patrick.net

I know this is a difficult and complex topic, but we revisit the topic so often, I thought it merited it's own thread. I've noticed there's quite a lot of ambivalence and disagreement about the level of "appropriate" government involvement in housing as well. Many people would like the government to "do something" about the housing bubble/loose lending, while (correctly) pointing out that government manipulation of the credit markets is mostly what STARTED this monster in the first place.

I'll find the article but Registered Representative (trade pub. for securities lic. people) said that 70% of the investor complaints they investigate are from people that aren't even registered!

97 to 98% of all licensed professionals have NO complaints against them! Does this mean only 2-3% of clients have ever lost money in the stock market? Hell no! What it tends to imply is that through careful screening on the front end they keep most of the riff raff on the outside, hence the disparity in the source of complaints. Additionally, through standardized practices client suitability can be reasonably gauged and everyone (for the most part) finds their own comfort level of risk to reward.

It's NOT perfect and it has been an extremely difficult transition but now that everyone's getting along "like the Brady Bunch" I'd have to say all of the regulatory pain has been wort it. IMHO.

I prefer something between options #1 and #2 from HARM's "preamble." The downfall of all these choices is a problem of human nature. Those who have the most power will tend to "game" the system in their favor. In an unfettered free market, those with money can do it better than those without, but I have no problem with that. However, in a tightly regulated "DS" market, those doing the regulating are invariably corrupt in either an overt or covert way. Why is it then that basically every "communist" government has ended up essentially a dictatorship?

Ideally we would have a true "caveat emptor" market as in choice #1. However, current RE laws, regulations, etc. are biased. Tax deductions for mortgage interest payments, Prop 13, government-backed entities like FNM and FRE, the Fed tinkering with rates up and down constantly, hedge funds' ability to operate without much SEC scrutiny - these are all examples of laws or rules that apply asymetrically to different entities. If we're to allow a truly "free market," we have to get rid of all of this. In HARM's sub-prime lender example, yes the chain of transactions can still occur, but there will be no bailout of FB's, the mortgage industry, MBS's, or hedge funds. If and when the bolus of defaults happens, those stupid enough to invest in these "junk" loans will have no way out. But that's a dream world. Of course, there will be Congressional inquiries, bailouts, more hedge fund and MBS regulation, etc etc.

hmm, you already mentioned the re-education camps -- poaching my finest ideas!

i think my preferred option would be 2½ -- stronger regulation of lenders and brokers and more prudential arrangements -- and the production of large amounts of 'New Deal' govt-supplied affordable housing of good quality to send signals to an overheated market and to assist people who are struggling. Note that this does NOT require spartan housing at all, just prevents land speculation and rampant greed and veiled Ponzi schemes with the painful boom/bust corrections we see all too often in capitalist free market economies. Nor would this require huge taxation to do -- it would be done under PPP arrangements, using low profit or not for profit developers, but the govt would effectively put controls on the price of land and curb developers and RE agents who constantly talk about 'luxury fittings' etc to flog their overpriced tat. Clearly using not for profilt developers reduces the risk of favourable contracts being awarded, etc, as there's no superprofits to be made, but on the other hand, all market upside or downside risk is managed and controlled. Of course, you don't see cronyism or nepotism with the Bush-Lockheed Martin-Texaco-Halliburton revolving door cartel in the free wheeling open market US of A...

good topic tho... i meant to do one like it myself if i could have been assed... altho position 3 is a little on the extreme end as constructed...

I certainly favor little "l" libertarianism. I think government has an important role in educating their citizenry and handling commons issues. I don't like the 3rd option because it distorts human behavior and I don't like a purely Libertarian option that introduces an extra layer of psuedo-government entities, that's inefficient and likely to lead to political instability.

I'll cast my vote for option 2, although going by the plethora of superlatives, our esteemed thread author seems to favor the *cough* third.

As to the third topic, the economy is a horribly complex system with many inputs, outputs, and feedback systems. Crude attempts to directly control it are doomed to fail, while looser attempts may manage it for a while. (My analogy here would be to compare economics to psychology; it provides a semi-decent model for predicting and modifying behavior, but it's not complete.) The best model for handling such a system is to take steps that keep it in a stable state, and let its internal feedback mechanisms take things from there. I believe that's traditionally called capitalism.

