Extortion!

For those with long memories, back in the 1970's conservatives would bristle at arguments that there should be support for the poor because otherwise the sick/unemployed/disenchanted would make life miserable for the rest of us. They would say that's "extortion" and not a legitimate argument (by their lights).

Well, look what they are saying now. John McCain on MTP:

MR. BROKAW: Let me ask you quickly about your $300 billion bailout of, of mortgages.

SEN. McCAIN: Hm.

MR. BROKAW: Some people have said, look, if there's a homeowner out there who's done the irresponsible thing...

SEN. McCAIN: Mm-hmm.

MR. BROKAW: ...and a bank is looking at that foreclosure and saying, "Hey, I don't have to work this out. I can just get the government to pick it up," why should a taxpayer in Waterloo, Iowa, or in Akron, Ohio, have to subsidize somebody who has done the dumb, wrong thing?

SEN. McCAIN: Well, in simplest terms, if their neighbor next door throws the keys in the living room floor and leaves, then the value of their home is going to dramatically decrease as well.

A Washington Post editorial this Sunday:

... there are legitimate social and economic reasons to limit foreclosures. Foreclosures not only cost families their homes, they drive down the property values of whole neighborhoods.

A broad [foreclosure rescue] plan might prop up house prices generally, at the cost, financial and moral, of putting taxpayers on the hook for borrowers who could make it on their own. A narrow plan would be fairer to taxpayers but lift home prices only modestly.

The Hope for Homeownership program, which went into effect Oct. 1, was also probably oversold. It offered $300 billion worth of federally guaranteed refinancings for borrowers who met certain eligibility criteria. But since it also required both borrowers and lenders to take a financial "haircut" in return for the help, there may not be many takers.

Which brings us to the notion sketched by Sheila C. Bair, chairwoman of the Federal Deposit Insurance Corp. She suggested last week that the government set out a standardized loan modification package for loan servicers to follow, enabling them to do workouts faster. In return for their picking up the pace, the government would guarantee some or all of the newly modified loans. By offering a strong material incentive to lenders, Ms. Bair's concept addresses one of the weaknesses of previous proposals.

posted by Quiddity at 10/26/2008 05:54:00 PM