Article: Mortgages

At the crux of our economic woes is a pernicious aspect of human nature which I will name later in this essay. The editors of the New York Times avoid naming it, but they do address it directly in today's editorial about home mortgages. Their advice ... and I think it is excellent advice ... is to call a spade a spade, call predatory lending a social pathology, and to stop the hemorrhaging of housing values due to a progressively larger and larger volume of home foreclosures. What has to be done is to halt the decline in housing values of all people, not just the people who for whatever reason subscribed to adjustable rate mortgages the adjustments of which became intolerably expensive. Kicking millions of people out of their homes on the basis that they have not done their part to create a windfall profit for the lenders does not provide that profit anyway. What sort of mentality is it that says that a contract is a contract when hewing to the contract means cutting off your own nose to spite someone else's face? Apparently there are people out there ... some inhabiting the White House ... who believe that the American people are just like themselves: selfish, predatory, and not a little imbecilic. They think that hordes of people who do not need help with their mortgages will quickly jump on the bandwagon to save home values and scarf up the new mortgages. For some reason they think that the alternative ... the paradox of deleveraging, explained here over a month ago (where if everyone sells at the same time the market will recognize an over-supply and lower the price and value) ... is preferable. These people need to be taken out of their positions and put to work doing something that does not require mental activity! Congress needs to declare a mortgage foreclosure holiday right now. It should have been done a year ago, it seems, but it is not too late to be done in November 2008. Bush needs to sign off on it. All subprime ARM mortgages need to be wound back to their original "introductory" rates and rewritten at some rate that makes sense. If banks think they are going to lose money this way, the answer is emphatically YES! The alternative is that they will make no profit at all! They will go bankrupt in a cataclysmic depression and will have only their "foreclosure pride" to comfort them. Obama should make a direct statement to Congress and get this going immediately. JB