In terms of option 1, I think that would quickly devolve into something non-freemarket. The ideal course of action would be for a company to externalize all of its costs and to remove all competition, and I suspect the outcome would look suspiciously similar to the Soviet Union. (Consider that the CP, in controlling all business, is in effect no different than a corporate monopoly that, having achieved complete vertical integration, just kept going for the horizontal. With no accountability or competition, there was no incentive for product quality, and similarly no incentive for clean environmental practices.)

oh, and the other thing is that, when you think about it, just about every aspect of building construction and RE generally is tightly controlled by govt regulation EXCEPT for pricing... densities, heights, setbacks, building construction codes for safety and quality, power, water and sewerage, zoning and land use, title, acceptable presentation, safe work practices, permits, etc, etc, between federal, state and local govt. the only thing left free-floating in the market is some discretion as to the appearance of a building, and price. and look how the free market manages to faff up price. the appearance of a 'free market' is somewhat illusory...

Of course, you don’t see cronyism or nepotism with the Bush-Lockheed Martin-Texaco-Halliburton revolving door cartel in the free wheeling open market US of A…

I don't know if you were referring specifically to me or not, but I do NOT consider the REIC or MIC to be "well regulated" or efficiently operating markets, based on the principles of transparency, competition and freedom of consumer choice. I agree that these markets are generally overreliant on cronyism/nepotism and are closer to fascism and/or socialism in practice.

good topic tho… i meant to do one like it myself if i could have been asked… altho position 3 is a little on the extreme end as constructed…

Now that I think about it, the way I presented 'position 3' might have been a little biased against socialism. :-)

a dyed in the wool Utilitarian would HAVE to go for number 3 -- greatest good for the greatest number...

that should head off some of the debate, hee hee

note that 'Fabian socia1ism' represents gradual socia1ism, not a sweeping revolution or installation of a dictator or totalitarianism. important not to conflate these things. you already have extensive fabian socia1ism in the West in the construction of the welfare state in the 20th century, being old age pensions, unemployment benefits, other types of family benefit and wealth reallocation, nominally free HS education and even universal inexpensive health care for those countries enlightened enough to implement it...

http://en.wikipedia.org/wiki/Fabian_socialism

"The Fabians also favored the nationalization of land, believing that rents collected by landowners were unearned, an idea which drew heavily from the work of American economist Henry George."

Of course, you don’t see cronyism or nepotism with the Bush-Lockheed Martin-Texaco-Halliburton revolving door cartel in the free wheeling open market US of A…

I don’t know if you were referring specifically to me or not

oh yes, you -- you're behind it all, HARM...

interestingly, tho, given ostensibly 'free market' conditions, people naturally steer towards making themselves as comfortable and secure and wealthy as possible, i.e. price fixing, monoplies, duopolies, cosy arrangements, fooling most of the people all of the time, etc -- so a free market of perfect competition and consumer choice is just as utopian or dreamlike as a worker's paradise, but a lot less honest and a lot nastier in motivation. and it is tipped towards over-consumption and low sustainability...

note also that small l libertarians almost exactly correspond to the 'communist ideal' in a lot of ways, meaning 'the withering away of the state' into collective communes of independent, self-employed artisans and workers no longer alienated from their work, from themselves, and from each other. fabian socia1ism is a form of progressive social change without revolution, and option 3 represents the actual path taken by china and russia et al which is to form a totalitarian state with the intention of achieving the ends of communism as a transitory phase, although one which never really got out of 'command capitalism' in reality -- but which was suggested by marx at the 1st comintern...

Peter P Says:
This is a difficult topic. I predict that human societies will cycle through many forms of government. Only change is permanent.

a little known and under-studied author (k. marx) also said words to that effect...

Funny, but now that I've posted a thread that contains the word "socialism" in it, I'm suddenly seeing tons of 'Cialis' spam posts in the moderation queue.

write it and they will come... spambots from hell...

actually, i don't know why they don't enforce really tough penalties on people writing, distributing and using spambots treated as tho they were malicious viruses -- not sure what stage the anti-spam legislation is at now... an international policing operation recently busted the actual physical operations of some of the pharmaceutical mailing firms... i choose option 3 for spammers...

DS,

In a perfect world with omnipotent and disinterested rulers, I would go with path 3. But since previous efforts at high level of government control tend to horribly wrong, I think I'll tough it would with path 2.

Interestingly, tho, given ostensibly ‘free market’ conditions, people naturally steer towards making themselves as comfortable and secure and wealthy as possible, i.e. price fixing, monoplies, duopolies, cosy arrangements, fooling most of the people all of the time, etc — so a free market of perfect competition and consumer choice is just as utopian or dreamlike as a worker’s paradise, but a lot less honest and a lot nastier in motivation. and it is tipped towards over-consumption and low sustainability…

I generally agree with the former statement, but not the latter conclusions. How is competition and consumer free choice inherently "less honest" and "a lot nastier" than socialism/communism ? Isn't greater freedom/more choices/better products a good thing for workers (or anyone)?

