The Somewhat-Jaundiced View from Sunday

It took a while, but I think I've finally found someone more irate about the financial crisis and proposed "rescue plan" than I - my daughter.

Her anger is based on a part of the proposed plan I hadn't heard about yet and still haven't been able to verify...one which would permit homeowners who bought property they couldn't afford with variable-rate mortgages to refinance their mortgages at a lower, fixed rate based on the new, depressed value of their property. For instance, someone who bought a home for $650,000 at a variable rate could now refinance the new value - say, $300,000 (not a stretch around here) at a lower, fixed rate. Essentially, they'd get $350K worth of free house.

If this is accurate (and, again, I haven't seen it anywhere myself), I also think it's way beyond fair. Even if these homeowners were sold a bill of goods by unscrupulous lenders who sold them loans they knew the people couldn't afford, what message does this send to the people like my daughter who purchased less-desirable homes in less-desirable locations because they knew it was what they could afford? We could now see people who overreached (for whatever reason) being rewarded for their fiscal stupidity while those who were smart and managed their finances wisely becoming the big losers.

If it turns out to be accurate, it'll just add another few degrees to the top end of the anger meter.

This morning Mike offers a collection of editorials he's culled from various papers, some of which are quite good. This is a quote from one of them that appears to scratch my daughter's itch:

"...The government should buy selected batches of these loans at 25 cents on the dollar. These loans then should be examined individually. For any of those in or near default, an attempt should be made to renegotiate the terms of the loan based on the buyer's ability to service the loan. New terms should be established as follows: The principal should be established at the higher of the current appraised value of the home or 85 percent of the paid-up balance of the original loan; fixed interest rate no lower than 5 percent; and terms not longer than 40 years. If these conditions cannot be met, foreclosure would be the last resort" (italics are mine).

According to CNN this morning, a bailout deal is apparently near despite Senator McCain's meddling on Friday that tanked an earlier plan. Based on the contents of the article, it's probably about as good a plan as a Congress as screwed up and cowardly as ours is likely to approve, but I still have a major problem with it. Here is an excerpt from the CNN article:

"...Under the tentative deal being finalized, the rescue program would be overseen by a board including the Treasury Secretary, Secretary of Commerce, head of the Securities and Exchange Commission and chairman of the Federal Reserve...".

Now, correct me if I'm wrong, but are these not the same people whose lack of oversight and management of the economy helped get us into this mess in the first place?


I remember the Savings and Loan meltdown in the 80's. I wonder what kind of mess we're laying the groundwork for another 20-odd years from now.

Have a good day. More thoughts tomorrow.

Bilbo