Penalize THEM. THE GREEDY THIEVES.

As you know the Feds already subsidize homeowners via the Mortgage interest deduction.

Would it not be easier, quicker, safer and a more ‘populist’ political act to simple adjust our tax laws so that, for example, for the remainder of 08 & 2009 a married-filing-joint couple with an adjusted gross income of under a quarter million could replace their current mortgage interest *deduction* with a sliding-scale 50 to 90% mortgage interest ‘refundable credit’.

While insufficient to assist some unemployed folks who couldn’t make payments regardless, for most struggling middle-class citizens the promise of a fat IRS refund in April would provide a huge incentive to *make their mortgage payments* as well as provide incentives for new home buyers.

End result = fewer mortgage defaults, bank stock values soar, home sales skyrocket and the Federal subsidy to eliminate this problem goes to millions of individual taxpaying families rather than to a relatively small group of already wealthy gamblers…

Your thoughts ??

The point is not that I shouldn’t have to pay for anything. The point is that I’m not happy about having to pay for this breakdown, and your suggestion doesn’t make me any happier. Either way I’m paying for someone else’s foul-up, and I want to see more punitive measures in here. Someone needs to go sit in the corner over this, and it doesn’t look like anyone will.

1) Bail out lower on the pyramid and the transaction costs become enormous. More money is spent valuing assets/investments to purchase (rather than bundles of assets), purchasing assets, and selling assets — and less money is injected straight into the financial system.

2) The Paulson plan is not to invest up to $700B, not spend that much outright. So, hopefully the Fed will make some — or perhaps all — of its investment back by re-selling the troubled investments later. By contrast, money simply given to homeowners would never be recouped.

I don’t think these problems ultimately are fatal to your idea, because it’s just SO the right thing to do. (Talk about promoting “the onwership society”) But it raises the price.

If you want to stabilize the mortgages – at the bottom end of the pyramid – it’s pretty straightforward: get these improvident people out of whatever horrific terms they have on their current mortgages and refinance them into 50-year fixed-rate terms. (With one exception to the fixed rate: they get a lower rate at such time as they achieve 20% equity in their homes, but it doesn’t change the monthly payment, only shortens the term.) No discounts – they eat the difference between the original mortgage and the current value.

This gets them on a stable basis, with a predictable monthly payment and no unpleasant little reset surprises. It also gives them an incentive to hang in there and get their equity up to a nice respectable level as soon as practical. They pay a price for having bought more house than they can afford with the much longer term, but they get terms that let them keep the house, and their credit rating isn’t screwed. If they’re underwater, they’re paying for nothing for a while – but they’d be paying rent anyway, so that’s a wash.

The homeowners get to keep their houses and have a predictable budget item, the asset stabilizes so the mortgage holders are in better shape, people who were responsible and therefore did not buy too much house don’t get screwed by taxes… I’m not sure why no one has done this already, actually. Is it legal?

Professor Wildenthal’s argument notes that the government is _already_ suggesting a wealth transfer of up to almost a trillion dollars, from taxpayers to large banks. He’s suggesting that if we’re already discussing transfer (to banks), it may make sense to transfer to individual home owners instead.

As for the “why should the responsible homeowners bail out irresponsible homeowners?” question — well, for the same reason that Bush-Paulson are suggesting that responsible homeowners should bail out irresponsible bankers. If the crisis is sufficiently large, it could affect everyone. (Just as responsible, fire-code-abiding taxpayers subsidize the fire trucks that put out fires at non-code-abiding buildings, because it’s better to do that than to let the whole city burn down.)

That’s rationale may not be convincing for some critics, but it’s the rationale behind the original Bush-Paulson plan; and it’s a rationale that equally supports Prof. Wildenthal’s proposal.

Surely you jest. Subprime deadbeats do not earn enough to *pay* federal taxes. Your idea is nothing more than a huge transferral of wealth from responsible citizens to irresponsible citizens who used their houses like ATM machines and bought BMWs, boats and vacations.

As a mortgage broker, I saw it all. People with 520 credit scores making $35k a year driving around in new Beemers while I’m driving a ’97 Tercel. And now you want to take food out of my kids’ mouths so I can bail-out the deadbeats by paying their bills? Good grief.

Boo-frigging-hoo. They should all lose their homes.

Here’s a novel idea: how about everyone, from Wall Street bankers to subprime deadbeats, be held accountable for their own decisions and live with the consequences of their actions. Too much to ask?

- – -

“Progressive” thought cascades from one central paradigm: those that live within their means are suckers.

No more ARMs/balloons and it forces a writeoff of the bubble. Also rewards people, like me who are current.

You have to be a Democrat.

The underlying weakness in the financial system comes from illiquid mortgage assets that have lost value. These illiquid assets are choking off the flow of credit. Giving $20K each to selected households, to do with pretty much as they like, does nothing to restore the value of mortgage assets or liquidity in the credit system.

You’re going to price us out of the market AGAIN, only this time with our own money.

Thanks.

You people are acting like you’re not going to pay for it *anyway*.

You are going to pay for this debacle whether you like it or not.

It’s the same way we all pay for bad schools, racism, cursing, Britney Spears, obesity, crime, and every other social ill.

- pay the bankers

- pay the home owners

- pay neither right now, and later pay in the resultant 25% unemployment and social disorder.

LOL @ thinking that you can some how opt out.

Like you actually live on self sufficient island, replete with ammunition to keep the hordes out.