Considering the kind of governments and outcomes that "pure" anti-capitalist socialism has produced, I don't buy that it's necessarily the lesser of two evils vs. unfettered capitalism.

Why don't I ever see birth control pill spam or colon exam spam? That would be a semi useful spam, at least. It's the monotony of breast enlargements and male enhancement spam that really bugs me.

I think spammers automatically fall under policing action and commons problems, so they would be taken care of under option 2. Option 1 would probably resort to private networks and very very elaborate spam filters.

Ooh.. spammers...

I like to think option 3 would include the death penalty for spammers, and option 1 would simply put bounties on their heads. Option 2 would be less bloody, unfortunately.

"I like to think option 3 would include the death penalty for spammers, and option 1 would simply put bounties on their heads."

LOL! I never thought of it that way. But who would contribute to pay the bounty hunters?

LOL! I never thought of it that way. But who would contribute to pay the bounty hunters?

"I'd buy that for a dollar!"

(special Nerd points to anyone who knows the movie....)

(courtesy of google)

Ughh, Robocop?

The good news is, urbandictionary thinks it predates Robocop.

Picture a PayPal tip jar on Mr. Goodcat's personal website, every person with a clogged inbox adding some pocket change to the sum.. Oh yes, the numbers could add up very quickly.

tchah...too easy...;-)

Consider yourself 'nerded up level 2 p0wnd!'.

But since previous efforts at high level of government control tend to horribly wrong, I think I’ll tough it would with path 2.

i suggest option 2½, which of course doesn't exist in the construction we've been presented with. i repeat, fabian socia1ism ≠ totalitarian state socia1ism. but, there is a spectrum of possibilities not represented in the options above, where 1 and 2 are almost indistinguishable in any real world implementation, and are not teleological or social policy driven, and the gap between 2 and 3 is vast...

option 2 seems to produce all the gripes and pathologies that this blog likes to chew over...

speedingpullet,

Man, only level 2 nerd! I started a post with a picture of Lady Jessica the bene gesserit (before she turned bene gesserit traitor, blah blah blah) for gawdsakes!

It would be sad if Congress decided to further regulate realtors. What this market needs is to break up realtors as a cartel and push home buying towards large hourly fee based companies (preferably ones that can do everything in-house from financial counseling and taxes, to home inspection and document preparation).

ajh,

Draws won't work, but storage bins could work (for a while, did I mention my boyfriend has a five year backlog of his college paper and magazines that he refuses to throw away?). My problem goes beyond my boyfriend's packrat tendencies, he also likes to have papers covering every surface because he claims its easier to find stuff that way. He seems to subscribe to Sherlock Holmes's method of document archiving.

draws = drawers

a dyed in the wool Utilitarian would HAVE to go for number 3 — greatest good for the greatest number…

Why? I am a Utilitarian and I think number 1 and 2 are not necessarily bad, since #3 needs to work against human nature to realize it potentials. I do not believe human nature can be defeated.

The outcome of this housing bust will be a “new beginning” to housing regulation and accountability for the unethical practices that belie this current industry... The end result will be a more efficient and credible housing market.

@John, let's hope so. That would certainly be the ideal outcome.

What this market needs is to break up realtors as a cartel and push home buying towards large hourly fee based companies (preferably ones that can do everything in-house from financial counseling and taxes, to home inspection and document preparation).

Amen. RC's long been arguing in favor of exactly that --a fee-based model where you walk into a bank, go to the REO kiosk and browse their catalog of properties. Tour your picks, make your selection, apply for financing, get inspection --bam, 1-stop shopping. Hopefully all for a lot less than the 8-10% chunk each RE transaction takes out of your ass now.

Drawers won’t work, but storage bins could work (for a while, did I mention my boyfriend has a five year backlog of his college paper and magazines that he refuses to throw away?). My problem goes beyond my boyfriend’s packrat tendencies, he also likes to have papers covering every surface because he claims its easier to find stuff that way. He seems to subscribe to Sherlock Holmes’s method of document archiving.

i'm glad to know it's not just me then...

politicians don't like to worry about real estate prices too much, because they are pretty sure the market is ultimately self-limiting -- prices will always be contained due to the fundamental of salaries and wages. there may be some tulip boom pain once in a while, but they're better off keeping out of it so they can't get the blame if something goes wrong with their interventions...and now we are seeing a price correction and high inventory, although it's hard to know how far down prices will come...

they don't worry too much about conventional market failure, and see their role as providing residualised public housing for the bottom end only as a welfare state necessity...

however, that's not to say it couldn't all change using generous state land grants, price covenants, and not for profit developers... as per the example of Bridge Housing in SF, for instance..

