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How To Protest?


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2009 Feb 19, 5:32am   16,202 views  111 comments

by Patrick   ➕follow (55)   💰tip   ignore  

i want you -- in debt

Americans are enslaved and controlled when they submit to mortgage debt.

The government is not only a willing participant in this enslavement of Americans, it actively seeks to sacrifice American lives to the banks, which live on mortgage debt. All government "affordability" programs drive up prices and increase debt:

    The mortgage interest deduction, which fools buyers into spending a dollar on interest to save 30 cents in taxes
    Fannie Mae and Freddie Mac and the FHA, which push the promise of enslavement onto taxpayers after the inevitable defaults
    The trillion dollar bailout, which forces us to pay for our neighbor's foolish mortgage

What we need is less mortgage debt. What is the most effective way to tell the government we are not fooled? What is the most effective way to tell them we want less debt, lower prices, and no more false and harmful "affordability" programs designed to trap us in more debt?

Patrick

#housing

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1   Patrick   2009 Feb 19, 5:33am  

Posted for a reader:

My wife and I are currently renting and are saving our money to be able to afford a house. Obviously, with housing prices still too high, that has not happened, yet. And, it appears that it will not happen anytime soon due to all of these governmental programs to help people who made poor choices. These programs are supposed to "stabilize" housing prices. And, they just might. We need them to fall further in order to afford a house.

My wife and I are frugal, pay our bills on time, do not carry debt, and live within our means. We know of many people who are getting write-downs on their loans with very low interest rates. This is a subsidy and a gift to people who, in my opinion, do not necessarily deserve it. Quite frankly, it really pisses me off.

Question: Do you think it would be possible to sue the United States for our piece of this gift that people, who bought well beyond their means, are getting? Since most of the write-downs are between $100K and $225K, we would sue for the middle amount of $162,500. I think that is fair. That amount, combined with our savings, is roughly the figure we need to put down on a house.

If the government is going to help other people out, we want our fair share. Especially, since we did not overextend ourselves and live like idiots.

2   Peter P   2009 Feb 19, 5:36am  

We are already protesting by ranting here.

Obviously, protesting will yield no effects. Our game plan should be

1) protect our nest eggs
2) make speculative profits
3) let other people eat cake

in that order.

Some people define morality based on the actions of a reasonable person. By the standard of our society, responsible renters are not reasonable people and we are morally wrong. :(

Do you think it would be possible to sue the United States for our piece of this gift that people, who bought well beyond their means, are getting?

Absolutely! One can sue anything under the sun. But you will NOT win.

I am so pissed off that I have become a misanthropist!

3   Patrick   2009 Feb 19, 5:42am  

Should we willingly pay our neighbor's mortgage after they got into trouble because they re-fi'd to get the granite countertop, boat, and big screen TV?

4   Peter P   2009 Feb 19, 5:45am  

Reality: you will unwillingly pay your neighbor’s mortgage.

Question: what are we going to do about it?

Politicians know debt is bad. However, it is not in their best interest to enforce fiscal responsibility. Game is over for responsible spenders. What should we do to save ourselves?

5   Randy H   2009 Feb 19, 5:58am  

It's not so much the mortgage interest deduction that causes problems: that's just a deduction, not a credit or exemption. In other words, you have to spend the $$$ to get out a % of a %.

It's the capital gains exemptions that distort the market. There should either be no capital gains for any investments, or there should be no exemptions for people making a gain when they sell their houses.

Hell, I'd even settle for the way it was 15 or so years ago: you could take the exemption only 1 time per lifetime, only if you were 65 or older, and only within some threshold max -- fairest would be a max % of sale, like say 25% of the sale price with a limit of half a mil, ...

6   Peter P   2009 Feb 19, 6:04am  

I still think that bubbles are not avoidable and we can at best allow occasional busts to purge the system of rottenness.

But I do think there should be no capital gains tax for any investment.

So... where is the next bubble?

7   Patrick   2009 Feb 19, 6:11am  

Good point Randy -- I don't like the capital gains exemptions either, unless we go to a single tax on land. Then there wouldn't be any other taxes.

I do think the mortgage interest deduction causes problems, like this:
* especially at the high end, people see that they can spend more with the same monthly payment because they are paying with pre-tax money
* debt goes up
* prices go up
* savers who hate debt are penalized by higher prices

Peter -- I just cannot accept that I have to pay for the mistakes of others, especially since I've been complaining about their over-borrowing for several years now.

8   sa   2009 Feb 19, 6:13am  

MID is one of big factors among friends I talk to.

9   Peter P   2009 Feb 19, 6:16am  

Peter — I just cannot accept that I have to pay for the mistakes of others, especially since I’ve been complaining about their over-borrowing for several years now.

