Subsidize Bad Behavior?

[DKW 86 8,215]

http://www.realclearpolitics.com/articles/...d_behavior.html

Subsidize Bad Behavior?

By Lawrence Kudlow

President Obama's massive mortgage-bailout plan is nothing more than a thinly disguised entitlement program that redistributes income from the responsible 92 percent of home-owning mortgage-holders who pay their bills on time to the irresponsible defaulters who bought more than they could ever afford. This is Obama's spread-the-wealth program in action.

Team Obama is rewarding bad behavior. It is enlarging moral hazard. It is expanding its welfarist approach to economic policy. And with a huge expansion of government-owned zombie lenders Fannie Mae and Freddie Mac, Team Obama is taking a giant step toward nationalizing the mortgage market.

Reporting from the Chicago commodity pits, my CNBC colleague Rick Santelli unleashed a torrent of criticism over this scheme. Santelli said: "Government is promoting bad behavior. ... Do we really want to subsidize the losers' mortgages? This is America! How many of you people want to pay for your neighbor's mortgage? President Obama, are you listening? How about we all stop paying our mortgages! It's a moral hazard."

All this took place on the air to the cheers of traders. Santelli called for a new tea party in support of capitalism. He's right.

Obama's so-called mortgage-rescue plan amounts to $275 billion in new debt that will have little if any lasting impact on deeply corrected housing prices or the mortgage-default problem that stemmed from the insistence of government to throw home loans at lower-income people. A modest reduction in mortgage rates will have little impact on home prices, as Harvard professor Ed Glaeser has shown. And by the way, re-default rates on modified mortgages have been running 50 percent to 60 percent. This is not going to change. So why should we throw more good money after bad?

Meanwhile, Wall Street is awakening to the disappointment that the securitized mortgages behind the toxic assets that have done so much damage to banks and the credit system are not being treated in the Obama program. The oversight is incredible. There are no safe-harbor provisions to protect mortgage servicers against lawsuits if agreements are broken. The ownership of these securitized mortgage pools is wide and far, spanning the globe. Breaking contracts is exceedingly difficult, especially without any legislated legal protection.

Of course, banks that have whole loans can choose to modify them if they want. And in some cases it's much better to modify than foreclose. But 70 percent of this bank-owned paper is performing. It's the securitizations that have clogged up the world credit system.

Then there's the bankruptcy-judge cram-down, which would allow the courts to renegotiate interest rates and loan principal. This would abrogate private contracts and throw out the rule of law. Do we think future investors will put up mortgage capital if they fear judges will overturn the terms of contracts? Home-loan supplies will fall and mortgage rates will rise.

Then there's Fannie and Freddie, the big winners here. Only their products are eligible for mortgage relief. Jumbo mortgages are not. Neither are private-label mortgages created by various non-bank lenders. Fan and Fred already run 48 percent of the mortgage market. Obama's proposal would greatly enlarge that and move the mortgage system toward government nationalization.

What's even more incredible is Team Obama's stubborn refusal to have any faith in the free market. In some of the hardest hit areas of the country, markets are already solving the housing problem. Writing on his Carpe Diem blog, University of Michigan professor Mark Perry notes that while California home prices dropped 41 percent in 2008, home sales in the state jumped 85 percent. It now looks like 2008 sales for single-family houses will exceed levels reached in 2007.

What's more, the unsold-inventory index for existing single-family detached homes in December 2008 was 5.6 months, compared with 13.4 months for the year-ago period. And the median number of days it took to sell a single-family home dropped to 46.1 in December 2008, compared with 66.7 in December 2007. So inventories are dropping, the number of days to sell a home is falling, and sales are rising in the wake of lower prices. The market is already working it out...

If the government really wants to help, instead of bailing out irresponsible mortgage-holders, it should support new and younger families who want to buy starter homes and begin to climb the ladder of prosperity.

All this is free-market economics 101. And I say, let free-markets work. Let's remember that most folks -- even those with underwater mortgages, where the loan value is more than the home value -- do not walk away from their obligations. They don't want to wreck their credit -- and their homes are their castles. That's the American way.

But if we penalize the good guys and subsidize the bad ones, we are undermining the moral and economic fabric of this country.

Lawrence Kudlow is host of CNBC's The Kudlow Report and co-host of The Call. He is also a former Reagan economic advisor and a syndicated columnist. Visit his blog, Kudlow's Money Politics.

