But there’s every reason for political reporters to follow the lead of the AP and the outlets it cites here, and do what they can to force housing onto the candidates’ agenda. (That goes for coverage of the incumbent in the White House, too.) Partly that’s because of the human suffering and the damage to local and regional economies that results directly from the foreclosure epidemic. More broadly, it’s because the housing crisis is inextricably linked to our ongoing economic struggles. When the bubble popped, a whole lot of people discovered they weren’t as rich as they’d thought, and found their mortgage debt—incurred during the boom years—looming larger than they’d anticipated. Even people who weren’t at immediate risk of foreclosure have sharply cut back on consumer spending to focus on “deleveraging”; that sucks money out of the economy, contributing to widespread job losses from which we’ve yet to recover. Meanwhile, with prices still falling and access to credit for prospective buyers extraordinarily tight, we’re witnessing a historic collapse in new homebuilding, which devastates the construction sector.
It’s true that there are different ways to try to address this debt overhang and restore demand, some of which don’t depend on housing-specific policies. For example, liberal blogger Matt Yglesias recently wrote that he’s not enthusiastic about “targeted debt relief” because it raises “fairness, moral hazard, and time-consistency problems”—that is, all the things that make the politics of housing hideous—“that can be avoided with broader based stimulative ideas.” Instead, Yglesias is a persistent proponent of suddenly fashionable NGDP targeting, an approach to monetary policy that aims for real growth but will tolerate higher inflation, which serves as untargeted debt relief.
While that sort of approach isn’t targeted to distressed homeowners or mortgage debt, it’s responsive to the ways in which the housing crisis is weighing down the U.S. economy. That’s not something that can be said, at this point, of the plans (or non-plans) offered by the GOP contenders. Good catch by the AP, and let’s see more of this over the course of the campaign.
"[H]eterodox conservative economist Bruce Bartlett."
You're way too kind. Ideological chameleon is more like it. In fact, the now-Keynesian Bartlett is just one of many questionable or fraudulent sources of "expert analysis" cited by the Associated Press to support the AP's Obama-worship and statism in general. They might as well have relied on Obama's top economic adviser.
By the way, where is Ron Paul in that AP analysis? That's right: he's omitted (as usual). The only candidate with a viable, coherent, specifically detailed plan (which throws the wrench into the gears of the AP/CJR/Bartlett agenda) is ignored by the AP and CJR.
And where are the AP and CJR on the Obama Administration's targeted killing (murder) of an innocent American 16-year-old, his innocent American father, and several other innocent bystanders? As usual, they are either omitting it or parroting official sources w/o critical analysis; as usual, Glenn Greenwald is running circles around the "free press" when it comes to exposing the immorality and illegality of federal-govt violence against humans.
#1 Posted by Dan A., CJR on Tue 1 Nov 2011 at 08:55 PM
The solution to the "housing crisis" is simple.
Let the houses get foreclosed.
The dumbass borrowers who signed up for mortgages they couldn't afford will get a fresh start with bankruptcies and the dumbass lenders who lent money on inflated houses will lose money. Smart investors will buy foreclosed houses cheaper and smart lenders will make money on the mortgages.
Fixed.
Tossing the government into the equation will only exacerbate the problem.
#2 Posted by padikiller, CJR on Wed 2 Nov 2011 at 12:24 PM
If you want to fix the housing market, you should empower the bankruptcy courts to resolve differences between creditors and debtors on primary residences like they can on any other asset. Banks should also be required to produce proper original documentation before initiating a foreclosure claim. However, these actions would render TBTF banks insolvent and there is a bipartisan commitment to the "save the banks, save the world" strategy.
But yeah, cramdown would have been a big f'in deal.
#3 Posted by Thimbles, CJR on Wed 2 Nov 2011 at 02:55 PM
Of course banks should follow the law in foreclosing, and anyone who forges or falsifies documentation should be prosecuted. And I'm not opposed in principle to a mortgage cramdown in bankruptcy - however, the practical reality is that it only works when real estate values are declining and it's really too late to implement it now.
For those who don't know what a "cramdown" is - let me explain. Say you buy a new car for $20,000 and finance all of it for five years. Two years later, you still owe $14,000, but the car is only worth $8000. Now you file a Chapter 13 bankruptcy. You have to pay the secured part of the loan ($8000) at 100%, but you can include the unsecured balance ($6000) in your plan to be paid at a much reduced rate. This is called a "cramdown" because the court can cram the deal down the lenders' throats - but the law only allows cramdowns for personal property, not mortgages.
