Rick Santelli is a CLOWN

[trefoil]

Willem Buiter, a professor at the London School of Economics, makes Santelli's case AND digs into the mortgage interest deduction and its effects, in this post on his blog:

Home loans in the US: the biggest racket since Al Capone?

Of course, being as how he's from London, he makes it sound all classy & sh*t.
Anyway, some pretty good points to chew on in there. My point in this, um, gentlemanly discussion he gets into in this bit:

Why do politicians of all political colours and parties get their knickers so twisted about people losing their homes? In the case of the Tories in the UK and the Republicans in the US, the answer is obvious. Both parties believe that home owners are conservative. Not it the sense that people who are inherently conservative are more likely to become homeowners (although they may believe that as well). This is not a selection story but an osmosis story. Home ownership makes people more conservative. So both Tories and Republicans do everything they can to encourage home ownership.
But so do (New) Labour in the UK and the Democrats in the US, so it’s no longer a left-right thing.
The one argument for encouraging home ownership that makes sense is that owner-occupiers look better after their property and its immediate surroundings than would a tenant. This is a simple principal-agent story where it is costly for the principal (the owner) to monitor the care and attention the agent (the tenant) bestows on his property. Add some neighbourhood externalities (I don’t want to live next door to a place where they don’t mow the lawn or paint the exterior of the house), and you have an argument for encouraging owner-occupancy, say by subsidising it.
The US does not encourage owner-occupancy directly, say by paying each head of household who is an owner-occupier, a given amount of cash each year. Instead it encourages and subsidises a particular form of borrowing, regardless of what that borrowing is spent on. Funds, after all, are fungible. I can withdraw equity from my house by taking out a first or second mortgage against it, or by increasing the size of an existing mortgage, and spend the proceeds on Cuban cigars.
All this is rather insane. Through the deductibility of mortgage interest from taxable income, the US tax payer gives vast subsidies to borrowing secured against a particular type of collateral - residential real estate. What so special about this borrowing and this collateral? Fortunately, the UK has abolished this boondoggle. In the US, other forms of preferential treatment for home ownership are piled on top of the mortgage interest-deductibility.
Over half the stock of home loans, and virtually all new home lending in the US are heavily subsidized by the lending and guarantees of Fannie Mae, Freddie Mac, Ginnie Mae and assorted aller smaller government agencies. The direct interventions of the Fed and the Treasury in the market for residential mortgage-backed securities, announced as part of the credit-easing policies of the FEd represent further quasi-fiscal subsidies to housing finance. This is on top of the creation by the Fed of at least a dozen facilities that accept RMBS as collateral for Fed loans in the earlier stages of the financial crisis. All these quasi-fiscal interventions by the GSEs and the Fed are deeply non-transparent as regards the magnitude of the subsidies involved. They also evade the normal scrutiny and accountability to Congress that is associated with explicit subsidies by the Treasury.

Also, not to commit the violation of engaging in reasoned discussion in the middle of all this bomb-throwing, but there are three parts to the Obama plan:

1 - Allowing folks whose homes are nearly or completely underwater to refi to a lower rate without bringing down the principal.
2 - Handouts to folks to make their payments, basically.
3 - Restructuring mortgages.

I can't find a problem with the first part. (yes, I'm a socialist pig. Sue me. If, on the other hand, anyone wants to ask nicely why, I'll explain.) Third part is a case-by-case kind of thing. Second part is just crazy.

 

[Landis82]

Quote from IluvVol:

LOL, I heard about it.....so...wait....I just fail to understand how you now link CDS markets up with the current problem that we have, which is consumers who lived beyond their means and people who should have known they get into trouble when their assets will lose in value, something that SHOULD HAVE BEEN taken into consideration.

I'm sorry, but were you not the poster who said,
"STOP with your ridiculous derivatives blame"???

And you don't think that the CDS market has had any effect on the current state of our frozen credit markets and banking system? If those derivatives aren't the problem, then why did the market take a big dive when Lehman went under? Why did the federal government "loan" AIG $145 Billion?

In case you've been living in a cave the past week or so, the MAIN point of the Barron's Plan or the Administration's Housing Plan is to help the BANKS.

Why are the BANKS the center-piece of Tim Geithner's work right now?

Simple.
The CREDIT MARKETS ARE THE KEY and they need to be unfrozen in order for the Economy to stop contracting.