There is a law in Economics that says that what you subsidize you will got more of. Do we really need to subsidize bad mortgage behavior?

[Strychnine 1,812]

There is a law in Economics that says that what you subsidize you will got more of. Do we really need to subsidize bad mortgage behavior?

Is Atlas Shrugged an old favorite, or a recent read?

[arnaldoabru 11]

http://www.realclearpolitics.com/articles/...d_behavior.html

Subsidize Bad Behavior?

By Lawrence Kudlow

President Obama's massive mortgage-bailout plan is nothing more than a thinly disguised entitlement program that redistributes income from the responsible 92 percent of home-owning mortgage-holders who pay their bills on time to the irresponsible defaulters who bought more than they could ever afford. This is Obama's spread-the-wealth program in action.

Team Obama is rewarding bad behavior. It is enlarging moral hazard. It is expanding its welfarist approach to economic policy. And with a huge expansion of government-owned zombie lenders Fannie Mae and Freddie Mac, Team Obama is taking a giant step toward nationalizing the mortgage market.

Reporting from the Chicago commodity pits, my CNBC colleague Rick Santelli unleashed a torrent of criticism over this scheme. Santelli said: "Government is promoting bad behavior. ... Do we really want to subsidize the losers' mortgages? This is America! How many of you people want to pay for your neighbor's mortgage? President Obama, are you listening? How about we all stop paying our mortgages! It's a moral hazard."

All this took place on the air to the cheers of traders. Santelli called for a new tea party in support of capitalism. He's right.

Obama's so-called mortgage-rescue plan amounts to $275 billion in new debt that will have little if any lasting impact on deeply corrected housing prices or the mortgage-default problem that stemmed from the insistence of government to throw home loans at lower-income people. A modest reduction in mortgage rates will have little impact on home prices, as Harvard professor Ed Glaeser has shown. And by the way, re-default rates on modified mortgages have been running 50 percent to 60 percent. This is not going to change. So why should we throw more good money after bad?

Meanwhile, Wall Street is awakening to the disappointment that the securitized mortgages behind the toxic assets that have done so much damage to banks and the credit system are not being treated in the Obama program. The oversight is incredible. There are no safe-harbor provisions to protect mortgage servicers against lawsuits if agreements are broken. The ownership of these securitized mortgage pools is wide and far, spanning the globe. Breaking contracts is exceedingly difficult, especially without any legislated legal protection.

Of course, banks that have whole loans can choose to modify them if they want. And in some cases it's much better to modify than foreclose. But 70 percent of this bank-owned paper is performing. It's the securitizations that have clogged up the world credit system.

Then there's the bankruptcy-judge cram-down, which would allow the courts to renegotiate interest rates and loan principal. This would abrogate private contracts and throw out the rule of law. Do we think future investors will put up mortgage capital if they fear judges will overturn the terms of contracts? Home-loan supplies will fall and mortgage rates will rise.

Then there's Fannie and Freddie, the big winners here. Only their products are eligible for mortgage relief. Jumbo mortgages are not. Neither are private-label mortgages created by various non-bank lenders. Fan and Fred already run 48 percent of the mortgage market. Obama's proposal would greatly enlarge that and move the mortgage system toward government nationalization.

What's even more incredible is Team Obama's stubborn refusal to have any faith in the free market. In some of the hardest hit areas of the country, markets are already solving the housing problem. Writing on his Carpe Diem blog, University of Michigan professor Mark Perry notes that while California home prices dropped 41 percent in 2008, home sales in the state jumped 85 percent. It now looks like 2008 sales for single-family houses will exceed levels reached in 2007.

What's more, the unsold-inventory index for existing single-family detached homes in December 2008 was 5.6 months, compared with 13.4 months for the year-ago period. And the median number of days it took to sell a single-family home dropped to 46.1 in December 2008, compared with 66.7 in December 2007. So inventories are dropping, the number of days to sell a home is falling, and sales are rising in the wake of lower prices. The market is already working it out...

If the government really wants to help, instead of bailing out irresponsible mortgage-holders, it should support new and younger families who want to buy starter homes and begin to climb the ladder of prosperity.

All this is free-market economics 101. And I say, let free-markets work. Let's remember that most folks -- even those with underwater mortgages, where the loan value is more than the home value -- do not walk away from their obligations. They don't want to wreck their credit -- and their homes are their castles. That's the American way.

