More depressing news:
The unexpectedly deep plunge in home sales this summer is likely to force the Obama administration to choose between future homeowners and current ones, a predicament officials had been eager to avoid.
Over the last 18 months, the administration has rolled out just about every program it could think of to prop up the ailing housing market, using tax credits, mortgage modification programs, low interest rates, government-backed loans and other assistance intended to keep values up and delinquent borrowers out of foreclosure. The goal was to stabilize the market until a resurgent economy created new households that demanded places to live.
As the economy again sputters and potential buyers flee — July housing sales sank 26 percent from July 2009 — there is a growing sense of exhaustion with government intervention. Some economists and analysts are now urging a dose of shock therapy that would greatly shift the benefits to future homeowners: Let the housing market crash.
When prices are lower, these experts argue, buyers will pour in, creating the elusive stability the government has spent billions upon billions trying to achieve.
“Housing needs to go back to reasonable levels,” said Anthony B. Sanders, a professor of real estate finance at George Mason University. “If we keep trying to stimulate the market, that’s the definition of insanity.”
The further the market descends, however, the more miserable one group — important both politically and economically — will be: the tens of millions of homeowners who have already seen their home values drop an average of 30 percent.
Basically, as I understand it, the economy the past decade was based on people using their houses as ATM’s. Then the market crashed, and still has not gone to realistic levels, and the Democrats are now holding the hot potato. To make matters worse, no one listened to the DFH crowd regarding cramdown, so now we have no real good options other than to let the market completely crash. And then, people will blame the relatively moderate Obama policies and call them “failed liberal/progressive” policies, and we can expect another rightward shift in the narrative.
Awesome.
Hunter Gathers
The next 2 years are going to be fucking awesome.
Kryptik
Any way that we can create an official Liberal party in this country? And have its mascot be Cassandra?
sherifffruitfly
Sounds about right.
Michael
Housing wouldn’t have to crash if the bricks and mortar bankers decided to act responsibly.
And when I say “responsibly”, I mean “lend some freaking money and quit restricting credit lines to small business”. We can’t trust the speculator class at the Wall Street casinos to do the right thing, so it has to be up to Main Street.
Napoleon
Here is a good rule of thumb, never take any advice from anyone from George Mason University. If the government lets the housing market further crash, instead of the slow motion soft landing they are trying to engineer, you are going to see so many foreclosures and a turbo charged double dip recession.
jwb
Can we just all agree to stop ragging on Democrats, progressives, and leftists of all stripes for the next two months and devote ourselves to attacking and ridiculing the Republicans? After the election, there will be plenty of time to re-form the circular firing squads.
MikeBoyScout
Jobs. Jobs. Jobs.
no, not the Steve type of jobs.
kwAwk
I wondering if you’re beginning to understand some of the criticism of Obama being a bit to worried about playing a centrist role, soliciting the Republicans for ideas too much, when others were saying that he should be acting a bit more decisively in his economic policies?
WereBear
Yes, it’s going to crash, but doing it all at once is bad.
Just like if you fall out of an airplane, landing all at once is bad.
There’s isn’t any way to fix it. People bought overpriced houses and they can’t stay inflated any more. But softening the landing will allow new ways to appear.
I could lose a hundred pounds by not eating for months, but it’s not the best way to do that, either.
sven
This is exactly the same fallacy we witnessed during the housing bubble. Home buyers don’t have a particularly good way to judge if prices are ‘right’ or ‘wrong’. Instead, they tend to look at recent history and make a best guess about whether the price they are seeing today is likely to go up or down. When prices were rising during the bubble, home buyers were willing to purchase homes priced far above historical norms because they thought the price would go up further. During a crash buyers won’t return until prices stabilize and prices won’t stabilize until….
Nick
I’m not sure how you can create a soft landing here. The housing bubble was way overinflated and its still too overinflated, but further collapse will make more people suffer.
The end result of this is we need to just accept the punishment of being assholes for the past 30 years. That’s not a political winning strategy, but it’s true.
Tim Connor
Yeah, I guessed they should have listened to Krugman, eh? It couldn’t have come out worse for the Progressives.
So much for “RealPolitik”.
Nick
@kwAwk:
Why, it was Obama who proposed cramdown. It lead to Rick Santelli’s hissy fit on live TV that gave birth to the tea party. It was the Senate that overwhelmingly rejected it. Why blame Obama for something he proposed failing? Isn’t that what the professional left wants? Him to fight for something even if it fails?
racrecir
Some stuff that might be interesting.
A 1997 article on Robert B. Reich:
Mr. Reich’s own cause is to close the growing gap between rich and poor. During his 1992 campaign, Bill Clinton, borrowing liberally from Mr. Reich’s writings, promised to invest in job training and education. But once in office he fell under the sway of the deficit hawks — especially Alan Greenspan, the chairman of the Federal Reserve Board, described by Mr. Reich as the ”most powerful man in the world.” Too much Federal spending, the deficit hawks argued, could cause the bond brokers on Wall Street to lose confidence, which would drive up interest rates, which could choke off the economy — which could cost Mr. Clinton his re-election. Since cutting middle-class entitlement programs would be political suicide, the poor (who don’t vote) must take the hit. Hence, no money for Mr. Reich’s programs to retrain out-of-work Americans.
This ‘Century of the Self’ segment on the Clinton admin:
http://www.youtube.com/watch?v=-n1e423orUc
Bill Murray
@Napoleon: indeed, the definition of insane is a Democrat listening to someone from GMU immediately prior to an election
Citizen_X
@Nick:
QUIT FUKIN UP MAH NARATIVE!
What are you doing, denying me victimhood status? I’m trying to get my pout on over here.
Bill Murray
@Nick: because he appeared to have let it fail without really pushing for it
KG
It’s self interest on my part, but I’ll just throw it out there that short sales are a decent option.
jwb
@Bill Murray: Would you please direct your ire toward the Republicans?
