A Mortgage Bailout: Is Anybody Else Mad?

I'm with you. I think the current bailouts are needed, but that doesn't mean I'm not holding my nose at the same time. By all means save the economy, and help people ruined through no fault of their own; but if someone took out a crazy mortgage and we're paying a slice of it, when they sell we own an equal slice of any profit they make.

Beyond that, use existing laws to make crooked financiers pay back their bonuses and golden parachutes or go to jail. Strip sleazy mortgage lenders of both their ill-gotten profits and their licenses to sell anything riskier than Bingo cards.

And while we're at it, since election day is coming up, let's throw out the free-market worshiping bums who enabled this whole crisis in the first place.

I agree with you. I am tired of paying for other peoples mistakes. I am annoyed because when people were rushing into these home purchases on interest only or option arm loans, at ridiculous prices. They can all lose their houses, cars, everything now that the bubble burst, it's fine with me.

I agree! But, Mr. Dalloway, the stupidity started wtih Bill Clinton, who (check the NY Times article, 9/20, 1999, please) put pressure on Fannie and Freddie to start this mess. It was NOT Bush, as much as you want to make it that way. You only show your ignorance by your statements.

I couldn't agree more. I feel like I am being penalized for being responsible. Where is the outcry against this by the people? I too passed on buying the bigger house and the bigger mortgage because I knew I couldn't afford it. I even moved an hour away from work because everything closer was too expensive without adding more debt. What really bugs me is that the government (both republicans and democrats, ironically) are moving toward socializing the banking system now, including Fannie Mae and Freddie Mac (which arguably were the source of this problem). They are moving toward restructuring current mortgages (including principal owed to the bank) so that people can afford their homes. What? So if we all wanted the government to help finance our homes, there is a huge incentive now for everyone to default on their homes. Just quit your job, and tell the government you need help. Now tell me how that does not create moral hazard! In the meantime, while all of those lazy and irresponsible people cry poor, I'm busting my butt to earn a good living and now in effect I'm paying for these other people too. If I'm going to get socialism, I might as well move to another country where at least the taxes are lower! It's just terrible how we have mortgaged the future of this country to save the irresponsible few. We are creating a big debt burden and an even bigger inflation problem down the road...

Comments showing both sides of the issue should be aired...

Here's the flip side. Since Hurricane Katrina hit in August 2005, we had to rebuild and refinance our home, as did many of our neighbors. We lost 80% of everything we owned in the storm. We did have homeowner’s and flood insurance, but replacing nearly everything at today's prices has been daunting and expensive task. I have had several surgeries and fortunately, my husband was not a part of the 60% of the employees who were let go after the storm. Others were not so lucky. We were blessed; our ARM reset this year lower then the pervious year, but our homeowner's insurance increased by 55% and our car insurance by nearly 40%. Then, two weeks ago, we were notified that our property taxes were increasing by 50%. When the next adjustment in our ARM comes in the spring of '09 we might be adjusting to a move from this house and region of the country. By the way, our neighbor lost her job after the storm, then her house. Others never came back. The broker who sold my neighbor's house right before it was to be auctioned, and asked our underemployed neighbor to bring $2,000 to the closing. Obviously if they had the money, they would not have lost their house it in the first place. They did not have the money and lost the house. I don't think everyone needs a handout, just maybe a break.

I agree, too. I'm also tired of paying for other peoples' mistakes. I say ANYONE or ANY ORGANIZATION that gets bailed out by my hard earned tax dollars should only be done by granting an equity interest in the bailed-out property/corporation. And yes, eliminate all the over the top corporate bonuses and golden parachutes. I worked my tail off last year and earned a bonus of approx. 25% of my meager salary. This year I'll be lucky to see total bonus income in the 2% range, if that. But even with the huge hit to my income, I'm living within my means and carry only a mortgage and the 5th year of a car loan as debt. So yeah, if my tax dollars are keeping you in your house, I want a piece of the action. It's better than being on the street, isn't it? And I want a BIG piece of the action for all the banks, brokerage houses and other corporations run by greedy, shortsighted fatcats. They should get NO salary, NO bonus -- and be happy they don't all end up in JAIL, which is where many of them belong. The government can sell off these assets later, when times are better, and we can all see a tax rebate, or major projects funded with no additional tax $$. How's THAT sound??

