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It is in the prosecution of some single object, and in striving to reach its accomplishment by the combined application of his moral and physical energies, that the true happiness of man, in his full vigour and development, consists. Possession, it is true, crowns exertion with repose; but it is only in the illusions of fancy that it has power to charm our eyes. If we consider the position of man in the universe,—if we remember the constant tendency of his energies towards some definite activity, and recognize the influence of surrounding nature, which is ever provoking him to exertion, we shall be ready to acknowledge that repose and possession do not indeed exist but in imagination. - Wilhelm von Humboldt, The Sphere and Duties of Government (The Limits of State Action) (1854 ed.)

Thursday, October 2, 2008

My understanding cont.

my good friend corrects me, we should not be bailing out the banks at all.

I came up with the "dollar-for-dollar" solution mostly because I thought it was reasonably pragmatic: I just can not imagine Congress not paying off the bankers and financiers that they whore to. But as it says right here on this blog: Everything revolutionary is impractical: I should have been more revolutionary! I will endeavor to be next time.

And little did I realize that the solution is not completely stupid:
Glenn Greenwald documents a number of "real" economists suggest simply buying the "toxic" mortgages: A bailout for the little guy. Glenn also provides a number of links to other solutions.

Glenn's post is not really about solutions though. It is about the media -- specifically one award winning journalist: Steven Pearlstein -- who just can not stand the little people having their say. You should read it.


checkman said...

While I don't like the "dollar-for-dollar" solution for reasons already stated, I respect you for proposing creative solutions. That is exactly what's needed here -- calm, rational debate. Instead, the Administration, the Candidates, and most of Congress is pushing fear and panic, and wildly throwing vast sums of money around.

I don't like the idea of simply buying the toxic mortgages at their face value, and not expecting the mortgage holders to pay any of it back. That rewards the people who offered and accepted these loans at sub-prime rates and on other speculative terms for their irresponsible behavior.

On the other hand, most of these toxic-mortgage-holders should perhaps receive *some* governmental assistance because they were most-likely caught by deceptive practices of the banks.

I would support a solution that would authorize the government to offer to buy the mortgages at a fair value (not current market value but something like 75% of that). And then give the mortgage holders the option keeping the existing terms, or accept new terms that are more friendly (lower fixed rates). This would encourage these people to pay them off.

I think *all* mortgage-holders should get some kind of break, if they are trying to sell their house, and it can be shown that their house is currently over-valued.

Additionally, we need other solutions put in place to help with the unemployment problem, so that all mortgage holders can continue to make their payments, and find another job soon. I'm talking about temporary assistance, and measures to stimulate small business growth and community revitalization.

This is all based upon the assumption that further regulation of the financial industry would be forthcoming in the next few months.

Solutions like these would encourage housing prices to fall to more reasonable levels, while helping everybody on the way down, and would hopefully help to prevent this from happening again. And yes, everybody would have to pay some of the cost, but it would be far less than $700B, and the economy could be kept reasonably stable in the meantime.

checkman said...

I am using "mortgage holder" incorrectly. So, in my previous comment, replace all occurrences of that with "home mortgager" (a person who is trying to buy a house). I was trying to deliberately refrain from saying "homeowner", since if you have a mortgage, you don't own your home. Poor choice of words on my part. Sorry for the confusion. Bleah.