I cannot accept that either. But there is a difference between accepting it as a moral fact and accepting it as reality.

Most people are NOT irresponsible debtors. Unfortunately, the responsible citizens are being held hostage. Now most people think the government should do something. We cannot win.

10   Peter P   2009 Feb 19, 6:18am  

MID is one of big factors among friends I talk to.

MID has been there for a while. It did not suddenly become a factor just for this bubble.

All bubbles are driven by high-octane financial psychology. Somehow people thought housing was the fortress in 2003 and it gained critical mass.

11   HeadSet   2009 Feb 19, 6:24am  

Americans are enslaved and controlled when they submit to mortgage debt.

Well said. But if your were to free the average debt bound American by paying off his mortgage, he would quicky sell himself back into slavery. He would not see his new found debt freedom as a second chance to stay solvent and liberated, but as a fresh big block of credit freed up to fund further consumption. We are fighting a losing battle as long as the people and the politicians see no difference between earnings/savings and credit. To them, cash and credit are spendable in the same exact manner.

12   Peter P   2009 Feb 19, 6:29am  

I hate to say this but slavery is very natural to humanity. It has to take one form or another: wage slavery, debt slavery, etc. This is simply because of the hierarchical nature of the human society.

Wealth is really about power over others. Everyone cannot be wealthy or powerful at the same time. Hence the economy is a zero sum game.

Have our society created overall value through history? I don't know, but I'd much rather be a medieval warlord than a iPod-touting noody.

13   slantedview   2009 Feb 19, 6:47am  

The government is not only a willing participant in this enslavement of Americans, it actively seeks to sacrifice American lives to the banks, which live on mortgage debt. All government “affordability” programs drive up prices and increase debt:

Excellent commentary!

14   Peter P   2009 Feb 19, 6:49am  

We are all slaves to something. Some of us manage to enslave others. The game is to have more, a lot more underlings than overlords.

(e.g. Husbands are slaves to wives)

15   Chuck Ponzi   2009 Feb 19, 7:07am  

Peter,

What is a Noody?

16   Peter P   2009 Feb 19, 7:09am  

Nobody.

17   Peter P   2009 Feb 19, 7:44am  

Consider the selection of I-tunes compared to that of medieval minstrels.

What is wrong with medieval minstrels? And, I have always dreamed of owning a house with a moat and a dungeon.

only the banksters get to know.

So... where is the next bubble, original bankster? ;)

18   Peter P   2009 Feb 19, 8:00am  

Oh, I am sure those details will be taken care of.

I will settle for indentured servants. :)

19   EBGuy   2009 Feb 19, 8:00am  

This article in the Atlantic has been making the rounds on housing sites (patrick has a link on the main page) and seems relevant to our discussion now.
If anything, our government policies should encourage renting, not buying. Homeownership occupies a central place in the American Dream primarily because decades of policy have put it there. A recent study by Grace Wong, an economist at the Wharton School of Business, shows that, controlling for income and demographics, homeowners are no happier than renters, nor do they report lower levels of stress or higher levels of self-esteem.

And while homeownership has some social benefits—a higher level of civic engagement is one—it is costly to the economy. The economist Andrew Oswald has demonstrated that in both the United States and Europe, those places with higher homeownership rates also suffer from higher unemployment. Homeownership, Oswald found, is a more important predictor of unemployment than rates of unionization or the generosity of welfare benefits. Too often, it ties people to declining or blighted locations, and forces them into work—if they can find it—that is a poor match for their interests and abilities.

As homeownership rates have risen, our society has become less nimble: in the 1950s and 1960s, Americans were nearly twice as likely to move in a given year as they are today. Last year fewer Americans moved, as a percentage of the population, than in any year since the Census Bureau started tracking address changes, in the late 1940s. This sort of creeping rigidity in the labor market is a bad sign for the economy, particularly in a time when businesses, industries, and regions are rising and falling quickly.

20   Peter P   2009 Feb 19, 8:02am  

Good article!

21   Randy H   2009 Feb 19, 9:09am  

As said earlier, the MID has been around for a very long time. Much much longer than capital gains distortions.

Also MID doesn't affect the extreme upper-end at all because those taxpayers lose all MID under AMT. Even people in the $2mm-ish home range are probably right at the point where they are losing some to AMT.

Finally, you can only (under 2008 rules) take a deduction on a first up to $1mm and a second up to $100K. So your max is $1.1mm. Yes this has affected home prices in places like S. Marin where $1.1mm "coincidentally" became the median home price for a while.

But, when you see someone's title records and they're carrying $2.6mm in 3 or 4 mortgages on a $2mm home, they are only deducting the first $1-$1.1mm.