But if we penalize the good guys and subsidize the bad ones, we are undermining the moral and economic fabric of this country.

Lawrence Kudlow is host of CNBC's The Kudlow Report and co-host of The Call. He is also a former Reagan economic advisor and a syndicated columnist. Visit his blog, Kudlow's Money Politics.

There is a law in Economics that says that what you subsidize you will got more of. Do we really need to subsidize bad mortgage behavior?

Why not? We're already subsidizing bad behavior by banks that wrote fake insurance policies to help sell their greed.

[OldNewby 27]

The fox is guarding the hen house. Repeat, the fox is guarding the hen house.

The fox is throwing a party for all his friends. Repeat, the fox is throwing a party for all his friends.

Out.

[OldNewby 27]

http://www.realclearpolitics.com/articles/...d_behavior.html

Subsidize Bad Behavior?

By Lawrence Kudlow

President Obama's massive mortgage-bailout plan is nothing more than a thinly disguised entitlement program that redistributes income from the responsible 92 percent of home-owning mortgage-holders who pay their bills on time to the irresponsible defaulters who bought more than they could ever afford. This is Obama's spread-the-wealth program in action.

Team Obama is rewarding bad behavior. It is enlarging moral hazard. It is expanding its welfarist approach to economic policy. And with a huge expansion of government-owned zombie lenders Fannie Mae and Freddie Mac, Team Obama is taking a giant step toward nationalizing the mortgage market.

Reporting from the Chicago commodity pits, my CNBC colleague Rick Santelli unleashed a torrent of criticism over this scheme. Santelli said: "Government is promoting bad behavior. ... Do we really want to subsidize the losers' mortgages? This is America! How many of you people want to pay for your neighbor's mortgage? President Obama, are you listening? How about we all stop paying our mortgages! It's a moral hazard."

All this took place on the air to the cheers of traders. Santelli called for a new tea party in support of capitalism. He's right.

Obama's so-called mortgage-rescue plan amounts to $275 billion in new debt that will have little if any lasting impact on deeply corrected housing prices or the mortgage-default problem that stemmed from the insistence of government to throw home loans at lower-income people. A modest reduction in mortgage rates will have little impact on home prices, as Harvard professor Ed Glaeser has shown. And by the way, re-default rates on modified mortgages have been running 50 percent to 60 percent. This is not going to change. So why should we throw more good money after bad?

Meanwhile, Wall Street is awakening to the disappointment that the securitized mortgages behind the toxic assets that have done so much damage to banks and the credit system are not being treated in the Obama program. The oversight is incredible. There are no safe-harbor provisions to protect mortgage servicers against lawsuits if agreements are broken. The ownership of these securitized mortgage pools is wide and far, spanning the globe. Breaking contracts is exceedingly difficult, especially without any legislated legal protection.

Of course, banks that have whole loans can choose to modify them if they want. And in some cases it's much better to modify than foreclose. But 70 percent of this bank-owned paper is performing. It's the securitizations that have clogged up the world credit system.

Then there's the bankruptcy-judge cram-down, which would allow the courts to renegotiate interest rates and loan principal. This would abrogate private contracts and throw out the rule of law. Do we think future investors will put up mortgage capital if they fear judges will overturn the terms of contracts? Home-loan supplies will fall and mortgage rates will rise.

Then there's Fannie and Freddie, the big winners here. Only their products are eligible for mortgage relief. Jumbo mortgages are not. Neither are private-label mortgages created by various non-bank lenders. Fan and Fred already run 48 percent of the mortgage market. Obama's proposal would greatly enlarge that and move the mortgage system toward government nationalization.

What's even more incredible is Team Obama's stubborn refusal to have any faith in the free market. In some of the hardest hit areas of the country, markets are already solving the housing problem. Writing on his Carpe Diem blog, University of Michigan professor Mark Perry notes that while California home prices dropped 41 percent in 2008, home sales in the state jumped 85 percent. It now looks like 2008 sales for single-family houses will exceed levels reached in 2007.

What's more, the unsold-inventory index for existing single-family detached homes in December 2008 was 5.6 months, compared with 13.4 months for the year-ago period. And the median number of days it took to sell a single-family home dropped to 46.1 in December 2008, compared with 66.7 in December 2007. So inventories are dropping, the number of days to sell a home is falling, and sales are rising in the wake of lower prices. The market is already working it out...

