Posted by
Don White on Thursday, May 22, 2008 12:34:56 PM
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Congress Poised To Pass Housing
Bailout Bill
Don White
What is patently unfair and stupid is a proposed Democratic
Congress bailout of homeowners who aren't keeping their promises with the Banks
and mortgage companies--homes they bought during the speculative home buying
binge of 2005-2006.
These people never had any intention of making mortgage payments over a long
period of time and weren't qualified for the loans they got. Many of them took
out adjustable rate mortgages (ARMs) and now the payments have skyrocketed to
two or three times their original monthly payment.
Several hundred thousand homeowners--most of them speculators owning two houses
or more--are about to lose homes because they can't make the mortgage payments.
Making payments was never their idea. They bought believing they
could "flip" it and make a lot of money.
Well, the nose-dive in the housing market put an end to that
fantasy.
Here's what Congress would do. They would ask Freddie Mac and Fannie Mae to
refinance these homes, insured by the FHA, at rates and monthly payments people
"could afford." The government would pump in about $85 billion into
these homes--basically owning the homes-- and when the homes sold again, hopefully
the $85 Billion would be paid back so that taxpayers wouldn't lose a dime.
Wishful thinking! What these "astute" lawmakers haven't factored into
the equation is how long and how deep the housing recession will take us. For
example, let's assume someone bought a house for $500,000 with a payment of,
say, $1800 per month. That means they didn't put much down. The value of that
house may now be $200,000 and the payment double the original amount if they
took out an ARM. But let's say in two years the value has dropped to $40,000.
The money that should have gone back to the Treasury isn't there. The owner
only put down $30,000 and he walks away free and clear, leaving John and Mary
Q. Taxpayer holding the bag.
Mark my words, today it's $85 Billion and tomorrow it may be another $85
Billion. This is "Deep Dark Hole" speculative legislation, something
our government should never engage in.
Another reason that a free society government shouldn't engage in this is far
more basic and simple: America is the land of opportunity, and we operate a
free market based on individual initiative with rewards based on a
person's hard work and acumen. Some people profit greatly, some fail. It
isn't an economy run by the government, which, by the way, is incapable of
running anything correctly.
America isn't a great country because government has all the answers and
is the backup for every free enterprising endeavor.
Companies come and go. That's the idea--free marketplace. Some go
bankrupt. People play the market, some lose big. It isn't a function of
government to bail out private enterprise in America.
If we continue doing this—as we did recently with Bear Sterns and with Chrysler
in the 1970s, for example—we won't be a private enterprise country any more.
What will we be? The Soviet Union, a socialistic top-down demagogue-run society
or dictatorship with most things owned by the government. The Democratic-led
Congress of Nancy Pelosi and Harry Reid is quickly taking us there.