You keep talking about the consumer who overpaid, or bit off more than he could chew, but that is a smaller portion of the pie.

Feel free to do the math.

 

[Trader666]

That's what this thread is about, you dimwit.... Santelli's rant in response to Obama's plan to bail those losers out.

Quote from Landis82:

You keep talking about the consumer who overpaid, or bit off more than he could chew, but that is a smaller portion of the pie.

 

[Landis82]

Quote from Trader666:

That's what this thread is about, you dimwit.... Santelli's rant in response to Obama's plan to bail those losers out.

Duh.

And why does the Obama Plan seek to bail-out the home buyer who bit off more than he could chew? Try turning on your BRAIN and thinking up the "food-chain" another level or two.

Duh.

 

[Trader666]

No, you engage your brain if you have one. The abdication of personal responsibility is NOT in our country's long term best interests... only naive liberals and/or people needing to be bailed out drink that koolaid.

Only in America would we reward fraudsters and the irresponsible in the name of the "greater good" by bailing them out with money our children and grandchildren will have to repay.

People used to sacrifice so future generations could lead better lives. Now we steal from future generations to underwrite our mistakes, hoping it will make our lives undeservedly easier.

Quote from Landis82:

Duh.

And why does the Obama Plan seek to bail-out the home buyer who bit off more than he could chew? Try turning on your BRAIN and thinking up the "food-chain" another level or two.

Duh.

 

[zdreg]

beggar thy neighbor like the 1930's is back gain. instead of between nations it is within country. people who made bad decisions in investing in their homes are asking the gov't to force other people particularly renters to bail them out. why should renters bail out homeowners?

 

[IluvVol]

Be my guest to blame CDS markets for frozen credit markets. Thats pathetic to say the very least!!!
To remind you

a) credit is frozen because cash is precious and nobody is willing to EXTEND credit at this moment
b) The market sold off after Lehman NOT because some banks/funds suffered losses from the Leh bankruptcy but because the trust in the system was shattered and a major financial institution was allowed to fail for the first time in this crisis. Consensus among financial professionals is that this should have never happened, that the govt should have stepped in similarly than what they have done for AIG/BS.
c) The govt loaned money to AIG because they made bad investment decisions (only a small part of those bad investments can be traced back to CDS positions) and a failure of AIG would again have had an even larger effect than the Lehman failure.

Banks <> CDS, just for your information.

Quote from Landis82:

I'm sorry, but were you not the poster who said,
"STOP with your ridiculous derivatives blame"???

And you don't think that the CDS market has had any effect on the current state of our frozen credit markets and banking system? If those derivatives aren't the problem, then why did the market take a big dive when Lehman went under? Why did the federal government "loan" AIG $145 Billion?

In case you've been living in a cave the past week or so, the MAIN point of the Barron's Plan or the Administration's Housing Plan is to help the BANKS.

Why are the BANKS the center-piece of Tim Geithner's work right now?

Simple.
The CREDIT MARKETS ARE THE KEY and they need to be unfrozen in order for the Economy to stop contracting.

You keep talking about the consumer who overpaid, or bit off more than he could chew, but that is a smaller portion of the pie.

Feel free to do the math.

 

[Trader666]

Don't waste your time. Landis82 is confused. Ask him for advice on "FICA" scores LOL.

 

[burn8]

Quote from Trader666:


People used to sacrifice so future generations could lead better lives. Now we steal from future generations to underwrite our mistakes, hoping it will make our lives undeservedly easier.

This is the main issue here. It's stupid, but fine if people want to blow their own futures in this mess, but leveraging our grandchildren's futures is immoral.

These apologists refuse to address this issue. Anything as long as the value of their home doesn't go down. Regardless, these fixes will fail anyway.

-burn8

 

[PohPoh]

Quote from Landis82:

Absurd.

If you in fact were an idiot who actually paid an inflated price, and can afford to keep up with your mortgage, there will be a larger nicer house in your future as prices decline and you can upgrade...





Look, an idiot who overpaid for his house BUT can afford to keep paying for it will be able to upgrade after prices fall 80%...

He bought a 500K house instead of the Million dollar house...
at the end of the day the 500K house is selling for 100K and the million dollar house is selling for 200K, and so he should be able to upgrade into the former million dollar house no problem (so long as he still has a job and can keep up with his current payments).... It's only 100K more rather than 500K more...