Nick
@Citizen_X: Well I’m just making a point that the firebaggers who claim they would have been behind Obama if he proposed something bold even if it failed are talking out of their asses.
They’ve clearly forgotten those weeks from March through April 2009 where the Dow was at 6600, the media spreading lies and fear that mean old Obama was taking their 401ks to save black people and immigrants who bought houses they knew they couldn’t afford and how Rick Santelli will start a movement of patriotic (white) Americans, while Austin Gooldsbee, Christina Romer, Tim Geithner, Joe Biden, Shaun Donovan, Robert Gibbs, Rahm Emanuel and the President himself are forced to talk to a wall about their cramdown program, only to watch fall decisively in the Senate.
Napoleon
@racrecir:
I didn’t look at the article but my recollection of that incident is even worse then your out take. In what has been the classic bait and switch from the right since Reagan was in office (including the right side of the Dems) I recall the whole jobs thing being sold as part and parcel with NAFTA. NAFTA would bring us a brave new world of free trade and sure it would be disruptive to some but don’t worry about it because we have this whole jobs retraining thing queued up. Except once NAFTA pasted they dropped the part that would have helped the working class it was about to inflict pain on.
jon
Houses got overpriced because there was a frenzy. Those who called it a frenzy were told to shut up because there was money to be made. And now that money isn’t being made, the frenzy is the fault of those who did some basic accounting and called it a frenzy.
It sure is good that only the grown-ups can vote in this country.
Nick
@Bill Murray:
and this is why he’ll never get credit for proposing something that fails, because he’ll be accused of “not pushing” for it. The media will do what it did, use the fact that they ignored the administration for two months while focusing on the Rick Santellis of the world as a rationale for them to say they weren’t fighting and stir up the cynical left into actually fucking believing it.
Meanwhile the amendment fell 15 votes short. 15!
kwAwk
@Nick:
lmao Nice including of the phrase professional left there to let people know where you’re coming from. I swear O-bots have more disdain for the people who voted to put Obama in office than most conservatives do.
In any case think about what you’re saying.
Yeah. Why blame Obama for his failure to get through good legislation. Let me think about that one. Why blame Obama for his failures? Gosh…. that’s a hard one.
I know! Let’s blame Pee Wee Herman for Obama’s failure to get his legislative agenda through! That makes it easy! Maybe if we’re lucky Pee Wee Herman will be part of this professional left you keep talking about! Double Whammy!
Corner Stone
Sure, there were some bad actors in this mess. But a lot of people used their house as value because they weren’t receiving an increase in income, and still needed to pay for things. Not big screen TV’s or granite countertops, but college tuition which went through the roof over the last two decades, health care which went through the roof over the last two decades, and consumer necessities which thanks to the fuel prices involved also went through the roof the last two decades.
We’re seeing deflation now in consumer prices because the consumer has nothing left to spend.
What are we seeing in tuition and health care costs?
Nick
@kwAwk:
no, I don’t really hate Independents.
I have no problem with blaming Obama for failing to get legislation through. I have a problem with saying he should have proposed policies everyone knew would fail (like a public option or $1.2 trillion stimulus) and you’d back him up, because cramdown proves you wouldn’t. You would’ve blamed him for not fighting hard enough (like cramdown) or for using said policy as a bait and switch (Dawn Johnsen). If he had vetoed a bill with no public option because Lieberman wouldn’t bend, and no bill passed, you wouldn’t have given him credit for standing up, you would’ve blasted him for not getting Lieberman to change his vote. If he had let Dawn Johnsen go down on the Senate floor, you wouldn’t have given him credit for standing up for her, you would’ve blasted him for not “twisting arms”
Hell, when the 9/11 bill failed in the House because Democrats stood up to Republicans to prevent them from politicizing the bill and called their bluff, did progressives stand up for them? Nope, they called them cowards for being afraid Republican amendments would pass.
You’re never going to give him credit for what he proposes unless it passes (and even then), so why wouldn’t he play it cautious?
SlyFox
@kwAwk:
Gee, so Presidents of the United States are also Senate Majority Leaders, Committee Chairmen and 60% of the friggin senate now.
So lets repeat. Obama does fight for something, it fails, you say he should have fought harder for it without naming what he should have done.
He doesn’t even bother, you accuse him of not really wanting it and being a corporatist sellout. After all, who accepts that these men aren’t superhuman and should have zen like powers to pass loads of shit you want.
Cain
@kwAwk:
Uh, what kind of force do you think Obama can put on blue dogs in Senate to get them to pass legislation? Ultimately , Reid is the one who needs to get the votes. Trying to bully senators is what got Clinton in the hole last time. You can only push so far.
Remember, Congress is fubar’d… even with a democratic majority the blue dogs are fucking it up for the rest of us because the states they represent are full of real ‘merricans.
Frustrating..
cain
TJ
Home prices may crash, but the Obama admin will not do it willingly. And not to benefit the peons, either. When it crashes, there are trillions of $ of CDOs and CDSs sitting around that become worthless. And the big boyz will take that hit only over our cold, lifeless bodies.
Corner Stone
@TJ: So you’re saying there will be a “peon tax” to pay for the losses the banksters suffer?
Oh wait, tax payers already did pay for that.
A “New Peon Tax”!
Objective Scrutator
@kwAwk
Barack Obama has swindled us out of our goals for the LAST time! Attempting to primary him in the 2012 elections is the only solution remaining. After all, if Ronald Reagan nearly beat Gerald Ford in 1976, surely Dennis Kucinich should be able to outprimary Barack Obama in 2012!
