Monday, July 10, 2006

The Blame Game


You cannot talk a bubble down, it is an irrational exuberance. You cannot do something to deliberately pop a bubble. If bubbles were subject to rational forces they wouldn't become bubble. Therefor whatever popped the bubble was accidental/incidental and emotionally based. Therefor it was the Democrats who in their disgust with the state of current politics have tried to inflame the passions of Americans by trash talking the entire nation until some people here and abroad actually started believing their rhetoric. Yup, it was the Dems and their lapdog mainstream media buddies.

Alright you didn't like that one. How about:
The markets are busy finding the best use of capital. The stranglehold the Republicans have on the Federal govt has allowed the normal checks and balances to go unattended. The Reps caused the bubble so in effect the Reps are responsible for the bubble popping.

Personally, its all those damn Libertarians on their blogs. Speaking in calm clear rational terms, they have managed to dislodge the emotional content from housing with the enevitable result that people have woken up and are pricing rationally now.

Nope, it was big oil. Think about it. Who is raking in the big bucks? Who was getting $15 and now gets $75 for the same damn thing? Who isn't being blamed for the whole mess? Yep, big oil.

8 comments:

Anonymous said...

come on robert,everyone knows the butler did it!

sm_landlord said...

The Moving Finger writes; and, having writ,
Moves on: nor all your Piety nor Wit
Shall lure it back to cancel half a Line,
Nor all your Tears wash out a Word of it

-- Omar Khayyam

Anonymous said...

Hey Robert,

I've been following your posts over on thehousingbubbleblog.com (I've posted a few times as "ex-Californian"), and most recently the little tiff with weblog.housing.com

I'm curious: If you wrote the laws, what fate would you intend for fucked buyers? Just to keep things simple, assume there was no fraud involved in the person's acquisition of their home, they just happened to buy at the top of the bubble, ignorantly chose a risky loan, and are now in severe financial distress.

Assume you had no control over the law until now, and that you now have complete control.

Rob Dawg said...

Good question Gabe. I think we can work something out. There's no getting blood out of a stone after all. Look what happened with the usurious conditions imposed on Germany after WW-I, we got paid back with WW-II. I'm thinking something along the lines of the Resolution Trust Corp. The RTC wasn't to bail out the F'd S&Ls but to contain the damage. So, the FBs get a new loan from the Mortgage Trust Corp. The terms will be such that they only apply to primary residences and require liqudation of other properties and disgorgement of any equity withdrawn asset purchases. Terms will incude forbiding 2nds and restricting future purchases of non-primary residences. These will be full recourse loans, no turning in the keys. I imagine some form of indexing as well. Finally I think an extended repayment schedule for the tax liability incurred with these writedown loans.

It'll be a way to keep the house but with pain. There's always the alternative of losing the house so don't think I'm being too hard.

Anonymous said...

Interesting--that's more generous then I was expecting, and probably more generous then I'd be. The arguments over "bailouts" had seemed insubstantial; all rhetoric and no policy details. Your actual proposal isn't heartless at all.

One thing that jumps out from your plan is the tax liability. Someone who had to liquidate a second property and take out new loan on their primary residence could easily incur a tax liability that exceeds their yearly income a few times over (if I understand it correctly).

Even with an extended repayment schedule, the tax issue would make bankruptcy a more attractive option for the most deeply f'd buyers. But perhaps that's your intent. :)

Rob Dawg said...

Gabe, see the discussion in April:
http://exurbannation.blogspot.com/2006/04/screw-turns.html

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bill said...

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