of paying for someone else’s mortgage.  He was bemoaning the lack of personal accountability for one thing.  The new guy talks about that a lot but never seems to apply it where the rubber meets the road.   We, the ones who actually pay income taxes, are going to in fact be picking up the tab for perhaps millions of others who haven’t paid their mortgage.  One argument in favor is that such action will stabilize the housing values and therefore be good for everyone.  I don’t buy that argument and even if it had some merit I would still oppose it because it justifies and vindicates profligate and irresponsible behavoir.  I will pay for my mistakes (as I sure have with my investment choices lately) and you pay for yours.  It is a matter of simple fairness.  A basic American concept.

We will not be helping the deserving but in fact the spendthrifts and ne’er do wells also.   Take the example of the fellow who is a fireman say in California in a mid size town.  He makes $72,000.00 a year and has a wife and two kids.  That is not Donald Trump money for sure but it is not poverty or someone in “need”.  Let’s further assume he bought a house for $400,000.00 and now it is worth only $350,000.00 and he is behind on his mortgage payments for six months.  His mortgage is held by Fannie which is a quite likely assumption.  He will qualify for all that special help the Government is offering.   But, but let’s make another couple of assumptions which are not that far fetched at all.  Say in the last three years he has made several trips to Las Vegas and lost $22,000.00 and bought two brand new cars in the last few years and he is making those payments  and his wife likes nice clothes and they owe $18,000.00 on their credit cards and further they have taken several nice vacations in the last couple of years that cost another $5000.00.  And don’t forget the pool he put in his backyard that cost $25,000.00.   Well, blow me over with a feather he is not current on the mortgage.  He is in default not because he can’t afford the mortgage but because of his life style.  We are going to be subsidizing his profligate living style.  I can assure you this type scenario will occur under this mortgage bailout plan over and over.  How are they going to determine for millions of people who derseves the help?  They don’t have enough bureaucrats for that.  We will be picking up the tab for millions of folks who could have paid their mortgage but chose to spend their money in other ways and then their chickens came home to roost. 

I do believe in charity and being kind to others.  I believe in giving a hand to the deserving needy.  But when it comes to the secular and political world I don’t like a system that makes me my brother’s keeper by force of law.  Charity is voluntary and is good for both the giver and the recepient.  Forcibly taking from one and giving it to another is not charity.  That is stealing by Government fiat.   It is classic socialism.

Someone a lot smarter than me gives some advice in a prayer about how those who do wrong should be dealt with.  King Solomon when dedicating the Temple gave a prayer in which he said ” and judge thy servants, condemning the guilty (sinful) by bringing his conduct upon his own head, and vindicating the righteous be rewarding him according to his righteousness”.   Let those who have been wasteful and careless pay for their own mistake.  I ask no more than what Solomon did.  We can’t truly know how each man acted with his money and we certainly don’t know his heart.  A bit later Solomon said “and forgive , and act, and render to each whose heart thou knowest, according to all his ways (for thou , thou only, knowest the hearts of all children of men)”.

The mortgage bailout is a sop to buy votes pure and simple and a way for the politicians who promoted and required these worthless loans in the first place to mollify everyone and divert the condemnation away from themselves.  Mr. Frank, Senator Dodd are you listening?  We would do better by letting the market fix this problem.  If left alone it will do it more quickly and efficiently than any Government program.   There are other ways to alleviate the issue such as changing the “mark to market” accounting rule.  Like all accounting rule it is a fabrication of one’s view of value and disclosure.  That doesn’t mean it is the only way or the best way to reflect values.  Full disclosure of loan portfolios would be better to my way of thinking and then everyone could do their own due diligence and we could have a variety of opinions about worth which is the way a market should work. Those various opinions will meld into a price that is more accurate than any artificial accounting rule.

Quo Vadis?

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