Gov’t bailout won’t solve problem; or, will cause bigger one
Most people have already decided where they stand on government-supported “assistance” plans, but in case you haven’t, or in case you want to read even more commentary on the subject, here’s an op-ed piece someone wrote in today’s Journal.
…[W]hy do so many Wall Street types, including legendary (and shrill) bond investor Bill Gross, insist the economy is doomed without a concerted federal rescue of underwater homeowners? Good question.
… Proponents say a bailout would benefit all homeowners, halting foreclosures and propping up prices. But it wouldn’t. Even by the generous reckoning of the Congressional Budget Office, only a small fraction of the soon-to-be-foreclosed would voluntarily take up the House plan or Monday’s proposed Senate version on its offer.
Of course that overlooks the possibility of a concerted effort by mortgage investors to get their worst customers into the government plan, which would pay 85 cents on the dollar for mortgages now selling for 50 cents or less. True, the House bill gamely seeks to exclude speculators and homeowners who lied about their incomes. But an ill-equipped FHA would be a sitting duck for lenders who tacitly permit nonpayers to remain in homes just long enough to pass the bag to government.
… Data may show the first national home-price decline since the 1940s, but housing markets are local, and virtually every local market has experienced housing booms and busts at some point. Plenty of homeowners have had the experience of being underwater on their mortgages (show of hands here) without walking away – because they didn’t take out more loan than they could afford to plant themselves in communities that now appear to have little future.
We’re what, halfway into this mess, and have yet to see dramatic problems, right? Certainly, no “depression”, contrary to the predictions by some well-respected economists.
Get back to me in six months. If things have worsened, we can talk. Until then, everyone just needs to sit tight.
Source: Why a Housing Bailout Won’t Help – By Holman W Jenkins, Jr., The Wall Street Journal