--where I agree MID is a big problem is more on the tax fraud side. Two main forms:

1. People taking [full] MIDs on investment properties that they are renting out but claiming as primary residences (also with liar loans).

2. People taking the $100K-max loan MID on a home equity loan even though they didn't use the money for purchase or improvements. ie., It's tax fraud if you take a HELOC and use the $ to buy a Hummer, then take the MID on that amount of debt.

22   homeowner_for ever_san jose   2009 Feb 19, 9:21am  

Patrick,

I understand your frustration because i am going through it as well.
We cannot win this battle.We have been held hostage to mass stupidity.
There is nothing right and wrong in a democracy except what the majority believes in.Unfortunately , we are paying for others mistakes.
No body can stop whats going on with we sharing the burden.
Lets be realistic and ask for this :

Take whatever you want but PAY IT BACK. when the economy starts buzzing again, all the folks who got paid (low interest, loan modifications..etc) should pay it back. I am OK even if they pay it back after 10 years. Why not create a account on every person who screwed up and link it to their SSN. They need to repay after 2015..how about that ? any issues ?

23   Peter P   2009 Feb 19, 9:25am  

There is nothing right and wrong in a democracy except what the majority believes in.

Tyranny of the majority? This is why capitalism should override democracy. But again, this too is not going to happen.

24   kewp   2009 Feb 19, 11:35am  

I have cash, no assets and generate my investment income by shorting speculative asset bubbles.

So, there's your answer.

25   Peter P   2009 Feb 19, 11:45am  

I have cash, no assets and generate my investment income by shorting speculative asset bubbles.

Excellent!!! Have you read The Zurich Axioms by Max Gunther?

26   DennisN   2009 Feb 19, 11:56am  

At least medieval minstrels always knew where their lute was kept.

27   Peter P   2009 Feb 19, 12:00pm  

And they dress in funny clothes. They are more colorful then an iPod nano.

28   PermaRenter   2009 Feb 19, 12:05pm  

Will Obama's mortgage plan help Silicon Valley homeowners?

.....

But it's unclear how many in Silicon Valley will benefit since so many homeowners have big mortgages that may not qualify for one of the programs announced Wednesday.

....

The plan could bring some help to the roughly 19 percent of homeowners in the San Jose area who were "underwater" on their mortgages in the fourth quarter of 2008, according to figures compiled by Zillow, a real estate research service. (Being "underwater" means you owe more than your home is worth.) Homes in the area lost $58.5 billion in value during the year, the company reported.

Experts said the refinancing plan will help lower-middle-income borrowers in California, but may not do much for those with the large home loans

Economic crisis
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typical in parts of the state, including Silicon Valley. That's because the refinancings will be only for mortgages held or securitized by Fannie Mae and Freddie Mac, which only made loans under $417,000 in recent years.

Slightly more than 60 percent of the home loans made in the state in 2006 and 2007 were over those loan limits, according to estimates by the California Association of Realtors, although in 2008, because of falling home prices, only 33 percent fell into that category. Also in 2008, the limit was raised to $729,750.

29   PermaRenter   2009 Feb 19, 12:06pm  

Bargain-minded buyers snapped up deals on foreclosed properties in Santa Clara County in January, even as some high-priced Silicon Valley cities saw record-low numbers during the same period.

The number of homes sold in the county rose by more than one-third last month compared with January 2008. But with home values still generally sliding and foreclosure properties accounting for about half of all sales, the median price fell precipitously from last year.

The median price of resale, single-family homes sold last month in the county was $420,000, down 39 percent from January 2008 and down 8 percent from December 2008, according to a report MDA DataQuick released Thursday. The last time the county's median price was lower was in February 2000, when the figure was $417,500. The median price of condos sold in January was $262,000, down 43 percent from a year earlier, and 13 percent from December.

30   PermaRenter   2009 Feb 19, 12:18pm  

Sales Volume Median Price
All homes Jan-08 Jan-09 %Chng Jan-08 Jan-09 %Chng
Alameda 780 994 27.4% $487,750 $300,000 -38.50%
Contra Costa 667 1,333 99.9% $463,000 $220,000 -52.50%
Marin 122 122 0.0% $845,000 $525,000 -37.90%
Napa 44 78 77.3% $532,500 $370,000 -30.50%
Santa Clara 869 1,037 19.3% $639,000 $400,000 -37.40%
San Francisco 293 229 -21.8% $744,000 $562,000 -24.50%
San Mateo 295 273 -7.5% $675,000 $489,500 -27.50%
Solano 247 560 126.7% $347,500 $192,500 -44.60%
Sonoma 269 424 57.6% $425,000 $299,750 -29.50%
Bay Area 3,586 5,050 40.8% $550,000 $300,000 -45.50%