At first i believed them (Paulsen,Bernanke,et al) that we must bailout these losers because if we don't we all will pay big-time. Well, in the context of all the other mega-bailouts, i think we (joe&jane middleclass)are prepared to take the ripple-effect from letting at least these losers (ie:sleazy-mortgage lenders & the idiots who played along)to take the heat). Like many others (Mr. Dalloway, Dan, and many other debt-averse citizens) we're prepared to handle a bumpy-ride just so that we see justice is served.

When a bank takes back the house, they
keep the down payment, and the years of equity/ payments that were made during the time of ownership. When the law
exempts the bank from capital gain tax
the robber barons profit. Anyone else
would pay capital gains if they "flip"
a house. Lets change the laws and tax
the bank profits, so that the banking
profits can refuel the economy.

I too am furious! Everyone - including economists who continue to say "I didn't see it coming" obviously never opened their eyes. Signs were everywhere. Anyone who had even a fundamental understanding of finance could see that what was going on was unsustainable and in many cases, criminal.

So, lots of people who believe in being responsible sat it out. They did not take out loans beyond their ability to pay them back. They did not buy extravagances they could not afford. They waited, because they knew that in a fair, capitalist society - what goes up, must come down. They knew that eventually they could upgrade when all those who acted without any thought were flushed out of they system.

And there's the twist. Instead of being rewarded for their ethical, prudent behavior - they instead are being punished. They are having to bail out the same individuals who caused the chaos. And to add insult to injury, they will have to stand by and watch those others who acted irresponsibly, get special deals and perks that they, because of their good behavior, cannot qualify for.

Wake me up from this nightmare.

The bailout is maddening. Banks now have the money they need to cover they're butts, but it leaves the homeowners high and dry. Some people may get relief but is that enough? What about holding lenders accountable for the poisonous loans they flooded the market with.
It's sick.

I totally agree with you.

My wife and I have been struggling to save enough money for 20% down payment since we got married. But after paying rent, insurance, gas, utilities, etc, not much left for savings. House price is still way too high. Please do not bail out the irresponsible home buyers and just let the price drop to the reasonable level.

We rented instead of buying. Where's our bailout? Bailling out speculator-homeowners prevents the necessary downward adjustment of housing prices to a level where they should be based on incomes.

Question: Should the markets "deflate" to prices that debt-free people feel good about OR should market prices get government support for people who can only buy on margin and need credit?

Is the operative expression is "want" credit rather than "need" credit? Perhaps the answer is found in the old rule that "banks only lend money to people who don't really need it".

I am debt adverse, sold near the top, and don't owe a penny. As I sit on cash and consider buying, not only do I think homes still look too expensive for me, what about my 15 year old? Should he have to face the future result of these inflated prices when he enters the market?

I completely agree with the writer of the article. Why should taxpayers who lived within their means bail out anyone or any company. I dont really want to bail out the mortgage industry, the auto industry, the retail industry or anyone else. Bailing out those who were not responsible, or took risks they should not have only encourages the same behavior by others. There are really very few situations where individuals/companies could not avoid the risk...do you live in a hurricane-prone area? Maybe you should move if you don't want to suffering the consequences of a hurricane. Are you overweight? Maybe you should think about the personal and financial costs of being overweight. Do you smoke? Maybe you should consider the risks of having lung cancer. Don't get me wrong - there are things that happen unexpectedly, but they are rare, and in these cases we (our communities, government) should help. But...perhaps we should start living more responsibly rather than expecting others to bail us out.

I agreed, don't understand why we got punished by being responsible. Now, with Obama being the new president (scared), most of the reader liker you and I have to let the BIG government to spread our hard earned wealth around. When this going to end?

