{"id":52,"date":"2008-11-12T01:10:38","date_gmt":"2008-11-12T06:10:38","guid":{"rendered":"http:\/\/www.knitbot.org\/blog\/2008\/11\/12\/git-yer-buckit-were-bailin\/"},"modified":"2008-11-12T01:10:38","modified_gmt":"2008-11-12T06:10:38","slug":"git-yer-buckit-were-bailin","status":"publish","type":"post","link":"http:\/\/www.knitbot.org\/blog\/2008\/11\/12\/git-yer-buckit-were-bailin\/","title":{"rendered":"Git yer buckit, we’re bailin’"},"content":{"rendered":"

There were multiple announcements today of home mortgage bailouts in
\nthe US – from
\nCitibank to its customers,<\/a> as well as US Federal bailout plans via
\nFreddie Mac and Fannie Mae.<\/a><\/p>\n

The Citibank plan offers the possibility of reviewing the principal of
\nthe loan as one possible parameter to adjust in aiming to bring the
\nmortgage payments of a principal residence under 40% of monthly
\nincome.  Wait a minute — isn’t that retroactively changing the
\nprice of the house you bought?  How is that fair to the
\nneighbours?    Or to those who purchased more modest
\nhomes?  Well, the answers there are:<\/p>\n

1\/ it isn’t fair, nobody ever said it
\nwould be; and
\n2\/ it’s Citibank’s money — they aren’t obliged to be fair, and they
\nare “simply” acting to do what they believe will yield the best return
\non their investments.  A defaulted mortgage is not good for
\nanyone’s business.\n<\/div>\n

\nAs a flipside of the fairness coin — those who are not concerned about
\nwhether or not it is “fair” are concerned with whether or not the
\navailability of bailouts for some will cause an escalated demand from
\nthose who have been struggling but surviving:  why should they
\ntry, if they can get a bailout?<\/p>\n

Also, it’s not entirely clear that banks will simply slash the value of
\nthe principal.  Other
\nbanks are apparently considering <\/a>different things:<\/p>\n

“[…s]omething called principal
\nforbearance. There, the bank carves off a chunk of the money you owe
\nand puts it aside. You continue making payments, now lowered, on the
\nrest of the loan. When you sell or refinance later, however, the bank
\nadds that chunk back onto the total amount you must repay. By then, it
\nis hoped, the value of the home has rebounded or you\u00e2\u20ac\u2122ve built up enough
\nequity to make the bank whole.”\n<\/div>\n

\nThe federal plans are already coming under criticism because they will not adjust principal.  Well, this is taxpayer money — why should I pay my taxes to bail out someone who bought a house that I would only dream of (and, unlike them,  had the good sense to realize I could not afford?)  But, “experts” are concerned that people will walk away from mortgaged homes if their mortgaged value is greater than the current value of the home.     In other countries, people doing that would be crushed by the inevitable ensuing personal bankruptcy; in the US, that’s not currently a very difficult reputation to shed. <\/p>\n

The math here is really not simple, as the pros and cons have to be
\nweighed to consider<\/p>\n

1\/ The current situation was caused,
\nin a large part, by people making bad, overreaching choices in an
\natmosphere that was devoid of expectation of (negative) consequences<\/span>. 
\nBeing able to walk away from some or all of a mortgage does nothing to
\naddress that.<\/p>\n

2\/ The current situation goes well
\nbeyond the mortgage market.<\/span>  We haven’t even begun to see
\nthe extent of the credit crisis, but we need to be aware that it is not
\nlimited to the US (there are global collapses).   <\/p>\n

3\/ The “righting” of markets is
\ntaking down giants<\/span>  — such as DHL and General
\nMotors.  If and as these types of companies fail, the
\nrepercussions reach far and wide.  The American
\nauto industry has a broad reach:<\/a><\/p>\n

“[…] directly employs about 355,000
\nAmerican workers, and it says that, through related industries that are
\ndependent on auto manufacturing and sales, it supports about another
\n4.5 million jobs.”\n<\/div>\n

\nThe impact of not propping up mortgages,  GM, etc, even if it
\nmeans bad decisions get rewarded, may be far too great to ignore. 
\nSo, the questions are — is it possible to bail out “enough”, and how
\ndo we ever get to a situation of adequate responsibility for individual
\nchoices so that we can stop the madness of the spiral of bad decisions
\nthat got us here?<\/p>\n

Have we even begun to see the bottom of this hole?<\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

There were multiple announcements today of home mortgage bailouts in the US – from Citibank to its customers, as well as US Federal bailout plans via Freddie Mac and Fannie Mae. The Citibank plan offers the possibility of reviewing the … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[2,6],"tags":[],"class_list":["post-52","post","type-post","status-publish","format-standard","hentry","category-all","category-misc"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p7dQdt-Q","_links":{"self":[{"href":"http:\/\/www.knitbot.org\/blog\/wp-json\/wp\/v2\/posts\/52","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.knitbot.org\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.knitbot.org\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.knitbot.org\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.knitbot.org\/blog\/wp-json\/wp\/v2\/comments?post=52"}],"version-history":[{"count":0,"href":"http:\/\/www.knitbot.org\/blog\/wp-json\/wp\/v2\/posts\/52\/revisions"}],"wp:attachment":[{"href":"http:\/\/www.knitbot.org\/blog\/wp-json\/wp\/v2\/media?parent=52"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.knitbot.org\/blog\/wp-json\/wp\/v2\/categories?post=52"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.knitbot.org\/blog\/wp-json\/wp\/v2\/tags?post=52"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}