George W. Bush established a wise precedent of a unitary executive office. Barack Obama has an obligation to keep it that way. If he does not, then we must whisk him out of office, and replace him with someone who does.
burnspbesq
@Michael:
Responsibly in whose interest? Remember, we are talking about corporations here – legally, the only stakeholders who matter are the shareholders, and they don’t seem to be unhappy.
Also, Mr. Van Winkle, while you were sleeping a wave of mergers swept across the landscape of commercial banking. There are now only four banks that matter: Citi, Chase, BofA, and Wells Fargo. And they behave exactly the way oligopolists always behave.
kwAwk
Well, I’d agree with Cain, it is frustrating. But keep in mind that those who would be most willing to fight with Obama to get these things through are those professional left people you guys keep deriding. Those least likely to stand at Obama’s side to fight to get good legislation are those independents you keep talking about.
A lot of the reason we’ve had such a hard time getting good legislation passed is the fact that Obama hasn’t set forward a clear agenda of what he thinks should happen and spent his time selling a clear agenda to the American people. It makes it rather easy for the obstructors in Congress to water down every piece of legislation when the President doesn’t set the benchmark of what the legislation should be and how he thinks it will help the economy or the country. Instead we get a bit of mealy-mouthed wording about what the legislation should contain with the details left up to others.
Funny thing is, Harry Reid has no real clout outside of the halls of Congress and the State of Nevada. He’s one of two Senators from Nevada if you’ve forgotten. The President however has nationwide powers which can be used to bring pressure on wayward bluedogs.
kwAwk
@Objective Scrutator:
Or those of us on the left could just stay home and/or quit hitting those moneybomb links.
burnspbesq
@kwAwk:
Too funny. You should consider standup comedy as a career.
Cat
If by moderate do you mean bank friendly and home owner screwing, then yes, his moderate policies failed.
HAMP was a giant screw the homeowner policy. It allowed the banks to trick home owners into continuing to pay money to the bank while marking them as past due.
Firebaglake had many posts about home owners who were paying 80-90% of their original mortgage payment all the while being marked past due and told by the banks to not worry about it. The homeowners were then denied a permanent HAMP modification and then foreclosed on if they didn’t pay all the past due amount plus all the late fees.
It was a giant FU to homeowners as the majority of the people who tried to get into the program were denied and still foreclosed on. They could have just stopped paying the mortgage and been in better shape then trying to get into HAMP.
Corner Stone
@Cat:
Not only was HAMP a giant FU to desperate people, it seems to be clear it was designed that way from the beginning. With everyone understanding that except the desperate homeowner.
kwAwk
@burnspbesq:
I apologize burnsey. I forget that Obama is the first President in the past 200 years who isn’t also the head of his own political party.
It was predestined for Obama’s first two years to be considered a failure. There’s nothing he could have done about it. Why we would expect him to try is pure comedy.
bookcat
My husband and I own a house in Baltimore. Bought 4 years ago, past the frenzy of the market, but not far enough to know it was going to crash. It’s our first house. Fixed mortgage, can make payments off of one income. However, as the economy worsens, our neighborhood goes from “transitional” to possibly dangerous. It was one of the only places we could afford to live even with the 1 1/2 hour commute he makes to DC every day.
Our house has gone down a few thousand in value, not too bad. But we still can’t afford to sell. We’d like to move in the next year or so for a better, safer place for our kid and a better quality of life overall. If the market really tanks, what the heck do people like us do? We live beneath our means. Pay ABOVE the principle every month. I used to think it was our responsibility no matter what to stay and make payments even if the value went down so far we’d be here 15 years and have to put our kid in bad schools.
I cringe at the thought of “walking way”. I believe in taking responsibility for my choices. But really, I’m not so sure anymore. Does my loyalty lie with the bank or my family?
Cain
@kwAwk:
I think he has or is trying but when he shows up on tv the post analysis is not about the content of his speech but rather the horse race. The media is obsessed with the horse race. So he can’t seem to have a decent conversation with the population on anything without it being couched in the narrow confines of the horse race.
I stopped watching news a long time ago. If I want to hear something a politician is saying I’ll hit CSPAN. Their analysis and polls are 100% bullshit.
cain
Corner Stone
@Cain:
And I would argue that even when he tries to stick it to Republicans on Monday, on Tuesday he’s doing his best to rehabilitate them.
So the stark differentiation is not there for a lot of casual voters.
They see him pointing to Republican obstructionism one day then selling ideas that originated in the right wing.
He doesn’t have to pound them hammer and tong, but a clear delineation once in a while may help people who don’t have time to focus on this every day.
Corner Stone
@bookcat:
This is rhetorical, right?
NR
@kwAwk: Good point. Obama is the leader of the Democratic party. And he’s leading it off a cliff.
There is absolutely no fucking excuse for this. Obama had the most advantages of any newly elected Democratic president since FDR in 1932 (whose party, by the way, GAINED seats in the 1934 election, at the height of the Great Depression), and he’s been absolutely horrible. At every turn, he’s gone out of his way to embrace and include the very same people who got us into the mess we’re in, while shutting out the people who were right about the godawful policies of the last decade. At every turn, he’s proposed policies that have fallen far, far short of what’s needed to fix our economy and our country, and then negotiated down from there. Don’t blame anyone else for the disaster that’s coming in November. The buck stops with him.
bookcat
Corner Stone:
Yeah, of course. But the shame, however irrational, is there. People are beginning to realize that no matter how well you played by the rules, you get burned in the end. Everyone hoped that if they lived within their means, they’d get by unscathed. And relative to others we are. But I live in a community teetering on the edge. I try to focus on what is good here, because there is good here. But looking at my little boy, I know there are hard decisions ahead, and as John Cole said, no good options. Even walking away, I will live with the consequences for many years.
russell
Is it too late for cramdown now?
cmorenc
The fundamental mistake Obama made early on was to appear (and in reality too)to let Wall Street off so easily, so quickly, so generously instead of insisting on a very steep price (with a few prominent “masters of the universe” of the financial world prominently swinging by the neck from lampposts) to instill proper fear and respect for the new sheriffs in town. Part of the minimum price would have been acquiescence in a much stiffer financial reform bill BEFORE any further bailout money would be made available. Nationalizing a few of the biggest failing banks, and insisting that GM go through formal bankruptcy (perhaps with special legislation to insure that the actual process would be very similar to the way it actually unfolded). This appearance of taking care of the fat cats first, ordinary Americans second, was deeply damaging in a time of enormous economic stress.