What Thimbles is suggesting is giving bankruptcy courts the power to do the same thing with mortgages. However, the decline in real estate values during the Obama Recovery is unprecedented and can't last. Prices will stabilize and then increase with inflation. When this happens, a cramdown won't work, because the value of the property will have increased since the inception of the loan and therefore the entire mortgage balance will be secured.
While cars go down in value, real estate goes up in value.
A chapter 7 bankruptcy is the way to go. Borrowers who can't afford their houses can move into cheaper housing, give up the homes they can't afford (and should never have bought) discharge the deficiency balance and get a fresh start. Lenders who made stupid loans can write off their losses and move on.
Commie/liberals don't like this plan because it doesn't give people free real estate at the expense of lenders, but it is the most efficient and fairest way to handle the problem.
#4 Posted by padikiller, CJR on Wed 2 Nov 2011 at 03:20 PM
"What Thimbles is suggesting is giving bankruptcy courts the power to do the same thing with mortgages. However, the decline in real estate values during the Obama Recovery is unprecedented and can't last. "
First off, there are plenty of precedents and in Japan and other countries.
Second off, it was your deregulatory idiot conservatives, under republican watch, who created this mess. Obama has failed to clean it up and is accountable for that much, but it's not like you believe that it's the government's business to clean it up in the first place. I don't see how you can claim the government can't do anything and yet hold it responsible for everything. Can't have it both ways.
#5 Posted by Thimbles, CJR on Wed 2 Nov 2011 at 04:03 PM
Thimbles wrote: I don't see how you can claim the government can't do anything and yet hold it responsible for everything.
padikiller responds: LOL
The government can't do anything RIGHT, but it can certainly do plenty of things WRONG.
Even Marx understood this little slice of R E A L I T Y. Every single government intervention into the free market comes with a price tag - a cost associated with the inherent inefficiency of government meddling.
Old school commies acknowledged and embraced this cost - they KNEW that it would be inefficient to have the government run the economy, but wrongly believed that the desired utopian outcome justified it. It only took a few gulags, a secret police force and a huge standing army to terrorize the people into making this inefficient system last as long as it did.
You new commies are different - you actually believe that the gubmint can do things BETTER than the private sector - a silly, sophomoric notion that anyone who's taken ECON 101 knows to be false.
#6 Posted by padikiller, CJR on Wed 2 Nov 2011 at 04:21 PM
Again, when standing of the wreckage of the lawless market (which is what you conservative idiots consider "free") it's pretty rich to hear how the government can't do anything right.
We now know that democratic government does its most wrong when it does nothing on the dictates of an unrepresentative ideology and constituency.
The government witnessed crime and looked the other way based on market-knows-best. Are you guys who supported this ever going to apologize? Nah, you're going to deny responsibility. It's what you do.
#7 Posted by Thimbles, CJR on Wed 2 Nov 2011 at 05:14 PM
See what I mean...
Thimbles thinks the government can do business BETTER than free enterprise can.
Of course it can't. The CLASS Act that Obama told us would cut the deficit was recently scrapped by the administration in the face of the REALITY - namely that it would actually cost billions to implement.
The health insurance premiums that Obama promised would decrease by $2500 per year actually skyrocketed in the very first year of Obamacare.
The "stimulus" that Obama promised would keep unemployment under 8% has instead resulted in two years of unemployment over 9%...
The SEC that was supposed to stop Bernie Madoff didn't do a thing about him for nearly 10 years after receiving proof positive that he was running a Ponzi scheme.
Fannie Mae and Freddie Mac has proof of foreclosure fraud in 2006, yet did nothing to stop the "robosigning" of false affidavits.
The MMS facilitated the Deepwater Horizon explosion through slack regulation...
NASA put the wrong lens in the Hubble telescope, blew up a Mars probe by using inches instead of centimeters and killed two Space Shuttle crews by not following their own launch manuals.
Medicare loses many times as much money to waste and fraud as the private health insurance companies make in profits.
Etc... Etc... Etc...
Show me a government agency, and I will show you an inefficient operation that would not be tolerated in the private sector.
#8 Posted by padikiller, CJR on Wed 2 Nov 2011 at 06:36 PM