Posted on 01/29/2004 1:32:03 AM PST by sarcasm
Edited on 05/07/2004 6:27:06 PM PDT by Jim Robinson. [history]
Where do YOU live?
Lemme tell ya, I'm getting more socialist every day. I'm a conservative Republican, y'know, and that means more money for the National Endowment for the Arts, Big spending programs in prescrip drugs, open borders and amnesty--
You can get all theoretical and libertarian on me--but I say that a lending institution has responsibilities of its own. And if it goofs up, they shouldn't have brand new bankruptcy laws to help them out.
It hasn't been so long ago that I was a poor college student with bad credit. But then, I was making minimum wage and credit was how I made it through school.
Now I am continually flabbergasted by what people are willing to loan me. But considering my income, it really isn't all that amazing. Creditors are, in my experience, within the bounds of reason even if they aren't always conservative. Good credit is a two edged sword. It opens a lot of doors, but you have to judiciously pick which ones to go through. I can't fault a creditor for making the assumption that you won't go hog wild into debt.
A lot of these folks could make ends meet, except for the beer and cigarettes that are more important than the house payment.
But there's another major cause to this problem than too easy credit being extended to the foolish: It's feminism.
Yes, feminism. Feminism shamed millions of mothers out of the home and into the workforce. The consequence? Two-income families who, on paper at least, could "afford" a pricier house.
This drove up housing costs up through the wazoo.
Now these middle class, two-income couples are often in foreclosure too, as shown here: The Two-Income Trap.
We're sitting pretty now, on only one income, after buying a run-down (but solid) Victorian, cheap, in the early '90s, and fixing it up gradually...It has now more than doubled in value.
I wouldn't touch new contruction with a ten foot pole. Even the 'high-end' new houses are riddled with hidden flaws caused by builders taking short-cuts. No house less than 80 years old for me.
Let's see ....
I remember a whole industry, structurally noncompetitive, that depended utterly on Regulation Q (federal interest rate controls and the S&L differential) for survival.
I remember Jimmuh, double digit inflation, and massive disintermediation.
I remember financial deregulation that told S&L's that they either had to turn themselves into commercial banks or go out of business.
I remember tax reform that retroactively eliminated theretofore perfectly legitimate tax shelters, led to a massive writedown of affected assets, and arbitrarily pushed hundreds of S&L's into mortal difficulty.
And I remember grandstanding pols that, rather than admit the S&L fiasco was mainly a product of policy mistakes, ran wild on a witch hunt.
Sure, there were a few bad apples in the S&L barrel -- Jim McDougall, Bill & Hil come to mind, and there were others -- but mainly what we had was the collapse of a 1930's-style, government organized cartel that couldn't survive in a competitive world. A very expensive collapse, to be sure. What happened with the S&Ls was akin to what happened to the Soviet economy across the board. If a scapegoat was needed for public consumption, the proper course would have been to dig up Franklin Roosevelt, chop off his head, and parade it around on a pike.
I can fault him far enough to make him eat the consequences of his bad loans, rather than innovate a new set of laws for his profit.
Leave the laws as they are. If creditors are losing money, let them be more careful how they lend it.
At least, on college registration days, there are no liquor stores and cigarette retailers trying to get the students hooked before they get back to the dorm room.
The credit card companies are betting on the back door to dad's wallet, not junior's earning power.
Why change the laws to benefit these lenders--someone answer me *that*--
I remember it vividly. Do you know the real cause?
It was not caused by "greedy" S&Ls, or even financial mistakes they made. It was casued by congress changing the IRS code.
Before the crisis, real estate losses were entirely tax-deductable. This meant that anyone, no matter how wealthy could buy an apartment complex for a high price and deduct both depreciation and mortgage interest from income. If depreciation and interest were higher than income from rents this deduction was carried over to be applied against other income.
The practical meaning of this is that high-income investors were willing to pay more for real estate because of the tax benefit.
Well, congress saw fit to change this so that losses greater than $25,000 could not be carried over to ofset other income, and even the $25,000 was phased out as your AGI rose to either $125k or $150k.
All of a sudden, a building which generated a hefty tax deduction didn't anymore. The economics changed and the price people were willing to pay for a building dropped substantially as a result.
This was a government-generated problem.
I don't know exactly how the law is written, but based on the fact that there is no situation so bad congress can't make it worse, I would say no.
How do you know she isn't the one who drove "the metal fastener" through the wire?
No, it's true. I am having a similar experience. I got our East Coast house in a divorce settlement and, despite having a modest post-divorce income, I have made the payments on it faithfully at the first of every month. But the mortgage company told me candidly that I can't afford it, and they want to call my 6.5%, 30-year-fixed mortgage.
Well, I've been affording this loan, plus the taxes, plus the rest of my pleasant lifestyle, for nine years now. But very well, I say. You call the loan and I'll refinance to get a cheaper mortgage--say, 5.75% or 6%.
No, they say; you can't afford that either.
But the new loan will result in mortgage payments even lower than what I've been happily paying for nine years, I protest. And my income is higher now than it was just after the divorce, and my credit better.
In response, they give a corporate shrug.
I'm shaking my head in puzzlement at this illogic. Good thing I was planning to sell this big place and use the profilts to buy an ante-bellum farm instead.
I agree with this, but I was always under the impression it was caused by regulatory mismanagement of the deposit insurance system, which gave add'l incentive for banks to make risky loans. I hadn't heard of the IRS angle.
This single statement speaks volumes about what is wrong with our current culture.
"...who is responsible" seems very self-evident to me.
It's not theoretical. I put it in to practice in my daily life and so do millions of other people. I don't buy what I cannot afford. I don't take out a loan just because an advertisement tells me I ought to. I don't buy a flash new car just because. I live within my means and I avoid credit like the plague.
If you piss your freedom away by constantly pressuring the government to look out for you- your freedom will be gone and it won't come back. That's a serious thing. People have to take responsibility in their lives. They have to think before they have sex that a baby might result. They have to think before they run out and buy a new car as opposed to a used one. They have to think before they eat at McDonald's three times a day. They have to think before they take out a mortgage they can't afford.
This is about more than just mortgages. This is about an entire value system and what the results would be if you made it common practice for the gov't to always bail people out of difficulties that they would not have if they just thought for themselves.
The bankruptcy laws are a seperate issue. We're talking about people here who are buying more than they can afford. This is not a new problem. Been happening for ages and ages. And there's only one solution: teaching personal responsibility- not more laws.
It's less than two hours unless you have Michigan plates.
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