Wasn’t this why the public threw the GOP out and put the dems in power, to fundamentally change the corrupt way of doing things that had prevailed so long under GOP rule, and the dems seem to FAIL this basic test of why they got elected in the first place, from the perspective of much of the public.
It was the APPEARANCE (and reality) that the FIRST PRIORITY of the Obama Administration, upon taking office, was to take care of Wall Street with such soft-touch velvet gloves that the Administration (or so Geithner said) was unable to prevent the financial lizards in the very department of AIG who did so much to promote and sell house-of-sand derivatives, from claiming bonuses from those very transactions out of bonus money (even though AIG was BROKE, BANKRUPT because of those specific transactions! that enormously weakened the Administration’s standing with the public. With a different kind of start by the Administration more true to their promise of “change”, the GOP would never have been able to gain remotely so much traction, including on Health-Care reform.
This disastrous start also gave enough traction to corrupt factions within the democratic congressional delegation to be able to get away with standing in Obama’s way, hostage to their special interests.
Mnemosyne
@KG:
Only if you get the bank to waive their option to get a deficiency judgement from you. Otherwise, you’re still on the hook for the balance of the mortgage (minus the short sale) and you don’t even have a house to show for it.
Corner Stone
@bookcat: I feel for your situation, and am not making lite of it.
But when plugging in different variables, IMO, the bank and banksters should come a very distant 3rd or 4th.
I’m in a stable area, and could sell my house in less than 2 weeks for what I paid for it 7 years ago, and take nice equity out.
So, not saying what you should or shouldn’t do. But I am suggesting the “moral” aspect of your relationship with the banks is nonexistent.
Corner Stone
@cmorenc:
At dollar for dollar equivalence while breaking the UAW wage contracts.
Mnemosyne
@NR:
Uh, not quite. But please continue to ignore actual history in favor of your imagined Bestest President Ever who totally would have kicked the Republicans’ asses.
Germane Jackson
I’m not trying to be insensitive here, and I’m really just using this comment as a jumping-off point, but as someone in their mid-thirties who has elected to live humbly, rent small apartments, own almost nothing, and carry no debt, I get a little aggravated w/ this kind of mentality.
I’m sure it sucks to buy a house and not magically have your money double in ten years, let alone watch it depreciate, but that’s exactly the gamble you’re taking when you buy a house, even if it hasn’t seemed like it for the last couple of decades. I see a lot of the above sentiment lately, and I’m sorry, but it reeks of entitlement to me. No one is entitled to have their possessions accrue value, no one is entitled to live in a gentrifying neighborhood, no one is entitled to have their child go to the best school district in the county. Buying a house and then walking away when markets tank and housing prices fall, as they do sometimes, seems incredibly irresponsible to me.
I’m sympathetic to the view that the middle class wasn’t ultimately responsible for this mess, although certainly the middle class is responsible for protecting its own interests and not being led around by the nose by the ruling elite.
Cain
@Corner Stone:
I can agree with that. I hope the tuesday speech is not response to the crap the media was spewing monday night. Obama is good at communicating in a clear manner so I don’t understand why he can’t make that happen.. then again a lot of shit is happening all at once isn’t it?
He’s taking on Israel/Palestinian conflict in the midst of this downturn in the housing market, the media hopefully will not show him as out of touch.
cain
Germane Jackson
@Corner Stone:
How is there no morality in it? Banks are not staffed by robots. Defaulting on a loan or mortgage negatively effects the people employed by banks, and I’m not talking about John Shain or whatever his name is. On top of that, the more people default on loans, the harder it is for other people to get loans.
Of course there’s a moral aspect to it. Now, you may decide in your own self-interest to ignore the immoral/unethical nature of defaulting on a loan or mortgage, and that’s fair enough, but don’t pretend that it’s a morally neutral decision.
Jose Padilla
Neither the Repubs nor the Democrats are going to let the housing market fail. The banks would go under.
Paul L.
I trust there is a link to the DFH predicting the Housing Bubble.
Otherwise that is Barney Frank level of historical revisionism.
Barney Frank, When Democrats Were On The Rise: There Is No Housing Bubble; We Must Expand Freddie/Fannie
Barney Frank, When Democrats Are On the Slide: We Must Abolish Freddie/Fannie
NR
@Mnemosyne: Uh, nothing in that link actually contradicts anything I said. But please continue to ignore the actual political reality in favor of your imagined Bestest President Ever who actually fixed the economy and is going to lead the Democrats to a sweeping victory in November.
Corner Stone
@NR: She actually just puts what she wants to hear in any person’s response. She’s a little off.
Mnemosyne
@NR:
You mean other than the fact that it took Roosevelt two terms (8 years) to get the New Deal in place, not two years?
How about FDR working to get a Republican elected over a Democrat in 1934? Nah, that could never have happened, because FDR always supported Democrats, right?
NR
@Mnemosyne: That has absolutely nothing to do with anything I’ve been saying. Are you capable of making a coherent argument, or would you rather just throw out non-sequitirs all day?
Mnemosyne
@Germane Jackson:
I have a friend who’s fighting with her soon-to-be-ex-husband over who gets stuck with their house right now: they have an $80,000 mortgage on a house that is now worth $20,000. At best, the house might be worth half of the original mortgage in 15 or 20 years.
