The Housing "Crisis"

Our friends on Capitol Hill, in collusion with the Secretary of the Treasury and the President of the United States, have acted to address the housing crisis (or more appropriately, the financial crisis within the housing industry). I cannot even begin to address my disappointment with this bill and the conditions that necessitated its creation. So I'll let a friend's email to me speak to it:



"I’m a little surprised President Bush is going to sign this. I’ll tell you why I don’t like this one. When I signed (in about 30 different places on as many forms) my mortgage papers at closing, I gave my word that I would do all the things in the contract or risk losing my home (or more precisely, risk losing my ability to live in the home my bank owns and allows me to inhabit as if it were mine). So did everyone who bought a house. Even the ones who bought a house between January 2005 and June 2007, the period for which this bill applies. I am also guessing that nearly every person who bought a house had the opportunity to achieve sufficient education to be able to read what he or she was being asked to sign. My mother is one such person who did just that). My mother lives on a very modest retirement income. My mother lives within those modest means by making decisions that enable her to keep her word to the lender with whom she made the contractual agreement. And, yes, like many, she has had some unexpected expenses about which she was too stubborn to tell her children who could help her, and which she covered by going without medication for two months and by not driving her car and staying home except to go to church. She did that because the thought of defaulting on her promise to the lender was just not an option in her mind. She pays her taxes on time and in full every year. Yet those who signed their contracts with lenders either without reading them or with no appreciation that it was a written promise TO BE KEPT NO MATTER WHAT, those people will, courtesy of our elected officials in Washington, and after infrastructural pass through costs, get my mother’s taxes to get them out of their “unjust” mortgage arrangements. I know my critique of this bill may sound, may even be, cold-hearted, but if the Federal Government rewards that kind of behavior, will this nation, this culture ever lift itself out of its addiction to credit? Is it going to take another all out depression to change us? It’s as if the Declaration has been rewritten to include “…life, liberty and immediate gratification”. I’d say we are a nation of whiners but that didn’t work out too well for the last guy who said it."



Ok, back to my words now...sorry about the font shift, can't fix it. I'm actually not surprised the President is going to sign this bill. He's the "compassionate conservative" and gosh, isn't this bill so very compassionate? He's also the "ownership society" President, whose late 19th century view of man, land and dwellings has accelerated this incredibly selfish march into fiscal insolvency.

A couple of thoughts: home ownership as an investment is over-rated, especially when the average American homeowner has 60% of his wealth tied up in his home equity. This is not "diversification" and as the decline in housing prices has shown, this does not make fiscal sense.


The mortgage interest deduction is counter-productive, convincing people that they can have more house than they can possibly need or afford under the guise of "getting it all back" at tax time. The problem comes in meeting monthly obligations waiting for that IRS check.

I've come to decide that there should be a cap on the home mortgage interest deduction, to say, $15000 or so. After that, no one cares how big your mortgage is and the size of your house should not have an inversely proportional impact on your tax bill.

Finally, the whole "bail out Wall Street but not Main Street" crowd has got it all wrong. Of course it is a shame if a lot of people are foreclosed upon. Horror of horrors, they'll have to rent somewhere until they can get their acts together. If the big banks fail though, the whole economy slides into the tank. There just is no real comparison here.