McCain's (not so crazy) bet on housing

I think the first thing to say is that Obama's $10B is close to zero, when you get right down to it.

Beyond that though, McCain is really sounding right to me right now. There is a difference between preventing collapse and providing bailouts. Some of the dems, including some Howard Dean clips I heard on NPR this morning, are running too fast toward bailouts, and feeding the moral hazard.

I hope that Obama will take a more nuanced view, leaning a bit toward McCain and away from Clinton (and Dean?) on this one.

For every one voter's home that is in foreclosure, there are 95 others paying their mortgage on time. If this turns to be a battle on the housing issue, my money is with McCain.

Whilst it's fair to say many home buyers have to be responsible for their actions, what is missing is:
- Home buyers react to market conditions and market requirements
- When the market is inflated and prices are high (due to irresponsible lending practices) those who want a home - still need to buy one - at then inflated market driven prices.

So if the regulators and lenders let the market get inflated by their own stupidity, does that mean that no one should buy a home? No.

The fact is, the American Dream is in-part about owning a home. And individual buyers really do not have options other than to buy or not buy. When market regulations and lenders cause prices to rise (from their own irresponsible actions), even when you scale-back to something affordable - buyers loose out... as prices drop and mortgages rise.

The core purpose of regulation is to prevent stupid things like this from happening. McCain and Bush's hand's off policies could continue to let corporate ethics run wild and markets go nuts, whilst bailing out banks and letting the little people fall homeless. Stupid. But predictable from Bush.

But Terry, the fact remains, had these folks qualified for 30 year fixed mortgages and chose those, they wouldn't be in this trouble as it would make zero difference if the price of their home went up or down.

The folks that made bad decisions are the ones that bought too much house (it makes no difference if those prices were inflated or not, they still bought too much house.)

I agree that the Feds shouldn't rush headlong into a bailout. But is that what's being proposed? If bad mortgages can, with a bit of Fed help, be restructured into long term success stories, isn't that an investment? As an alternative to that, consider the problems cities are already running into with abandoned homes, half-constructed, crime-ridden areas, with pockets of owners who can afford their mortgages but no longer want to stay where they are.

Justin,

I can't agree with you here buddy. The housing situation is a mess. We need to regulate lending period for the individual. Why? Glad you asked.

The consumer is and will be for some time to come the most important aspect of the U.S. and the global economy. Of course, this is unhealthy, and if allowed to continue, we will consume ourselves into debt that we can't refinance and interest rates that destroy our currency.

It's that simple. By protecting and preserving our consumer, we protect and preserve America.

It just has to be done.
-Bryan

Bryan, any specific suggestions?

Are your plans going to stop me from buying a house if I want one and if someone is willing to lend me the money?

I still don't see the problem with helping people in trouble refinance into loans they can afford. The lenders still get their money, the borrowers get to keep their home, and everyone is happy.

Now, if after that, they still can't take care of paying off the mortage, then yeah, there's nothing more that can be done.

There still needs to be a review of lending practices and regulations, regardless.

A few of you above say "help restructuring" consumer debt, and "homes" or I'm sure other things "they can afford."

I don't get where there would be a problem, if people had bought things they could afford.

What these government plans must really be about is bridging the gap, for people who bought more than they could actually afford.

If the gap is small, the price of the program might be small ... but the whole idea seems terribly open-ended, especially as we consider the historic decline in home equity and savings.

The question of affordability is equally open-ended. How about our own government's immense deficits? How about our overall trade deficit? How about Bear Sterns?

Yes, I agree that fiscal responsibility an individual mandate, but also a corporate one, and a national one. I don't deny that there's no simple solution, but if you want to give the "Too bad" argument, then it should equally apply to Bear Sterns, et al.