I’m not sure what you see as their irresponsibility here: getting divorced, or buying a house in a state that five years after the purchase had the highest unemployment rate in the country?
NR
@Mnemosyne: You edited your post after I replied. But the simple fact is that trying to compare the raft of corporate-friendly policies pushed by Obama with what FDR was able to pass even in his first 100 days is laughable. End of story.
Mnemosyne
@NR:
Really? The fact that, despite your claims, it took 8 years for FDR to get the New Deal up and running has absolutely nothing to do with your complaint that Obama hasn’t fixed 30 years of Republican damage in his first 2 years in office?
What is your complaint, then?
Corner Stone
@Germane Jackson: Since when was a business decision infused with morality?
NR
@Mnemosyne: You edited your post after I replied. You know full well that my first reply was just to your non-sequitir about the 1934 California gubernatorial race.
The fact that you’re not willing to engage honestly on this speaks to how weak your position is.
Mnemosyne
@NR:
It’s true that FDR was completely unable to get health care legislation passed — it was torpedoed by the AMA. And Social Security was written so it only applied to white people — African Americans were pretty much totally excluded so Southern Democrats would vote for it. And FDR did declare a bank holiday and establish the FDIC so that banks could be rescued from their own folly. Of course, Congress actually gave FDR the authority to close the banks instead of screaming about how it was SOSHULISM! for him to criticize them at all, much less try to rein them in.
You may need to do a little reading up on the New Deal if you think that none of Roosevelt’s policies were designed to benefit corporations. There’s a reason they talk about Roosevelt as the guy who saved capitalism.
Mnemosyne
@NR:
It’s a non-sequitur to point out that, when FDR was challenged from the left, he supported the Republican and undermined the Democrat?
NR
@Mnemosyne: Fine. You think Obama’s record is comparable to the steps FDR took to save America from the Great Depression. I think Obama’s policies have been woefully inadequate, shaped by the same people who got us into the crisis that we’re currently in, and designed to help corporate America first over everyone else. We will see in November with whom the American public agrees.
Mnemosyne
@NR:
I think Obama’s record to this point is comparable to the same point in FDR’s record. It is not comparable to FDR’s overall record, because you’re comparing Obama’s 2 years in office to FDR’s 13 years in office.
Six years ago, the American public decided that George W Bush should have a second chance to screw over the United States, and gave the Republicans additional seats in both the House and the Senate.
Forgive me if I’m not quite as trusting in the common sense of the American public as you are.
bookcat
Germane Jackson:
I’m sure reading just what was in my post I could sound entitled. If you met me you’d come to the opposite conclusion though I’m sure everyone says that. And it is precisely because of judgments such as yours, which I do understand, that makes the guilt so pervasive. reading what you wrote is painful, not because it’s true, but because it’s what we all say to reassure ourselves it won’t happen to us.
I keep editing this post to remove explanations and details about my situation because ultimately no one else’s opinion matters and I’ll change no one’s opinion but my own. But all of us, even the rigidly self sufficient, a tribe of which I was a recent member, have internalized a set of rules that we think keeps us “safe”, keeps us in control. This is no longer true, if it ever was.
For many, the consequences are just and necessary. But for some of us, it feels like there is no responsible, sensible choice here. The game is rigged. We are all just watching to see how far the tide comes in.
But good for you for renting and I truly hope your life stays clear of this disaster.
Mnemosyne
@NR:
Also, too — the point of bringing up the 1934 California governor’s race was to point out that much of the left was very unhappy with FDR and thought that he was too beholden to business and corporate interests, and that FDR repaid them by supporting the Republican in the race.
So, frankly, I’m guessing that we would have had this exact same argument about FDR’s failure of leadership if the intertubes existed in 1934, except that there would be actual self-identified communists and sociaIists like Sinclair running for office.
Ruckus
@bookcat:
Does my loyalty lie with the bank or my family?
Well let’s see…
1. With the banks. I just screwed myself, my family and the banks are either happy or don’t care.
2. With me. I maybe don’t have to screw myself at all or at least nearly as much and why should I care if the banks are happy? And if they don’t care why should I?
I’d go with 2 myself as in the end the banks really don’t care about you, they only care about themselves. Why should you be any different?
If we are going to have corporate anarchy you have to play the game by the rules. In corporate anarchy the rules are, get the most you can, when you can, for the least cost and with an exit strategy that protects your butt as much as possible. It’s what the banks and the wall st casinos do. Why would you want to give them any more advantage than you have to?
sparky
@Nick: you, sir, are, in the vernacular, full of it:
Corner Stone
@Mnemosyne: So you’re saying that mass extinction events are just fine with you? And little children should be sacrificed to the Volcano Gods?
Good to know.
Germane Jackson
@Corner Stone:
What does this even mean? By this logic the assholes at Goldman Sachs haven’t acted amorally/unethically/etc. just because they were making business decisions. Is that a hook you’re prepared to let them off of?
Mnemosyne
@Corner Stone:
I think you posted this in the wrong thread. Either that, or you’ve started drinking much earlier than you should have.
Germane Jackson
@bookcat:
I didn’t mean to make you feel bad (really!) and do not presume to stand in judgment of the kind of person you are. I’m sure in the sum total you’re a responsible, self-sufficient person.
Corner Stone
@Mnemosyne: So you’re saying that the Aztecs are the superior civilization to the Chinese?
Corner Stone
@Germane Jackson: It’s not up to me. If they acted within the law then there aren’t many remedies.
Bankruptcy and short sales are within the law for individual families.
Importing some kind of mythical responsibility to people that corporations are not expected to live up to is more than a little silly. And I think strange.
My house is an investment. That’s the end of it for rational people.
KG
@Mnemosyne: I’ve actually been pretty good at getting them to waive their deficiency rights.
