Friday, April 04, 2008

The Needs of the Many ....

The primary problem I have with this bill is that it does nothing to address the disparity between home prices and personal income. Growth of home prices has vastly out paced the growth of personal income for more than a decade. At this point, anything that maintains the current home prices will only prolong the problem and likely make it worse. If this bill passes as is, nobody who doesn't own a home today will EVER be able to afford a home since just about every single market in the country is over priced and the cost of borrowing is going to go through the roof if lenders have to worry about bankruptcy court modifying the loan terms and writing down the principal. $7000 or even $15000 would do nothing to spur investment in markets like the west coast or around any large city.

The only possible outcome would be rampant inflation of personal incomes and the goods/services that aren't housing related. That would turn our dollar into the Peso or Yen.

Unfortunately, I think the time has come for America to take its medicine. Those who took the short cut are going to have to pay the price and lose their homes. I don't see any way to fix the problem, without making a bigger problem down the road. Lets not forget that its not 1929. There isn't rampant unemployment. Just about everyone who is losing their homes due to a sub-prime mortgage has a job and the means to rent. And as long as this bill doesn't pass, they will have the opportunity to own a home again some day when their credit rehabs.

The paper gains people have made on their houses, without selling are just that. Paper gains. Granted a home is usually a much bigger investment. A much more emotional investment than say stock options from 2001, but its really no different. I, along with many friends had enormous paper net worth’s that evaporated as the dot com bubble burst leaving us with only a tax write off on the options we paid taxes on. Some of us were worth millions and ended up with a few thousand. Most of us got nothing.

This bailout is very expensive. It’s very difficult to implement. Its has a significant likelihood of making things worse. This bill will help alarmingly few people in relation to the whole population of the American home owners and citizens in general. It forsakes the next generation's ability to pursue their American dream.

The needs of the many must be accounted for before the needs of the few. While it might be distasteful to see the CEO of Bear Stearns cash out $63 million from a company that was run into the ground but, preserving the integrity of our financial institutions benefits every American and perhaps every citizen of the world.

I urge everyone to contact their Senators and Representative and tell them you will not support them with your time, money or votes in their next election if they support this legislation.

List of Senators
List of Representatives

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