” Yes it is commonly said that this is proof of a market failure but the past many years were not an actual market.”

… I don’t necessarily agree. I think it shows a failure of Capitalism. An inherent , deadly, one of many flaws.

I too, have enjoyed discussion. But must zzzzzzzzzz.

Arbitrary cuts don’t solve the problem because eventually the market wins. As much as no one likes it this is the market finally winning. The true value came out and exposed all the lies and irresponsibility (of individual thugs as well as corporate thugs).

Yes it is commonly said that this is proof of a market failure but the past many years were not an actual market. A true market has three salient characteristics:
* A transparent market to trade assets.
* Well established asset prices.
* Perfect information about those assets.

The truth is NONE of this existed in the whole housing economy. There was no market for all the mortgage backed securities so no transparency in trading. As a result there was no established price for those assets and third this meant there was imperfect information on the bets people were making. Had mortgage backed securities been traded openly with their prices published the bubble would have never gotten this big.

Oh and THANKS for getting a good juicy debate going here. Yes I clearly have my opinion but I relish a good debate to keep me honest and to force me to really understand and justify my positions.

Please note that the comment depth is capped so if you want to continue this please start a fresh comment.

I’m not suggesting we pay for their f-ups. I feel this is a loss the corporate sector MUST absorb. There are profits and there are losses.
Well, here’s a loss by the name of 20% to all those corporate thugs.

So many people are suggesting, ” Break the UAW contracts and then it’s OK to give Ford/ GM, blah a bailout.” (I am not one of them.)

Well, then, this too can be broken.

Also a blanket 20% modification actually doesn’t help those most in trouble because home values have fallen about 40% on a nationwide basis since the peak and are expected to go down another 10-15%. Any approach sadly needs to be more nuanced and situation specific and any “accross the board” help doesn’t work. Remember the money to support these prices just disappeared. It doesn’t exist anywhere and so its got to come from somewhere else and that is you.

Also what if you cram-down a mortgage and the house continues to fall (which most economists think is a certainty)? Do you cram it down again or do you see people who already had a cram-down default for the very same reasons we were worried aout when we gave the first cram-down. The net effect is that in a falling markets you can’t time the cram-downs in a way that they arent’ wasteful. Instead you’ve just taxed someone to help no one. Now the person you tried to help can’t spend to float the economy because they finally defaulted and the person who paid taxes to temporarily help that person also has dimished spending capacity. You’ve actually made the economy worse by spreading the pain as opposed to localizing it and now two people stop spending as opposed to one.

Look at the letter at the bottom of this post for more information why cram-downs are actually bad for everyone:

http://reallyfuckedhomeowner.com/2009/03/06/renter-action-alert-reign-fire-on-the-new-york-times/

Additionally bailing out homeowners is a surprising regressive act that disproportionately hurts minorities and the poor (and in the long run, homeowners). See that here:

http://watchingmarcitz.com/2009/02/22/obama-hurts-100-million-to-help-9-million/

First, AIG bonuses are nixed completely. If they want our money, we set the darn conditions. Period.

Secondly, a 20% loan modification is in order because it has to be. The government can break the rules. The U.S. has broken the rules in many instances. This time it needs to be done for the sake of the country’s survival. So, someone’s profits will suffer.

Extraordinary circumstances demand extraordinary solutions.

Businesses and the national Chamber of Commerce are not above the well being of the United States.

Is this really an individual homeowner’s site or a corporate passing as an individual ??

Its a little late for that isn’t it? After all thats been done to protect AT&T and retroactive immunity etc a comment like this sounds a little bit ridiculous.

Please tell your friends.

- HUD