Mnemosyne
@Corner Stone:
Human sacrifice is always superior to gunpowder. QED.
Germane Jackson
@Corner Stone:
Solvently walking away from a home is not the same as declaring bankruptcy or actually being unable to pay your mortgage. It is unethically defaulting on a business agreement just because things didn’t go exactly how you’d hoped. When this kind of ethical standard is applied to corporations, you get Wall Street-esque malfeasance.
There is something wrong with your moral compass if this isn’t rather obvious to you. Also, I think the inanity of asking why we shouldn’t strive to be more civilized and ethical than a lot of corporations should be self-evident.
mclaren
Everyone seems to have neglected the essential dilemma here. Contrary to the article, this isn’t about screwing current homeowners as opposed to future homeowners.
This whole mess results from a much bigger Catch-22.
It’s simple. If cramdowns had occurred, the four big mega-banks that hold most of the toxic paper on houses in America would’ve been wiped out because they’d suddenly have to rewrite the value on those mortgages to their true value, which is far far far below what the mega-banks have on their books.
But if cramdowns or a convulsive housing crash don’t take place, the owners get foreclosed and the homes wind up vacant and eventually trashed by vandals, the homeless, used by druggies as shooting galleries, etc. That wrecks entire neighborhoods and destroys cities’ tax base, wiping out whole states.
The U.S. economy is getting hammered from multiple Catch-22s like this. Obama and company haven’t made good choices because there are no good choices.
Consider: the desperate and ongoing effort to prop up housing values has nothing to do with supporting homeowners and everything to do with keeping America’s financial system from disintegrating. If the actual value of the toxic mortgages gets revealed by cramdowns or a housing crash or some other huge convulsive revaluation of houses down to their true value (probably 50% to 70% down from current values, since the retrenchment always overshoots on the low side just as the bubble always overshoots going up), the currently dicey balance sheets of all America’s big banks get destroyed. There will be nowhere to run, nowhere to hide. America’s big banks will get wiped out.
You want to revisit late 2007? Banks refusing to do overnight lending? The entire U.S. financial system seizing up? Depositors unable to get their money out? Every ATM in America shuts down, all the banks shutter their windows and close up? That’s what happens if houses sink to their true value suddenly. The shockwave will wreck the financial system, which stays afloat right now only because of the “extend and pretend” charade by America’s big banks that their balance sheets are okay and those toxic assets will someday come back up in value and the mortgages that aren’t being paid are just in arrears and not in default and those houses standing empty that haven’t been foreclosed are being renovated instead of left to rot because as long the banks don’t foreclose, they don’t have to write off those loans as bad and can still carry the loans on their balance sheets as performing assets.
There are no good choices. If the housing market crashes, the U.S. financial system seizes up and most of our big banks implode. There’s no fig leaf then, no way of pretending America’s big banks are solvent. Right now we can pretend. But not if there’s a house sudden implosion in housing prices or a mass wave of cramdowns.
But if the housing market doesn’t crash and the big banks are able to limp along with “extend and pretend” and gradually make nickels and dimes to pay down all that toxic debt by gouging bank depositors with outrageous overdraft fees and 35% credit card interest rates, then we turn into Japan and get a lost decade. Ten years or more of 10% unemployment. A collapse in the federal and state and local city tax bases as far as the eye can see. Entire states going into default. CIties selling off muni water systems, parking meters, airports in desperation.
Neither choice is a good one. Which do you choose? There is no good choice. People who blame Obama for not making the right choice on he housing collapse don’t seem to realize there is no right choice. You’re fvcked either way.
Same deal with offshoring. Another Catch-22. If congress & the president get their act together and ban offshoring and erect trade barriers and tariffs to keep jobs in America, our standard of living declines and our exports plummet and America becomes non-competitive internationally in most areas, except drug and sex tourism and our Ivy league universities. This will result in drastic declines in America’s standard of living. No more nice flatscreen TVs or iPods for you, America won’t be able to afford ’em anymore. No more well-built Japanese cars, you’ll have to buy a Detroit POS that breaks down every 3 months. The median American wage is collapse and what’s worse, foreign companies will swoop in and buy up most of America’s big corporations because they’ve be vulernable to foreign takeover when their balance sheets decay because America as a whole has become much less wealthy.
But if we don’t ban offshoring and don’t erect trade barriers and don’t use tariffs to keep jobs in America, all our high-wage high-skill jobs as well as all our manufacturing jobs get exported overseas and America becomes a nation of dog groomers and xerox clerks. You can’t continue as a first-world country in that case.
So which do you choose? There are no good choices here.
Another Catch-22: if we slash U.S. military spending back to reasonable levels, we hemorrhage jobs because that’s where a huge number of the remaining high-paying jobs in America are. But if we don’t slash U.S. military spending, the country becomes an increasingly militarized garrison state and goes broke in the process.
Another Catch-22: if we reform America’s broken health care system lots of Americans will get decent health care who couldn’t before, but the last profit center of high-paying jobs that can’t be outsourced now gets wiped out. But if we don’t reform America’s broken health care system, we go broke and millions upon millions of people die real slow screaming like animals.
So what’s your choice? Which do you choose? To get boiled alive, or drink hydrofluoric acid? There are no good choices here. Everywhere we look, we’re staring at a myriad of Catch-22s.
Corner Stone
@Germane Jackson: Yep. And contracts with banks and CEO’s are inviolate but contracts with UAW are negotiable.
Give me a break man. It’s just a business deal, right wrong left center middle, whatever.
If I can save my family by moving on then I will do so. Would you prefer I stay and go underwater and end up with my kid under a bridge to satisfy your sense of morality?
lacp
@Cat:
You’re harshing everybody’s mellow here. If you were any kind of true progressive, you’d STFU.