31   DoctorRenter   2009 Feb 19, 1:48pm  

I'VE BEEN READING THIS SITE FOR YEARS BUT AM USUALLY WORKING TOO HARD TO COMMENT. NOW IS THE TIME FOR ACTION, NOT CHATTING. IF WE CAN HELP MOBILIZE ENOUGH DISCONTENT, THIS MORTGAGE BAILOUT PROGRAM WILL NOT GET OFF THE GROUND. CALL YOUR SENATOR, CONGRESSPERSON, THE WHITE HOUSE. LET THEM KNOW WHY RESPONSIBLE SAVERS SHOULD NOT HAVE TO PAY THEIR NEIGHBORS DEBTS. LET'S TRUST THAT IF ENOUGH VOICES PROTEST, THE PLAN WILL BE FOUGHT DOWN.

32   Brand165   2009 Feb 19, 2:06pm  

I AGRE TAHT DEBT IS ENSLAVEMANT AND...

(why is the rum gone? ... but why is the rum gone?!?)

Debt is a tool. Assets are a means to production. There is no such thing as willing "enslavement", only addiction. And nothing is more addictive than Easy. Taking credit for anything aside from long term benefit or profit is stupid. Let it burn. I am more Hank Rearden than James Taggart. I still remember how to build stuff, and this country will too.

It would be tyrrany of the majority only if they knew what to value. Give the boomers some happy pills and Miller Lite, and this will all be over quietly.

33   Brand165   2009 Feb 19, 2:11pm  

Peter, I think you see that water finds its level. So do grit, sludge and cream. I don't share your desire for an easy life. I just want to spare my capital until I can build something again, without too many parasites sucking its lifeblood.

And mideval lords had horrible bathrooms. My iPod toting plebian ass has a jetted tub.

34   Brand165   2009 Feb 19, 2:13pm  

Er, medieval...

35   GammaRaze   2009 Feb 19, 2:37pm  

We all work for the banks.

36   Peter P   2009 Feb 19, 3:08pm  

I don’t share your desire for an easy life.

Who says speculation is easy? Or being a medieval warlord is worry-free?

They needed dungeons for a reason. :)

37   Peter P   2009 Feb 19, 3:33pm  

TOB, trust your instincts.

There are no experts in economics. It is an art.

38   jcat   2009 Feb 19, 3:47pm  

"All government “affordability” programs drive up prices and increase debt:"

And all the greedy idiots who bought homes that they couldn't afford took in the bait. It's in the government's best interest to sell the American dream and drive up home prices, and that is exactly what happened. However, when a bubble is created, EVERYONE has to pay. I have also lived frugally and responsibly waiting patiently to buy a home that I could afford. I never saw a good time to buy because prices were super inflated and I knew that these prices could not keep going up. I watched on the sideline as idiots without any common sense were buying homes way beyond their means, taking out equity to buy fancy cars and lavish vacations. I did not reap any of their rewards, but now we ALL have to pay to keep them in their homes?

I do understand that losing a home is rough, but before this whole bailout mess, unfortunate folks who could not keep up with their payments due to unforeseen events lost their home, plain and simple. Why are we wasting precious tax money to bail out these "homeowners" who never should have been allowed to purchase a home in the first place? There are much better uses for our tax dollars... cleaning up the environment, improving education, research for alternate sources of energy, health care, etc. There are much bigger things out there than people losing their homes. It happens, we can move on. Contributing to our national debt so that on our dime and our future generations dime is NOT okay. It's a tragedy that I am not surprised that our government fails to see any of this.

39   DennisN   2009 Feb 19, 4:53pm  

On today's news page there's a story from the SD paper on commercial real estate....

It looks like the down payment requirement is going up dramatically, from maybe 20% up to 50%.

Where landlords may have been able to get a loan for 80 percent of a building's value during the boom, lenders now are limiting loan amounts to as little as 50 percent of value.

One of the commenters in that story stated that typical CRE loans were due in 3 to 7 years. Is this really true?

40   empty_houses   2009 Feb 19, 9:47pm  

When I walk out of my house and look up and down the street at the other houses, I'm compelled to define each house as bought by greedy f@ck ups or not. It strikes me as a strange way to view my surroundings. 10 years ago I would have defined each house by the persons occupation and if they were a good neighbor or not. Currently, about 75% are owned by greedy f@ck ups.

It's going to be interesting to sit back and watch the results of these Obama plans unfold. He has instilled a sense of hope for the middle and lower class folks, at least for now. This could have a positive effect. Typically, drug abuse and the crime rate go up during bad times. He may be able to curtail those problems to some extent. All of the would be criminals are scrambling to figure out how to get some free government money. Single people with no children will be able to get food stamps.

disclosure:I voted for Ron Paul

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