While in high school, one of our school’s physical education instructors was a hulking misanthrope with a sinister-looking Fu-Manchu mustache. He firmly believed that if one member of the class fell behind, the others should pick up the slack.
He instilled (and not always verbally) a military unit mentality in his classes and, as a coach of the football and lacrosse teams, that if one link was broken, the chain was worthless. Should a classmate or a teammate find himself unable to complete a required number of pushups or finish a distance run, the others were expected to finish it for them.
That never sat well with me. My argument was that if I worked hard to keep myself in shape, why did I have to cover for others who opted for Hostess Twinkies in lieu of wind sprints and weight training? But at the time I stood south of 5-foot-8 and weighed 135 lbs. By comparison, his arms were roughly the size of canned Easter hams, so I wisely opted not to argue.
Thirty or so years later, I’m wondering if my former instructor had been retained as one of President Obama’s revered economic advisors in drafting the recent homeowner bailout plan — a Hail Mary pass of sorts to stem the tide of foreclosures.
After all, it’s sort of predicated on the same principles he pounded in– I mean preached — to his student legions. The president told everyone that they should willingly accept this absurd plan, because when all those unsold or foreclosed homes begin piling up on your block, then the value of your house will begin plummeting – much like the Dow Jones has since Obama assumed office.
The president’s plan will create a fund – paid for of course by folks like you and me (read: “those who pay their mortgages on time”) that will reduce the monthly payments of anywhere from 4 million to 5 million “responsible” homeowners ultimately to about 31 percent of their income. Existing lenders would shoulder the cost of taking that figure to 38 percent and then would split 50-50 with the government to winnow the figure down to 31 percent.
His plan could ultimately cost taxpayers roughly $275 billion — $75 billion in direct spending — with the rest in earmarked for backing government-controlled mortgage concerns Fannie Mae and Freddie Mac.
My first question, and one that has been asked by others, is exactly who determines the criteria of “responsible?” If it’s the government, then that would increase my concern exponentially, because if there’s one noun that doesn’t describe Uncle Sam, it’s “responsible.” Particularly when it comes to matters of finance.
Also, why should this largesse be limited to those deemed “responsible” but have trouble making their payments? Why are folks like myself and the 90-plus percent of those who dutifully make their payments not included?
Obama’s plan also doesn’t broach the fact that nearly 14 million homeowners are indentured to mortgages that have balances higher than the current value of their homes.
I wish I had known that prudently saving for my daughters’ college education and building up a solid credit score was actually a foolish strategy, and that all I needed to do was recklessly over-mortgage my house and I would soon become another resident of the fastest-growing commonwealth in the world – Entitlement Nation.
There’s little doubt that something needs to be done about the shocking rate of foreclosures. And I don’t mean to suggest that predatory lending has not contributed to the current housing debacle. But conversely, there’s also fraud in accounting, medicine and law and I don’t see bailouts on deck for their victims.
I fear the plan will mandate borrowers to go through the government, and when politicians begin making homeowner decisions that’s enough to frighten the hell out of me.
After all, look at the stellar job august lawmakers such as Charles Schumer and Barney Frank did in ignoring the warning signs at Fannie Mae and Freddie Mac, and then did their best impression of being stumped on Final Jeopardy when those institutions imploded.
However, under this plan many struggling homeowners will soon learn that all they have to do is stall the banks long enough and the government will soon be here to thrown you a lifeline.