Nick
@sparky: You link a Paul Krugman editorial and parade it as news?
Paul Krugman not thinking Obama did enough to push cramdown is the same as you thinking it. It doesn’t mean it’s true, because it’s not.
Try again
Nick
@kwAwk:
This is snark, right?
mclaren
@Cat:
Keep on stating documented facts. It discomforts the foolish and enlightens the sensible.
“Harshing everyone’s mellow here” indeed. Shorter version of that criticism: “Don’t make me think, it hurts my head!”
Broken
“Fiscal Policy Works!?”
I suppose this is news to those who believe the revisionism which paints FDR, the New Deal, and fiscal policy in general as horrible economic failures. The New Deal certainly had some failed experiments as well as successful ones, but it is hard to deny the stellar growth rate, jobs created, and massive new infrastructure at a cost which was hardly overbearing. The average economic growth rate from 1932-1940 was 5.9%, including the 1937 recession. No president since has matched that. Yet this performance is deemed by some as a failure, “proving” that fiscal policies don’t work.
There is also the false claim that the build-up to WWII explains why GDP went from $92.2B to $126.7B in 1939-1941 . This ignores the fact that total Gov spending, including Defense, only increased from $14.8B to $26.5B, and only accounts for 1/3 the overall economic growth. Either you conclude that government spending had a 3X multiplier effect or that the private economy had a very healthy growth rate of its own. Neither answer makes the FDR haters happy.
Germane Jackson
@Corner Stone:
Eh. No. I’m not suggesting anyone starve to death while paying their mortgage. I’m addressing the idea that it’s okay or otherwise ethically neutral to walk away from a mortgage because a house has depreciated a few thousand dollars and not as many white people are moving into the neighborhood as expected.
And it’s not a zero-sum game of “own a nice house that appreciates a ton of money” or “live under a bridge.” There is a middle ground that involves living within your means and making realistic financial decisions and not being in debt, although the downside is you don’t buy a lot of things or get to live in that nice house you could barely afford before the market tanked.
Corner Stone
@Germane Jackson: And if I do everything I am supposed to, tighten my belt, buy a nice 1400sqft fixerupper in a decent neighborhood at going rates and 6 months from now I have 3 foreclosed homes on my block and I’m upside down?
Suck it up? Things don’t always go my way? Pay off an investment that makes no sense?
We’re always going to disagree on this.
mclaren
@Broken:
Fiscal policy works to an extent, until you get down around zero percent interest rates. At that rate you run out of room to reduce interest rates and you wind up with the “pushing on a string” problem.
FDR’s real innovation wasn’t so much fiscal policy as creating jobs out of thin air with new organizations like the CCC.
Interestingly, a lot of those supposedly “make-work” projects like roads and dams and bridges that were ridiculed at the time as “paying one guy to dig a hole and another to fill it up” are infrastructure we still use today.
The Grand Coulee Dam is the fourth largest in the world. It generates 3500 megawatts and powers three states. One of those “worthless make-work projects” started by FDR during the Great Depression. For comparison, San Onofre nuclear reactor Units 1 & 2 produce 2200 megawatts.
If we created the solar-electric power and the electric vehicle equivalents of the Grand Coulee Dam today we could employ hundreds of thousands of people, end our oil addiction, and kick-start a green energy revolution that would create vast new industries to export products to the rest of the world.
Germane Jackson
okay
Mnemosyne
@Germane Jackson:
The problem is, it becomes a matter of self-defense in the current climate. If the bank is willing to screw you over repeatedly to get a few more dollars in late fees, after a certain point it’s worth asking why you should keep up your end of the bargain since they’re unwilling to fulfill their half.
With any contract, if one of the parties violates it, the other party generally is not required to continue to meet their obligations. And yet when it comes to a mortgage, people are supposed to accept any treatment their bank dishes out and keep up their half of the bargain.
Not saying that no one ever tries to ditch a mortgage for selfish reasons, but after a while people get tired of having to meet a moral standard that the other half of the contract feels no obligation towards. It starts to sound like those people who urge people to stay with their cheating/abusive spouses because, after all, they made a vow and they should keep it even if their spouse isn’t fulfilling their half of the contract.
bookcat
Triassic Sands
My understanding is that the demand for new places to live is up all over the country. For example, the demand for refrigerator boxes has never been higher.
goatchowder
It’s the fault of idiot Democrats who let the Republicans and banksters call it “cramdown”!! What a miserable. stupid fucking name! It sounds like oral rape, or some kind of S/M sex act. Who can go to the wall for “cramdown”?
Fucking IDIOTS.
It should have been called what it was: “MORTGAGE RELIEF”. Every Democrat should have been on the TV for Mortgage Relief for hard-pressed working families. Let the Repugs argue against mortgage relief. What kind of heartless fucks are they?
Fucking Lakoff 101, and we failed it. This is how Repugs win: tax relief, death taxes, clean air, healthy forests. Go and vote against them on those, just try.
But no. We let the fucking banksters and economists use the technical term DREAMED UP BY BANKS WHO HATE AMERICA, who have been calling it “cramdown” forever, because they really really really hate to give relief to struggling people. Because they are evil. That is why.
Narrative, motherfucker, do you speak it??!!
sparky
@Nick: um, no, that’s not what that was. perhaps before you keep making stuff up you might actually want to read what you seem to have some desperate need to pretend didn’t happen….
first, what i pasted here was Krugman quoting an NYT editorial on the topic, not Krugman. it wasn’t there because the NYT editorial page said it, but rather because of the editorial’s observation that Obama didn’t do diddly about cramdown despite his rhetoric. this fact is reflected in the editorial’s observation that there was no statement about the failure from the WH. to belabor what i mistakenly thought was an obvious point, that’s the reason i posted it.
second, if you want something more straightforward to attempt to deny, here, from an NYT news article discussing the cramdown defeat in the Senate: President Obama sought the cramdown provision during the election, although the White House has done virtually nothing to move it through Congress.
facts usually sucked for Bush supporters, and sometimes, though not as often, thankfully, they suck for Obama supporters. not that i think the O-types will have any difficulty explaining away any other inconvenient facts.
