Hold the Mayo

August 30, 2007

Truth Without Consequences

Bush Plans Steps to Help Troubled Borrowers. That headline says is it all. The federal government is going to step in and save people who decided to borrow more money than they can afford to pay back.

Here's the nasty little bit of socialism that Bush is planning:

The officials said Mr. Bush would call for the Federal Housing Administration to raise the ceilings on what it can charge for federal mortgage insurance, a move that they said would enable an additional 80,000 homeowners with spotty credit records to take advantage of the program, beyond the 160,000 likely to use it this year and next.
Several other steps the administration plans to announce involve seeking legislative changes and what one official called “jawboning” of banks and other lending institutions to avoid foreclosing on distressed mortgage holders.

The president is going to try to convince lenders to allow people to keep houses they cannot pay for. I'm not going to be surprised if somewhere along the way the Federal Government is going to compensate them for their losses.

In addition, Mr. Bush is expected to endorse several proposals backed by Democrats in Congress that would raise the ceiling on the amount of mortgage insurance available for refinancing and to provide tax relief to those who re-negotiate their mortgages to their financial advantage.

My guess is he's working with Teddy K on this, so you know McCain's probably in there somewhere too.

I like the way this works though. If I re-negotiate my mortgage to my advantage I can get a tax break on top of that? I think I'm going to try to convince the bank to forgive about 25% of the principle on my loan. That would certainly be to my advantage and that tax break on top of it sounds sweet. Maybe I'll take the tax savings and buy a boat. Or at least use it as a down payment on a boat loan.

Many of these homeowners are lower-income families caught in the squeeze of variable-rate mortgages whose cost is certain to spike in coming weeks and months even as the value of their homes declines. Many are considered likely to default, possibly increasing the global turmoil in the financial markets.

Many of these homeowners took out adjustable rate mortgages while rates were at all time lows and now they are whining when the rate adjusted in the only direction it possibly could. But fear not imprudent borrowers. The all powerful ever expanding Federal Government is coming to your rescue.

The simple truth is people made bad financial decisions. It is not the job of the federal government to take my tax dollars to prevent the consequences.

Posted by: Stephen Macklin at 04:36 PM | Comments (1) | Add Comment

1 More bi-partisan socialism... What ever happened to letting the market fix the problem? Injecting hundreds of billions of dollars into the markets to bail out bad choices will function like crack cocaine for the financial system. It will eventually end badly, first with inflation and ending with the whipsaw of deflation. Inherently, gov't produces nothing and has no money - it either takes it from you directly by force through taxation, or it takes it indirectly by creating money/credit from thin air, thereby devaluing your savings and earnings. Kinda clever aye?

Politicians and bureaucrats don't want the economy to tank while they are in office. The markets have wanted to deflate for some time now, but thanks to economic central planning, they keep putting off the day of reckoning a little longer... That is until the dollar collapses under its own weight. Foreigners are becoming increasingly reluctant to hold dollars.

The dot-com bubble, followed by the mortgage/real estate bubble have made the real economy progressively unstable, causing the future day of reckoning to be a much more tragic event. Hang on, it looks like a bumpy ride ahead.

Posted by: Wayne at August 31, 2007 09:18 AM (CBzBI)

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