Learning zero from the housing market meltdown.
The Obama administration has announced another plan to help between 500,000 and 1.5 million American homeowners who owe more money on their mortgages than their homes are currently worth. The "short finance plan" is simple: creditors write down mortgages to a number less than the value of the property--and then handoff the reduced loan to the American taxpayer via the Federal Housing Administration. In other words, all taxpaying Americans are on the hook for the irresponsible behavior of a minority of their fellow Americans--again.
And once again, the bankruptcy of progressive ideology is revealed. Those who bought more house than they could afford are "victims" despite the immutable reality that every detail of their fiduciary responsibilities was written down on a mortgage contract which they signed. Now they must be compensated, or they will default on those contracts and walk away from their freely-agreed upon obligations.
Let's be clear here: there are two types of homeowners who are defaulting on their loans. The first type is the owner who, for any number of reasons, can no longer afford to make his payments. I suspect most Americans might feel a twinge of sympathy for people who have lost their jobs, or had some highly unlikely or unforeseen misfortune befall them. Helping those down on their luck is something Americans do better than any other people on earth. Perhaps some sort of program could be devised to get these people back on their feet, especially if they've made good faith efforts to help themselves.
Then there is type number two. These are the homeowners who can still afford to pay their mortgages, but have decided to default because they have no equity in their homes. That's a nice way of saying "things didn't work out the way I thought they would, so to hell with making payments." Such an attitude is very understandable when one considers that many of these Americans "bought" homes with no money down, and, like so many Americans today, feel no need to endure the consequences of their own choices. It is even more understandable if one accepts the current fallacy that houses which are "underwater" will remain so forever. This perniciousness is designed to relieve people of the burden of holding onto their homes until the market eventually improves.
Reality check? Unless there's something about the new loan modification program yet to be revealed, no distinction will be made between the two groups.
Where does that leave responsible Americans who busted their butts to make ends meet, and pay their bills on time even if it means sacrificing many of the things they used to be able to afford? Feeling like chumps. When you cut through all the progressive blathering about such nonsense as "helpless homeowners," "predatory lending institutions," "fairness," "social justice," and "compassion," you get to the undeniable nugget: when you subsidize anything, you get more of it.
The Obama administration has made it quite clear that irresponsible behavior will be thoroughly subsidized.
If there is one over-arching concept that animates the social justice crowd, it is the idea that "failure" is no longer an option. From the crony capitalists on Wall Street to the irresponsible homeowners on Main Street, the freedom to fail is being obliterated.
Many Americans are confused about why the housing market collapsed. The answer is quite simple: the government required lending institutions to engage in irresponsible behavior. They were required to make mortgages available to people manifestly unqualified to afford them. The Community Reinvestment Act (CRA) of 1977 was the hammer. The CRA was originally designed to make sure lending institutions did not discriminate with regard to making mortgages available in minority and low-income neighborhoods.
But, like many government programs, it mutated. In 1995, Bill Clinton ordered the Treasury Department to rewrite the CRA's guidelines. Lending institutions with low CRA ratings could now be prevented from opening new branches, engaging in mergers, expanding their lending business, or be fined, if they failed to fulfill loan "quotas" in minority neighborhoods.
In other words, housing became a de facto extension of affirmative action programs.
After that, the lending institutions themselves "one-upped" the government. Why limit risky loans to the sub-prime market? Why not make them available in the primary loan market as well? Why not expand irresponsible behavior to its upper limits? The possibility of failure? Let's "collateralize" failure and "spread it around."
The rest is history.
Lessons learned? Of course not. Fannie Mae and Freddie Mac, the two biggest lenders in America, are still holding hundreds of billions of dollars of bad paper on their balance sheets. Yet they continue to make loans--and they astonishingly remain exempt from any regulations in the newly-passed Dodd-Frank financial "reform" bill.
To get an idea of how unsavory this latest program is, substitute the word "car" for the word "home." Should American taxpayers be on the hook for someone's car payments if they bought "more car than they could afford?" How about peoples' credit card bills?
Aside from its embrace of irresponsible behavior, progressivism is also about the triumph of ideology over history. Very recent history. The Obama administration gave Americans tax breaks for buying automobiles. When they ended, car sales tanked. They gave Americans a tax credit of $8000 to buy a home. When those credits ended, home sales cratered to the lowest levels ever recorded.
Even with this program, some government officials believe one-in-five participants will default. That estimate is based on the track record of the Obama administration's Home Affordable Modification Program (HAMP) which fell well short of its goal to assist 3 million homeowners. 1.3 million Americans enrolled in temporary modification programs. Half of them failed to qualify. Only one-in-three have gotten permanent, modified loans.
Americans with integrity are seething. It is an anger fired up by a federal government underwriting people with little or no integrity to the point of obscenity. It can be reduced to a single question asked millions of times: why am I being forced to pay someone else's mortgage along with my own? It is an anger that will not be mollified until the ideology which refuses to recognize the necessity of allowing people to fail is relegated to the dustbin of history. Most Americans have no problem being "their brother's keeper."
Being "their brother's enabler?" Immoral, plain and simple.
Arnold Ahlert is a contributing columnist to the politically conservative news and opinion site JewishWorldReview.com.