If the government really wants to help, instead of bailing out irresponsible mortgage-holders, it should support new and younger families who want to buy starter homes and begin to climb the ladder of prosperity.

All this is free-market economics 101. And I say, let free-markets work. Let's remember that most folks -- even those with underwater mortgages, where the loan value is more than the home value -- do not walk away from their obligations. They don't want to wreck their credit -- and their homes are their castles. That's the American way.

But if we penalize the good guys and subsidize the bad ones, we are undermining the moral and economic fabric of this country.

Lawrence Kudlow is host of CNBC's The Kudlow Report and co-host of The Call. He is also a former Reagan economic advisor and a syndicated columnist. Visit his blog, Kudlow's Money Politics.

There is a law in Economics that says that what you subsidize you will got more of. Do we really need to subsidize bad mortgage behavior?

Why not? We're already subsidizing bad behavior by banks that wrote fake insurance policies to help sell their greed.

ACORN demanded "special" treatment and got it. Government set up "special" mortgages and loans for "special" people. And now these "special" people want the rest of us "unspecial" people to make their payments for them. After all, we are talking "special" people here.

[arnaldoabru 11]

I don't see the initials ACORN in this

http://www.npr.org/templates/story/story.p...toryId=94748529

[3328 0]

I don't see the initials ACORN in this

http://www.npr.org/templates/story/story.p...toryId=94748529

Should've allowed them to fail. Survival of the fittest. Their insurance division would've allowed investors to buy what great business they have.

And we have to prosecute the crooks in so called oversight in congress, now that's bad behavior.

Frank, Dodd, Raines, Johnson, Gore-lick, stole up to $300,00,000 of our money, damn.

Hey arn, quit listening to npr, unless you listen to the other side-or should I say the truth.

And by the way, what the hell is akern gonna do with five-billion dollars-effect fair elections?

[DKW 86 8,215]

There is a law in Economics that says that what you subsidize you will got more of. Do we really need to subsidize bad mortgage behavior?

Is Atlas Shrugged an old favorite, or a recent read?

Old favorite, plan on re-reading it in a few weeks. Got a bunch of stuff for my birthday that I am trying to find time to read now.

[Bottomfeeder 244]

It doesn't matter who is in office. This extortion scheme started when Bush was %$#@ and Paulsen was Treasury Secretary to the tune of over $812 billion Federal Reserve Notes (actually it started around 1913 and before). The extortion will continue until "We the People" have had enough and stop it. Until that time, don't expect anyone to change what started over 100 years ago.

[AU alum 2]

Pardon me while I get up on my soapbox for a little while.

Why is it, when my husband and I have busted our butts to not only stay current with the mortgage, but get ahead, nothing will be done to help us? But for people that screw around, get their house foreclosed on, they get help? Yeah, yeah, yeah, I know there are some people foreclosed on through no fault of their own. But they aren't the ones I'm po'd at. I don't have a problem with them getting help. I'm happy, as a matter of fact. It's like you're rewarded for bad behavior.

OK, I'll shut up now.

[DKW 86 8,215]

Pardon me while I get up on my soapbox for a little while.

Why is it, when my husband and I have busted our butts to not only stay current with the mortgage, but get ahead, nothing will be done to help us? But for people that screw around, get their house foreclosed on, they get help? Yeah, yeah, yeah, I know there are some people foreclosed on through no fault of their own. But they aren't the ones I'm po'd at. I don't have a problem with them getting help. I'm happy, as a matter of fact. It's like you're rewarded for bad behavior.

OK, I'll shut up now.

You got it right, but I would one more thing to it all. Those that lost jobs etc SHOULD HAVE FIGURED THAT INTO BUYING THE HOUSE. Noone today keeps a job for very long, maybe 5-7 years average. That means that over the course of your mortgage you better have a good backup plan for when you are unemployed. Look, caveat emptor is just a sane way to do business. If you signed up for one of these stupid mortgages, then you have to pay Stupid Tax. "Life aint fair, and it aint never gonna be fair." YOU are charged to look out for your family, not the the rest of us. If you need help, see your family, friends, or church. The opportunity for unscrupulous people to start running scams on the govt is just too great. The govt should never have gotten into this business in the first place.