I've posted this comment elsewhere but it bears repeating

The WSJ had an excellent article (of which the link I was unable to find) about a simple yet effective solution. Once a house if forcloused instead of kicking out the family allow them to live there as rentors (paying market rents) 5 years or so later they can purchase the house at market value after saving up a decent downpayment

The concept of money management is lost among Americans of late. College campuses allow credit card companies to prey on their own students, many who graduate with thousands of dollars of debt. Now, when mortgage companies create "new products" they're only doing the same to potential home owners - only this time it means losing a home, not trashing a credit score. When legislators allow sound business practices to be overruled you can expect trouble. Regan said it best, the scariest thing you could ever hear is "we're from the government and we're here to help."

Maybe I should take out some home equity loans so I can finance a vacation to Cancun, a cruise around the Caribbean, some new living room furniture from Ethan Allen, a new BMW for me and the wife ... and then I can ask for a bailout too.

Mad as hell!

Thanks for the thoughtful comments. To the writer from New Orleans (where my family and I volunteered for the rebuilding effort), as I said I think we must be compassionate toward people who end up in danger of losing their homes through no fault of their own. There seem to be no easy solutions, but many ideas on the table.

I don't own any real estate, and I don't think I will for quite some time.

Since the birth of my son four years ago, I've seen our "down payment" fund dwindle to pay for seven of my son's surgeries. Even with insurance, our out-of-pocket expenses exceeded $100,000. It never dawned on me or my husband to take a mortgage we couldn't afford!

So, yes, I'm pissed that people who took on much more than they could pay for get to live in their nice McMansions while we are smooshed into a New York City apartment with only one bedroom and three closets.

I think your anger is misdirected. It's not like they are getting off scott free. I've been in negative equity and it isn't pleasant.

More to the point, what people really need to be angry about is the fact that the bankers who created this whole mess are walking away with millions of dollars. Wall Street rewards failure as much as success.

I read today in the WSJ that Golden[sic] Sachs is getting $10 billion from the government and is giving away $11 billion in bonuses.

AIG is planning on giving the very people who ran the business into the ground 100s of millions of dollars in bonus.

They have absolutely no shame!!!!!

Yeah, the mortgage bailout idea is annoying; I work hard to pay my bills and my mortgage and I feel that if anyone should get a breather it's those of us who have been pulling our own weight... -B

Whatever assistance is made available should be limited to the amount of the downpayment.
Those wirh 100% financing have incurred no monetary loss beyond what they would have paid as renters.

If I want to bribe a politician to give me lots of money after I make massive errors which were either unethical or terrible for the environment, do I have to hire a lobbyist?

You bet I am mad. My brother in-law and his wife bought a house 4 years ago and we could not figure out how they bought such a large home and had all sorts of fancy things. It blew our mind and to top it off they rubbed it in our face every chance they got.
So he gets himself fired and now is on welfare. It is no wonder I can't afford to buy a nice home, I am paying for everyone else's! ERKS me to no END!

I can't stand it. Me and my husband have worked our butts off keeping our finances under control. We have been beyond frugal with our spending. And now we have to pay for all those people who didn't. The one's who took the credit and misused it. This is a travesty, our efforts and the work we did was wasted, now we have to pay others dept. I hate this, we still suffer every day being middle class. Our hopes and dreams are now being taken. My family will now suffer because of the credit companies. The credit companies extended credit to people they knew couldn't pay it back. They're still doing it. I receive at least 5 cards a week extending me credit. They would give it to me in a second even though my budget does not allow any more spending. We are forced to live paycheck to paycheck balancing our budget in this troubled time. We are still recovering from the gas, grocery, and insurance inflation of the past several years. Stuck on the income line of no help and can't get ahead. We don't qualify for any government assistance. There will be no aid for us, we are just paying off the bill. How horrible is that, what a great future my family has to look forward to.

if the gov bails out anyones morg with a across the board rate decrease for everyone then all of us hard working tax paying non welfare recieving citizens need a good class action suit