Posted on 09/13/2011 7:35:29 AM PDT by Notary Sojac
You want to fix this economic crisis? You want to put people back to work?
There’s a way to do it. But you’re not going to like it.
The fastest way to fix this mess is to see tens of millions of homeowners default on their mortgages, and millions more file for bankruptcy.
I told you that you wouldn’t like it.
I don’t like it much either. It sticks in the craw that people got to borrow all that money and won’t have to pay it back.
But you know what? The time to stop that was five or 10 years ago, when the money was being lent.
The key thing to understand is that most of that money has gone to what a fund manager friend of mine calls “money heaven.” Most of these debts will never, ever be repaid in real money.
Some will say, “why should people get away with borrowing imprudently?” The response: Why should the banks get away with lending imprudently?
In a free economy, the people who are supposed to ration the loans are the lenders. Banks are supposed to lend carefully and responsibly. What else are they paid for? Taking deposits? You could hire people on minimum wage to do that.
The banks knew this. When they were lending $500,000 to a bus driver with $1,000 in his checking account, they knew that their loan was only guaranteed by the value of the home.
If they didn’t know it, they should have. Their incompetence is not our problem.
The correct moral hazard is to punish the banks who lent imprudently by making them eat their own losses.
I told you that you wouldn’t like it. But the alternatives are worse.
(Excerpt) Read more at marketwatch.com ...
Tell me why Mexico has an unemployment rate of 5%? Thank you NAFTA.
This guys doesn’t seem to “get it”. The DemocRATS forced the banks to lend to people who had no chance of ever paying the money back. Liberal DemocRATS created the environment of lending money to anyone even if you knew you’d never get the money back. IMHO, this is the fault of the government, not the banks. The DemocRATS’ plan to collapse the American economy began many years ago.
Massive dafault is a bad idea - sure, it’s a really “fast” way to get beyond where we are now but it’s still a very bad idea. It’s like giving up entirely ...
Silly article. The author fails to mention the small point about the federal government coercing banks to loan money to unqualified borrowers — forcing banks to engage in practices which they would have otherwise avoided. Under the guise of “fairness” and “diversity” many banks had no choice but to approve loans which were patently risky. The feds didn’t give them an option.
Somewhat agree with this, there are tons of houses that haven’t even hit the market.
The housing market hasn’t even reached bottom because the government refused to put them on the market.
If they try to rent them out, then it is going to make all the landlords go bankrupt and they are the most likely to pay their mortgage because of the money they have invested.
So can’t do that....
SO you sell them, but who is going to pay on a mortgage for the next 15 years that is under water 15 years out by 40%? They aren’t, many are just going to walk away.
What ever is going to happen, lets just get it over with so we can move on.
Banks won't like it, as they'll have to recognize the hit on their books.
Borrowers that pay on time won't like it, as it's unfair to them...they were doing the right thing.
I don't much like it, either, but this economy's going nowhere until a bottom in the real estate market is established.
Without a 'floor', the best we'll see is treading water.
How does this ‘put people back to work’?
No, it's not. It's the very reason we have Bankruptcy Courts in this country.
It’s like giving up entirely ...
Bull****. It's letting the system work as it's supposed to.
L
They did nothing, betting instead that when it all blew up they could get a taxpayer bailout.
Ay-men to that.
We've been trying to treat the cancer of insolvency with bandaids and Bactine, when only surgery will do.
I've heard that line too many times.
Yes the Democrats were all for easy money, but:
So were most Republicans
And, so were the banks.
There are no good guys in this boondoggle.
As far as I can tell, both Democrats and Republicans are tap dancing around that fact in a manner that would do Gene Kelly proud.
The flip side of that is many of those banks along with the large corporations support Democrats. They become the victims of the monster they helped create.
chirp.....chirp.....chirp......
You're right on. But also those that had the gall to purchase a home knowing they could not pay for it speaks of the intelligence of millions of Americans. Dumb ignorant and probably were looking for something for nothing. They are no better than a common thief.
The banks knew this. When they were lending $500,000 to a bus driver with $1,000 in his checking account, they knew that their loan was only guaranteed by the value of the home. If they didn’t know it, they should have. Their incompetence is not our problem.
Not true, nor are his alternatives. Money used to pay debt doesn't go into some galactic Black Hole...it goes back into the system.
You really can have it both ways, except Obozo is too stupid and too Marxist to go along with it. For the tens of millions who are trying to pay back their debt, cut their taxes. This leaves them with more money to pay off debt and buy more goods are services. As consumer demand rises because take-home pay is now higher, business needs more inputs, from raw steel to labor. More labor means more (NOT less, you idiot!) tax receipts.
Now, cut the tax rate for corporations and make them permanent so corporations can plan around it. Is it by chance that the country with the second highest corporate tax rate in the world (the US) is struggling with 9.2% unemployment and negative growth while the country with the world's lowest corporate rate (Chile) has the highest growth rate and lowest unemployment rates? I don't think so. And this from a country that was going up in smoke under Allende's Marxist policies in the '70's. They saw the light...we don't.
Alas, lowering personal income taxes on ALL income levels and corporations doesn't square with Obozo's Class Warfare to destroy capitalism plans. I sure hope smart minds do better in 2012 than they did in 2008.
We can grow our economy if we get rid of Zero's roadblocks, but we can't grow it enough to clean up this mess.
After the “Crash” in 1929 homes that were valued at $20,000 were being sold for as little as $7000. The banks didn’t want them and sold them for what they could get just to get some much needed cash. The original large downpayment required plus the resale price minimized the banks exposure so they came out pretty well since they didn’t have access to the Big “O’s” stash. Also mortgages were typically for 3 to 5 years and people actually expected to pay off their homes and own them free and clear. “Burning the Mortgage” parties were a common social event.
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