- 200 million dollars to expand counseling programs for those at risk of foreclosure
- 10 billion dollars in tax-exempt bonds for local housing authorities to refinance subprime loans.
- 4 billion dollars in grants to local governments to buy foreclosed properties.
- 15,000 in tax credits for the purchase of foreclosed homes currently sitting vacant on the market. (NYT 4/2/08].
My basic problem with legislation of this sort is that I question whether it will really help those who deserve assistance the most - poor and working class families that were suckered into taking on mortgages that they really couldn't afford. Instead, it seems like a gift to the irresponsible banks and mortgage companies that pushed subprime loans in the first place, since they are not really being asked to take serious losses for their risky behavior.
With the exception of the first proposal, which has some merits, the legislation being offered will ultimately do nothing more than fuel another round of speculation in the housing market. Haven't we had enough gambling already in the housing market? Do we really need vulturous housing speculators to try to profit yet again from the misery of beleaguered homeowners? Aren't these many of the same people who brought on the housing crisis in the first place?
I have two additional - and prehaps more fundamental - problems with legislation of this sort: first, it makes prudent taxpayers, who have done the right thing by living within their means, foot the bill for those who were reckless and irresponsible in their behavior. Most Americans are hardworking and live fairly frugal lives, usually purchasing homes that they can reasonably afford given their levels of income. Many of these noble creatures probably would have loved to have been able to move into more spacious homes in more attractive communities, but recognized the imprudence of stretching their resources too thin. In short, these people, who ought to be rewarded for their fiscal responsibility, would actually be punished by having to bail out their recklessly selfish neighbors.
Second, the legislation being proposed fails to recognize a basic problem with the American economy that everyone is afraid to acknowledge--namely, that it is fundamentally unsound and needs to be dramatically reformed if it is to survive in the 21st century. The kind of freemarket capitalism that we advocate here in the U.S. is almost exclusively focused on short-term (i.e., quarterly) growth at the expense of long-term economic sustainability. In order to achieve the exorbident levels of growth that corporations have come to expect, Americans since the 1970s have been conned into spending more and more of their disposible income on crap they don't really need. Once Americans went though all of their savings to buy bigger homes, flashier cars, and more stylish refrigerators, multinational corporations had to figure out a way to keep them consuming when the logical thing for Americans to have done would have been to reduce consumption and pay off their debt.
This is where cheap credit came into play - mainly in the form of easily attainable credit cards and home equity loans. But now Americans have been driven into the highest levels of personal debt since the depression, and they can't tap into the equity in their homes because they are worth less than they paid for them.
In short, the "hens have come home to roost," and the result must inevitably be a collapse of our finacial systems, one of the most severe recessions that we have seen in some time, and large-scale suffering for the most vulnerable Americans. The very nature of American free-market capitalism necessitates this end. Pray to whatever gods you worship for deliverance, but nothing short of a miracle will save our economy.
I am convinced that there will be an economic melt-down during the next few years. But that doesn't mean that everyone need suffer equally. Those Americans who have practiced the art of voluntary simplicity already know how to survive in a world where goods become more expensive, jobs more scarce, and earning more meager. Those who know how to live happily with less will do just fine. And one positive thing that could come out of this economic crisis is that even more Americans will come to the realization that the consumptive lifestyle neither brings happiness nor peace. Rather than looking at the housing crisis as an unmitigated disaster, then, we should perhaps begin to see it for what it really is: a golden opportunity for all of us to reconsider how we our living our lives and take the necessary steps to live more simply and sanely.