Days of Change

Day 558 – I Need a Freakin’ Break | May 16, 2010

I’m as happy as the next person that Jackass got a mixed welcome in Buffalo with the INAFJ billboard. I checked out their “organization” website. It’s filled with all the stupid platitudes about finding a new way for government to work that Jackass used to fool the electorate in 2008. If you need a job, you’d better start looking. Contrary to popular belief, the president won’t pay your mortgage or fill your gas tank.

Speaking of mortgages, the possibility of re-default is looming. When you give people an interest-only loan and their collateral is worth less than their loan, the bank gets nervous. In fact, people “under water” are walking away and giving the bank a depreciated asset. Refinancing turns a 30-year mortgage into a 40-year mortgage. Those lower payments just aren’t affordable.

This is why old-style Barry Goldwater conservatism is coming back. Is it a reaction to the other Barry in office? Maybe, but it’s also about what happens when the government tries to eliminate risk. In many ways, it started with TARP and the TARP supporters in Congress are going down already.

Let’s look at 2 scenarios. The government bails out banks, the unemployed, the unions and anywhere else that complains. The banks sit on assets trying to ride it out. The unemployed collect checks because if they get a six-month job they could lose out on two years of benefits. Mortgage holders try to negotiate loans until the houses are worth enough to offer high interest mortgages again.

In scenario number 2, we let the banks fail. Banks buy up each other until they stabilize. They foreclose on houses but have to put them back on the market because no one is going to buy their “troubled” assets. The couple paying a $1,000 mortgage for a $500,000 house now worth $300,000 have to move and pay $1,000 a month on a house worth $200,000. But now, a new set of homes have to be renovated in a giant game of musical chairs. Jobs are stabilized in construction.

Both scenarios could fail, but at least scenario two costs the government about $4 trillion less.

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7 Comments

  1. I’ll take curtain 2, please.

    Comment by Mary — May 16, 2010 @ 11:07 pm

  2. Yep number 2. Probably the worst part of number 1 is that eventually you get to see what’s behind door number 3!

    Comment by Somebody — May 17, 2010 @ 9:25 am

  3. I would really really like to know how the hell anybody can think any two bedroom 1 1/2 bath house on a postage stamp lot is worth anything more than – oh say- $80,000. I mean come on- what the hell are they made of these 250,000 houses? Gold?
    greed- money money money
    Sorry- my parents paid 14,000 for a 3 story on a 1/2 acre about 15 miles south of Boston in 1962. From what I can see (I rode by it last summer) the normal upkeep has been done- Zillo says it is a 4 bedroom 2.5 bath now.
    Tell you what- I lived in that house from 1962 to 1973- It always had 4 bedrooms. In order to put in another bath and a half- they took some space away from other (originally not very large) rooms.
    No way in hell that house is worth 305,000. Not unless all the new fixtures are gold. The house was built in 1900 – not worth what they are asking- sorry- it’s greed- plain and simple- greed.
    If folks paid more that what something is worth- they get what they get –

    Comment by ProudMilitaryMom — May 17, 2010 @ 12:26 pm

  4. “how the hell anybody can think any two bedroom 1 1/2 bath house on a postage stamp lot is worth anything more than – oh say- $80,000.”

    Ah, Mom, I can tell you’r not from CA.

    Comment by Mary — May 18, 2010 @ 1:41 am

  5. Mary- that is exactly the point. WTF makes people in Ca THINK a house with the exact same materials as one in PA or OH is worth so much more?
    False pride and greed- pure and simple.
    Can’t tell me that it’s the climate- Earthquakes and smog? Thanks I’ll take the snow and my two bedroom with two car garage, garden shed and barn, 90 ft long asparagus bed, plenty of garden space, lots of perennials, tons of wildflowers on ten acres for 91,000 any day.
    Maybe I should just shut up= we don’t want those kind of snotty coastal elites coming here anyway. They drive up the price of everything and the taxes at the same time.

    Comment by ProudMilitaryMom — May 18, 2010 @ 6:46 am

  6. Mom,

    Many Californians don’t undrstand that ma does not live by sunshine alone. Earthquakes, mudslides, and fires they regard as a crap shoot and are willing to take their chances. I believe the (Ssn Francisco) Bay Area has the most outrageous real-estate market of all. You know, Pelosi/Feinstein/Boxer Land.

    Comment by Mary — May 18, 2010 @ 6:27 pm

  7. Don’t forget Newsom. He’s the one who slept with his friend’s wife.

    Comment by 1539days — May 18, 2010 @ 10:43 pm


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