We certainly are learning about how astoundingly bad government can be lately…

speaking of which, dubya has taken a shellacking from hugo chavez and mahmoud ahmadinejad in the un recently -- they are interesting times when a claimed born again christian is accused of being the devil...

Comrades, the graphic Patrick chose clearly illustrates how the masses must fight against domestic reactionaries and Yankee Imperialists and their running dogs.....

*slap* I've got to stop spending so much time reading that little red book my son sent me from China..

At least Chavez never sanctioned torture, diverted tax dollars to private military contractors or attacked another country without provocation. Plus, it is fair to say that Chavez has done more for the poor in the US (subsidized heating oil for poor new yorkers) than Bush has done (diddly squat).

I say this partly in jest. But seriously, for all his faults I think Chavez (or even Castro for that matter) is probably less toxic than Bush, Cheney et al.

"Of course, you don’t see cronyism or nepotism with the Bush-Lockheed Martin-Texaco-Halliburton revolving door cartel in the free wheeling open market US of A… "

This precisely why we do not want to give the government more power. It is odd that you justify adding more economic power to the government by using examples of a government abusing its existing power.

If the banks could not sell housing loans to gov agencies designed for this purpose, and the banks had to take the risks themselves, there would have been no housing bubble. Down payments would have been required and borrowers would be qualified. Gov interference created the environment for the speculator and FB.

HARM,

The "catalog, one stop shopping" model you introduced is pretty much what *George has feared for some time. Major banks getting involved in retailing RE would basically spell the end for small, independent local shops. On one hand this would a tragedy. The Walmart effect if you will.

On the other hand, NAR, CAR, legions of largely unregulated MB's have proven difficult if not impossible to regulate. The proof here sir is in the pudding.

Take for instance a newly minted rookie realt-whore fresh out of "boot camp". They studied (not much granted) and covered their chapter on ethics and no sooner than they get their first sale than some "senior broker" or branch manager is showing them how "the system" really works! What appraisers to avoid, how to get around inspections, which MB's to use to get marginal clients to qualify. I could go on but you get the idea.

The REIC will fight the "new beginning" tooth and nail. In the end, they will lose. Their half hearted effort at self regulation has failed miserably. Their self serving charter will become the focus of the FB/homeowners ire. At that point all of the economic reasons and well intentioned (but faulty) tax policies won't matter in their minds. Only getting back at those "that put them in this position" will matter.

It's not only the end of the housing boom, it's the end of the Cartel (TM).

Bush is a terrible president, weak leader, and has hired some of the worst foreign policy advisers since the 1800s.

Ahmadinejahd denies the Holocaust occurred and believes the Protocols of the Elders of Zion to be factual. He has repeatedly called not only for the extermination of Israel, but also of all unrepentant Jews, which means all of them in context.

Chavez is documented to use tactics like kidnapping and torturing wives and children of political enemies. Didn't he also arrest pretty much every domestic reporter who dared write or speak anything critical of him? And he uses Cuban security because he's under constant threat of internal assassination because of his strongarm tactics with his own military.

I'm not so sure there's a moral equivalency here, but I do agree that they all three suck. We are living in a time with absolutely no leaders. That's the real problem.

Randy,

True, all three suck. But the reason I might give Chavez the edge over Bush has to do with context. Chavez is the leader of a small country with a history of political instability and dictatorships. Bush is President of a large, overwhelmingly powerful country with a long history of open, democratic institutions and expanding civil rights. Yet they wind up at around the same place.

Bush has tried to undermine the press through covert propaganda campaigns, he has undermined the political process through a variety of means (see Florida, '00, Ohio, '04, etc.), he has sanctioned torture, alienated the world community, started a war without provocation, etc., etc... Chavez has basically acted like a thug who is trying to hold on to power. Sort of like a gang leader/mafia don.

Hard to say who is worse, but I think you need to consider the context. Otherwise, you would have to say that Jefferson was a worse president than Bush because he had slaves. At least Bush doesn't have slaves. But within his historical/political context Jefferson was quite progressive.