Update: Reader T.W. e-mails: “I wanted to commend you for your piece concerning the mortgage mess and the politicians who are offering handouts for people who made poor decisions. I live in the metro Northern VA area and purchased a home in mid-2006, just as the housing market was beginning to turn south. I have witnessed firsthand the wild speculation and building explosion that led to the drop in prices and the loss of equity. I attempted to warn friends that home prices were artificially high and that the market would be unable to sustain such levels.In response I was encouraged to go with an interest only loan by friends who claimed to be in the know. I took seriously the terms of my loan and made sure to keep myself within my financial limits. Limits that took into account not only the rates when I signed for my loan, but also taking into account what the rates might be in several years. I am not a financial wizard. I was History major in college and an enlisted Marine; I have an allergic reaction to numbers and percentages. If I could figure it out anyone can. Like you I am waiting for the other shoe to drop; and land smack on top of those of us, responsible citizens, who didn’t make uninformed decisions and think it was a good idea to take out a huge home loan when we did not have the income to match. Like you I am also waiting, most likely in vain, for politicians to reinsert a term in our national discourse that has long been out of style: responsibility.”
Update: Reader J.L. e-mails: “I read your column often and today you nailed the problem in the mortgage industry. I am a loan originator in Upstate NY and am increasingly frustrated with the lack of understanding of what has happened in the mortgage industry. For sure, there are many loan brokers and bankers who carry a share of the blame, but the biggest problem are the people who wanted to purchase a home that they really couldn’t afford and relied on creative financing. If you could see the endless amount of disclosures and paperwork that a borrower is required to sign and both the mortgage application process and at closing, it is laughable to think that, as Senator Obama suggests, these people had no understanding of what they were entering into.”
I need a man. A man who can say “No.” A man who rejects Big Nanny government. A man who thinks being president doesn’t mean playing Santa Claus. A man who won’t panic in the face of economic pain. A man who won’t succumb to media-driven sob stories.
A man who can look voters, the media, and the Chicken Littles in Congress in the eye and say the three words no one wants to hear in Washington: Suck. It. Up.
The Michigan primary put economics at the top of the political radar screen, and the Democrat presidential candidates have been doling out spending proposals, stimulus packages, housing market rescues, and other election-year-goodie pledges like Pez candy dispensers gone haywire. Which leading GOP candidate represents fiscal accountability and limited government? Who will take the side of responsible homeowners and responsible borrowers livid at bipartisan bailout plans for a minority of Americans who bought more house than they should have and took out unwise mortgages they knew they couldn’t repay?
I don’t want to hear Republicans recycling the Blame Predatory Lenders rhetoric of Hillary Clinton, John Edwards and Jesse Jackson. Enough with the victim card. Borrowers are not all saints. There’s nothing compassionate about taking money from prudent, frugal families and using it to aid their reckless neighbors and co-workers who moved into McMansions they couldn’t afford or went crazy tapping their home equity and now find themselves underwater.
Economist Tyler Cowen points out the problem of predatory borrowing — something you never hear politicians spotlight. He notes, “As much as 70 percent of recent early payment defaults had fraudulent misrepresentations on their original loan applications,” according to research on more than three million loans done by BasePoint Analytics. “Many of the frauds were simple rather than ingenious. In some cases, borrowers who were asked to state their incomes just lied, sometimes reporting five times actual income; other borrowers falsified income documents by using computers. Too often, mortgage originators and middlemen looked the other way rather than slowing down the process or insisting on adequate documentation of income and assets. As long as housing prices kept rising, it didn’t seem to matter.”
Message to Washington: Stop treating every defaulting borrower like Mother Teresa.
At last week’s FoxNews debate, the He-Men of the GOP field went all mealy-mouthed when asked about the signs of recession. Mitt Romney asserted our need to “stop the housing crisis.” Does he mean the government should insulate borrowers and lenders from culpability? Continue to artificially prop up housing prices? If so, why? If not, then what?
Last month, Mike Huckabee told an NPR reporter unequivocally that it “is not the purpose of government to prop people up from every poor decision they make.” Amen, Reverend Huckabee. But at the New Hampshire debate, he sheepishly avoided tough pronouncements and instead voiced support for President Bush’s Hillarycare-Lite housing bailout since it “didn’t involve tax dollars.” Yet.
Huckabee is comforting himself and his followers with semantic self-delusion. The Bush measures — including a subprime interest-rate freeze, a proposed expansion of the freeze to cover prime-rate borrowers, and a push to increase the availability of so-called jumbo mortgages and to lift the $417,000 loan cap — are the camel’s nose under the tent. Eventually, responsible taxpayers will pay.
As for “Straight Talk” Senator John McCain, he immediately pitched federal education and job-training programs for laid-off workers. “We need to go to the community colleges and design education and training programs so that these workers get a second chance. That’s our obligation as a nation.” It is? This is conservative? This is the alternative to Clintoncare? No, this is Clintoncare. Why can’t Americans be expected to pay for their own schooling and retraining?
Fred Thompson, supposedly the conservative’s conservative, asserted the need for a fiscal stimulus: “I think that has to be considered somewhere along the line if the economy calls for it.”
McCain and Romney want expansion of the Federal Housing Administration to allow borrowers to refinance — on the backs of taxpayers. Rudy Giuliani wants government aid for borrowers who were “cheated.” No word on what he would do to borrowers who did the cheating. (Summary of candidates’ positions on the mortgage bailout here.)
As we head toward Super Tuesday, the subprime mess and the economy will dominate — and the Do Something Democrat candidates will turn their spigot of overextended-homeowner sob stories on full blast. Do Republicans want a clear alternative to liberal-nomics? Or will you settle for a lip-service conservative who will reward fiscal recklessness with only slightly less government intervention than the Dems?
I’m still looking for Mr. Right. Remember: You’ll have me at “Suck. It. Up.”
A reader reminds me of the famous floor speech of Col. David Crockett, who served as a US congressman from Tennessee, “Not Yours To Give:”
One day in the House of Representatives, a bill was taken up appropriating money for the benefit of a widow of a distinguished naval officer. Several beautiful speeches had been made in its support. The Speaker was just about to put the question when Crockett arose:
“Mr. Speaker–I have as much respect for the memory of the deceased, and as much sympathy for the sufferings of the living, if suffering there be, as any man in this House, but we must not permit our respect for the dead or our sympathy for a part of the living to lead us into an act of injustice to the balance of the living. I will not go into an argument to prove that Congress has no power to appropriate this money as an act of charity. Every member upon this floor knows it. We have the right, as individuals, to give away as much of our own money as we please in charity; but as members of Congress we have no right so to appropriate a dollar of the public money. Some eloquent appeals have been made to us upon the ground that it is a debt due the deceased. Mr. Speaker, the deceased lived long after the close of the war; he was in office to the day of his death, and I have never heard that the government was in arrears to him.
Every man in this House knows it is not a debt. We cannot, without the grossest corruption, appropriate this money as the payment of a debt. We have not the semblance of authority to appropriate it as a charity. Mr. Speaker, I have said we have the right to give as much money of our own as we please. I am the poorest man on this floor. I cannot vote for this bill, but I will give one week’s pay to the object, and if every member of Congress will do the same, it will amount to more than the bill asks.”
He took his seat. Nobody replied. The bill was put upon its passage, and, instead of passing unanimously, as was generally supposed, and as, no doubt, it would, but for that speech, it received but few votes, and, of course, was lost.