Wednesday, April 23, 2008

Just the Charts Please

Have you ever admired an actor to the point of watching all of his movies, but then you hear them say something so stupid it made you never want to watch one of their movies again? This evening I encountered that same phenomenon in the blogging world:

If you are like me and live within your economic means, forcing you to buy and live in a house you can actually afford, you can sign your name as a sign of protest. In my opinion, it is absolutely ridiculous to have taxpayers' money given to people who bought homes that in so many cases they knew they could not afford. This will do nothing but reward the stupidity and greed that got us in this situation, but then again, that's what our government does best.

9 comments:

learningtotrade said...

I'm not looking to ruffle feathers, but I'm a bit confused as to what bothers you in the quote you posted? It is something that bothers me too, the bailing out of anyone that got into a bad mortgage because they thought they'd be able to afford it even when the arm went way up? So, I'm just curious as to what you don't like about it?

Thanks

leivalca said...

I agree with the quote above (no offense)...

The Market Speculator said...

Guys,
I may post more on this later. What baffles me is the venom I see towards borrowers (that have yet to get bailed out), versus that against lenders and the investment houses that are getting bailed out. Why are more people not upset about how *we* are bailing out Bear Stearns??? Sorry, but I'd much rather pay a few bucks and help out the average Joe. Bear Stearns should have known better.

Trader M.D. said...

I agree with the post above and your sentiments below.

I've thought that wall st is filled with a bunch of crooks for a while and if anything the recent events just further that point.

None of them should be bailed out IMO: Not the real estate agents, not the lenders, not the fed, not the legislators who were asleep at the wheel, not the borrowers, and definitely not the CEOs who encouraged these shenanigans in the first place.

I'd even take it one step further and I'm sure some people would think this is crazy, but the bonuses given out to the executive and those that partook in this debacle should be garnished and used to pay for the all the destruction they've caused.

There are so many people on fixed income (vets, elderly, etc) and many small towns, schools (the list is never ending) that have been devastated by the greed of the few.

carmichael said...

Agree with trader M.D.

Tyro said...

I don't see what the negative consequence of bailing out a few home owners could be. The cost is minimal in the grand scheme of things, it makes a huge difference to some people's lives, and many are innocent victims. There are more than enough foreclosures that there's no danger of people taking on huge mortgages expecting a bailout if times get hard.

Compare that to the bailouts that happen regularly in business. I don't mean just in things like BSC which is disgusting enough, but this lack of accountability is fundamental to incorporation in general and executive compensation in particular. If you take a huge risk, there's no personal consequence for failure and potentially a huge reward for success.

leivalca said...

Tyro, you live in Canada... no wonder you don't mind to bail anyone.

Trader M.D. said...

Tyro,

I hate to say it, but I disagree.

In the US we have a problem with over consumption and people that constantly want to live beyond their means (be it by eating habits, spending habits, etc).

Everyone of those people that purchased a house (that now they apparently can't pay for), purchased more than they could handle. In addition, they signed a contract. They had the chance to read over that contract and not to use a cliche, but "no one put a gun to their head."

Apparently the psychology of crowds got the best of them. They got in this buying frenzy of the fact that they "had to own a house." When in reality they probably had no business of owning that house or a house period.

Here we are in the US with an economy that probably couldn't even with stand a prolonged draw down in consumer spending and we wonder why (what ever happened to having a stash for a rainy day?). We're so dependent on US consumers that have little to no savings.

People constantly want to live beyond their means (be it spending too much, eating too much, etc).

The only way that behavior will ever change, is if we don't overtly promote it like we are doing right now.

What about all those people who decided to spend with in their means? You basically are telling them that they made a huge mistake for trying to be fiscally responsible.

I mean shit, if you're government isn't going to be fiscally responsible, why should you? And now, to make matters worse, because you tried to be fiscally responsible, we're going to penalize you for it.

What kind of crap is that?

It's honestly like a big party that everyone was invited to. Some people passed on the invitation, and now they're being asked to make up for those that drank too much at the gala.

If that wasn't enough, to top things off, everyone (even those that didn't participate) are having to suffer for the weaker dollar as a result of our disgusting trade deficits, and our interest rate inflated economy.

The only people I feel bad for in this entire situation are: those that didn't participate. Your government doesn't give a #@$! that you tried to be fiscally responsible.

By bailing out those those that have made bad decisions, we are only going to perpetuate this vicious cycle and make things worse in the long run.

So much for taking responsibility of your own actions.

I don't know about you, but that's not something I want to see happen.

Tyro said...

leivalca,
Tyro, you live in Canada... no wonder you don't mind to bail anyone.
:D

Canadians have learned through personal experience that helping individuals can make sense financially as well as morally. Perhaps that means I'm willing to consider the practical merits of this issue without any ideological hangups. It doesn't mean I want to bail anyone out.



TraderMD,

Yes, the boundary cases are difficult. There are certainly house flippers or those who would get a fourth mortgage every time their house price ticks up $1k so they can buy a another plasma tv because their last one looked too "boxy". The average US citizen is drowning in consumer debt and the situation is getting worse and any bailout will just delay the inevitable.

If you're asking me what should be done about this, I would not say there should be bailouts. I'd say that we should have fair bankruptcy laws so that people who are in trouble can have a chance of atoning and then getting on with their lives and so the credit agencies have some real incentive to do proper checks before giving out loans. It takes two to tango, and I don't see why only one side is bearing the full brunt.

As for homes, I don't know enough about all of the different circumstances. Some homeowners sound like victims of predatory lenders who used a bait-and-switch to sucker them into loans without understanding the consequences. Others sound like they cynically abused a lending environment that seemed to have no thought for the future.

By bailing out those those that have made bad decisions, we are only going to perpetuate this vicious cycle and make things worse in the long run.

Really? Which vicious circle is this? Which individual home owner or credit card borrower ever imagined that the government would bail them out if times grew hard? Even if some people got helped, who in the US would ever place their confidence in this being in place in the future, especially after seeing how badly the assistance was bungled after Katrina (a genuine disaster)?


You are right in a sense. There are some people who do not expect there will ever be consequences to their actions, who expect the government/legal system to come to their aid in tough times (and who have been proved right many times). The banks, lending agencies, credit card firms and other businesses know full well that the government offers help when they get in trouble. The individual executives, loans agents and workers know that even without government aid, their actions will have no negative consequences - they stand to make windfall profits if their gambles pay out, and lose nothing personally if they fail. Loans agents made fortunes for giving out mortgages they knew could not be sustained and now that the inevitable is happening, they still keep their money and can walk away happily. Where is the outrage directed at them? Where is the discussion of this real and dangerous vicious circle which has been with us for a hundred years?


In this environment, any anger directed at the individual homeowners seems misplaced.


Again, I'm not advocating that homeowners get bailed out. Those that are in trouble should be allowed to lose their house, go bankrupt and deal with the consequences. If there are bailouts however, I'm saying that the homeowners deserve it more, would do less future damage, and have a greater economic impact than bailing out the banks.


What about all those people who decided to spend with in their means? You basically are telling them that they made a huge mistake for trying to be fiscally responsible.

I'm sorry if I left that impression.