Nick
@sparky: The part where I mentioned the media ignored him for a month, then blamed him for its failure was lost on you I see. Once again, why would Obama propose and fight for something that will inevitably fail? So the New York Times can say he never did anything and you outrage addicts can fall it for hook, line, sinker.
Liberals, always so gullible.
mclaren
@Germane Jackson:
There’s a flip side to that coin. I’m sure it suck not to be able to buy a house and to rent a small apartment and own almost nothing while your friends buy houses and start families and move up in the world, but that doesn’t entitle you to look down on them when massive control fraud destroys the economy in an orgy of corporate looting and corruption.
Your response also seems remarkably short-sighted. Look, bookcat isn’t lamenting not getting rich off her house, she’s worried about not being able to move and take another job if her current one or her husband’s job evaporates.
That’s not just bad for bookcat — it’s terrible for the economy as a whole. It drives up unemployment because families can’t move if they get another job in some other part of the country, so they have to turn the new job down. Higher unemployment hammers not just the middle class but small and big businesses, because 70% of the American economy is consumer purchases. And small and big businesses getting slammed with drastically lower sales in turn creates more unemployment, because the businesses have to fire people to stem the flow of red ink.
I don’t think you’re looking at the bigger picture here. Wht bookcat is talking about is far more than an “entitlement” issue — she’s making the point that we’re all connected in a delicate social web of economic relationships, and when people are tied to a boat anchor of a house that they can never sell, their prospects for getting unemployment shoot up and it hurts the entire economy badly.
Bookcat is making a sophisticated judgment about the balance between hurting the bank by walking away and hurting society by staying in a house that’s severely underwater and can never be sold, and taking the chance that if her husband and she lose their jobs and can’t find another one within a very narrow local geographical area, everyone gets screwed — not just Bookcat, but the bank and the local businesses that thrived on selling goods and services to Bookcat and her hubby.
It’s not a simple black-and-white issue of “responsibility.” Bookcat has responsibilities to many different actors in the economy — to local businesses, to the bank, to her neighorhood, to the city where she pays property taxes, to the American economy as a whole that will be damaged if she has go on public assistance because she loses a local job and can’t move to find another one, and there are no local jobs.
mclaren
@sparky:
Nahhhhh. Making sh|t up is Nick’s stock in trade. He’s so desperately ignorant of the documented facts that he can’t do anything but pull provably false claims out of his ass.
mclaren
@goatchowder:
Brilliant. Your entire post should be tattooed on every Democratic legislator’s head in reverse so they can read it in the mirror in the morning when they shave.
Really, Gingrich has read Lakoff. He uses this stuff. He was using these framing techniques 25 years ago. Why can’t Democrats catch up?
bjacques
A good business decision is good no matter what the motives are. Frankly, if hanging onto a house is even slightly less convenient than walking away, you should walk away. That’s especially true when the other financial party decides that foreclosing on your house is slightly more profitable than letting you make a payment two weeks late. That’s the financial environment that’s existed since, oh, about 1981 (or 1979 in the UK), only now it’s harder to hide that fact. Sure, try to work something out, but if it’s you or the bank, save yourself and screw the bank.
It’s kind of moot, because none of the provisions for mortgage relief (at least for homeowners) are a “Get Out of Debt Free” card, anecdotes to the contrary.
Funny how the media aren’t clucking over developers who routinely abandon deals even when times are good.
acallidryas
I hate to argue with the magical free-market, but this is incredibly idiotic. In my parents neighborhood, they are all happy that for the first time in about a year a house has sold. It sold for about 50% of what my parents bought their house for. A few towns up in their county you can pick up a nice 3/2 foreclosure for around $40,000-$50,000. In what way has that market not crashed?
And no, the buyers are not pouring in.
RobW
Seems to me that if one is going to criticize Atrios and other commentators for pointing out that this $50 billion transportation bill is not nearly big enough either as infrastructure investment or as stimulus, then it’s your argument that this bill is, in fact, big enough.
I haven’t seen anyone here make this argument yet. Maybe I missed it.
If you are not willing to argue that the bill is actually big enough, then all you’re saying is that he’s right, but he should just shut up about it. You’re attacking critics for… what exactly? Being right?
In other words, we should all just clap louder. That’s really all you’re saying.
Corner Stone
@RobW:
No, actually what the complainers are arguing is that Obama made the offer so damn small in an attempt to get the R’s to effectually filibuster it.
IOW, they are making the case that Obama is 11D chess making the proposal so ineffectually small for the very fact that the R’s are sure to filibuster any offer.
And then ergo cogito ed hochuli, the voting public will see how unreasonable the R’s are and spontaneously vote for the D’s.
RobW
Well, conservatives do have this obsession with things being shoved down their throats.
RobW
So, if the dems are counting on the reps to filibuster any spending bill at all, why not make it bigger? At least bigger numbers get more attention. The public looks at this and goes, “that’s it?” And when it doesn’t pass, it’s no big loss because it wasn’t much of a win if it had passed. But a, say, $300 billion bill gets people excited- oh boy, finally some action on the jobs nightmare, finally real investment in this great country of ours… then when THAT fails, they know exactly who’s to blame for it.
Corner Stone
@RobW: I believe their belief is that by making it so small, when the R’s say “No!”, the voting public will finally realize what jerks the R’s are, and just how intransigent they aim to be.
El Cid
@RobW: Huge packages being rammed down their unwilling throats.
RobW
ElCid- That should be, “A black guy’s huge package…” right?