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Well, Hillary appears to be attempting to make EVERYONE happy.

More government money to rescue folks who simply bought more house than they could afford. According to a Wall Street Journal story Tuesday, Hillary proposes:

  • Freezing Forclosures for 90 days
  • Freezing Interest-rate Resets on Sub-primes for 5 years
  • Establish a $30 billion fund so states and cities can buy foreclosed properties
  • Expand the Mortgage Revenue Bond Program (provides below market interest rates for first-time home buyers) by $10 billion

Thanks so much. I’ve heard a number of people call this, appropriately, “cost-shifting”. That means one group of people (those of us who are careful to buy what we can afford) are going to take

Capitalism and open market disciplines cannot support a class of people who are allowed to get a mortgage that they really cannot afford and then avoid the consequences of their poor decisions.

on the burden of supporting the expenses created by others (those who buy whatever they can finagle whether they can afford it or not). I’ve got another name for it: communism.

Interestingly enough, Obama expressed concerns about some of Clinton’s recommendations, especially:

… a new nonpartisan housing panel led by economists such as former Treasury Secretary Robert Rubin and former Federal Reserve chairmen Alan Greenspan and Paul Volcker.

The Obama campaign on Monday said Sen. Obama called for a similar foreclosure summit a year ago. Austan Goolsbee, one of Sen. Obama’s top economic advisers, warned against a committee led by Mr. Greenspan and Mr. Rubin, a former Citigroup Inc. chairman, saying it would heavily favor the financial community.

Sounds like Obama thinks Clinton is being too conservative. Hillary’s just not liberal enough. Nice. I suspect that’s a bunch of FUD, and the real story is she’s being more than liberal enough. It’s also no coincidence that Pennsylvania (site of the next primary) has been especially hard hit by the current mortgage crisis.Money House

Capitalism and open market disciplines cannot support a class of people who are allowed to get a mortgage that they really cannot afford and then avoid the consequences of their poor decisions. Granted, mortgage companies have an obligation to protect their (their investors’) interests by primarily ensuring they lend the money to those that can truly afford it (with some level of risk), but then they also have a responsibility to protect those same interests by taking appropriate and timely action when borrowers refuse to meet their obligations.  Furthermore, much of this problem could be solved through better education, whether through our schools, or through the credit industry itself.  Based on the improvements in public education in the last 30 years, I vote for the credit industry to take this one.

Lenders can, and often do, go to great lengths to give borrowers ample opportunity to correct their situations… you don’t get foreclosed upon because you are late on a payment. Foreclosures are costly and typically end in some amount of loss to the lender so it’s not in the lender’s best interest to foreclose. And frankly, investors only experience so much loss themselves before the rest of us are impacted by rising ARM rates, increased closing costs on new mortgages, and increased rates on any new loans. These impacts are purely due to the cost of business.

Some practices need to be monitored and regulated by the government… I’ll give you that.  Lenders that take advantage of people and truly engage in “predatory” lending should be held accountable, as long as regulations and laws are clear and concise on what “predatory” means.

However, the items suggested by Clinton have the effect of snow-balling this whole problem. It presumes that homeowners deserve to own their homes even if they can’t afford it. This is wrong. We all, individuals, businesses and government need to buy what we can afford to own, and nothing more. The government must not create another gravy train that just continues to place greater individual and corporate dependence on the government.

Let the market discipline the businesses and consumers so that they can become even more self-sufficient later. Stop buying votes with communist cost-shifting solutions.

Hat tip to DCS (a coworker).

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