"The Obama administration is looking at subsidizing the mortgage payments of struggling borrowers before they default, according to sources familiar with the discussions. " I would say this is unfair to the people who are planned their home purchase in accordance to their affordability. Not good paying taxpayers money to the people who are reckless and purchased at the abnormal prices without thinking.
I agree but instead of giving that money to the banks and have someone's house get foreclosed, I'd rather give it to the struggling home-owners so that they can pay the banks.
Isn't that the essence of the entire bailout plan? It's unfair to banks that ran their business responsibly by giving to the ones that didn't. Give billions to AIG would be unfair to the responsible insurance companies. Give billions to GM and Chrysler would be unfair to other auto companies and other corporations in general. Well to Communism. "From each according to their ability, to each according to their need". Communist Manifesto. OldTrader
It depends, if there is means testing (DTI) then many will not qualify for help and will be forced to vacatehouses they should never have been in in the 1st place. This will allow house prices to fall to a level where real price equilibrium is acheived and those of us who have been responsible will be able to buy property at realistic values. If there is no means testing then the cycle of 60-70% of loan mods defaulting within 6-12 months will continue. One way or anither prices will eventually get to equilibrium, if not in 2009 then 2010 or 2011. Sooner would be better for all.
Therein lies our problem. If you allow wave after wave of foreclosures, toxic assets become more toxic, more banks fail, stock market tanks, economy falls to epic levels and more foreclosures ensue thus accelerating the negative feedback loop. If you help those who took on costly mortgages, you screw those with the means to repay their debt, possibly enticing a default on their loans, too. If the government could convince the wealthiest 1000 people in the country that returning the money that was hoarded during the good times is in their best interest, the country and the rest of the world would have nothing to worry about (about ZERO percent chance of it ever happening, though).
Eventually, it will get to the point where even financially responsible people will lose their jobs and then their houses. This recession won't effect just spendthrifts.
Don't be so sure. FDR proposed a 100% income tax on people making more than $25K in 1942 and congressed passed a 94% income tax. Of course that was prompted by Pearl Harbor and not a bunch of people who over indulged and are now having a hard time pushing back from the feasting table.
"Obama's gonna pay my gas and mortgage"!!!! http://www.youtube.com/watch?v=P36x8rTb3jI One out of two so far. :eek:
You talked about the negative feedback loop. Look at the flip side, the positive feedback loop didn't last forever and certainly, the negative feedback loop won't last forever neither.