THE New York Times ran a front-page article Friday on the suffering of heavily mortgaged Americans in the wake of the housing bubble's bursting. It was a textbook example of how to pitch a new entitlement. But the real surprise was the public reaction to the ambitious taxpayer-financed bailouts the Times suggested.
Congress and the White House are considering a few such bailout plans, the paper reports. One would create a new federal agency to buy up mortgages from investors at cut-rate prices and slash homeowners' debt. Another would entice mortgage lenders to reduce debt on their own, in exchange for a federal guarantee on the balance.
The programs would target the nearly 9 million households who owe more than what their homes are worthbut that number could grow substantially as the housing market keeps falling.
The Times tried to pick victims readers could identify with. Instead of focusing on single minority mothers who'd struggled to buy their first home and are now seeing it ripped away, it gave us people like the Breakstones, a Memphis couple earning more than $250,000 a year.
Mr. Breakstone custom-built a house eight years agorunning up far more debt than the house is now worth. So the Breakstones had to fork over $65,000 in cash when they sold the house recently, since the sale price was far below the amount owed. (They couldn't stay in the old house because, with their three children from previous marriages, they "needed a bigger house than the one Mr. Breakstone had built," the Times explains.) And they could owe more than their new house is worth.
The "solution" the Times writers seem to seek here isn't just merely guaranteeing every American freedom from financial losses or foreclosurebut freedom from any economic anxiety at all (plus a right to have a house whose value rises constantly).
One passage bemoans the millions of Americans "trapped in their homes": "The vast majorityembedded in their communities, their children in public schools, their reputations at stakewait nervously in hope that prices will... rise once again,... restoring their freedom to sell or refinance."
But readers aren't biting. More than 400 vehement reader comments on the Times' site ran 20-to-1 against any taxpayer rescuewith fairness and basic economics the main objections:
* Able-minded people should be responsible for their own financial decisions, the comments note: "I'll be darned if my tax dollars have to go save some folks who couldn't understand what "variable rate" meant, or who bought beyond their means," ran one.
* Any bailout punishes people who made sensible choices during the housing boom. "I have excellent credit and did not overextend myself. Anyone who studies history could see the pattern and should not have gotten caught up with this recent cycle," wrote one reader. "The changing housing market meant that I, a lifelong renter, would finally have a chance to purchase a home now that prices are being lowered," yet another noted.
* A bailout will encourage reckless behavior down the road. "Any so-called government 'rescue' will simply serve to encourage such irresponsible actions sometime again in the future," one commenter wrote.
* Though sold as a compassionate rescue, the bailout benefits a powerful special interest at the expense of the taxpayer: "Why should government reduce exposures these banks have? They lent these dollars," queried another.
And they go on, and on, and on.
Hillary Clinton, Barack Obama and John McCain should take noteMcCain's comments, and Obama's and Clinton's detailed bailout plans, suggest they're overestimating the public demand for a rescue package.
Indeed, a race with few differences on domestic policy, one candidate could distinguish him- or herself with a little straight talk, such as:
Yes, borrowers and lenders, lulled by low interest rates, were overoptimistic, making decisions that seemed reasonable at the time but have now turned out badly. We should feel compassioneverybody miscalculates sometimes, and it's easy to do so in a bubble environment. After all, bankers and lenders, supposedly far more sophisticated, made the same mistake on a vastly greater scale.
But, ultimately, the government can't do anything to compensate people for their financial losses, or to keep people in homes they can't afford, without causing problems far worse than the one we're trying to solve.
The candidate who says eloquently what the public is already screaming may find that the distinction equals votes.
Original Source: http://www.nypost.com/seven/02262008/postopinion/opedcolumnists/solutions_the_public_hates_99327.htm