Housing: Bush Rides to the Rescue, Sort Of

[w¡n9Nµ7 §£@¥€r 123]

President George Bush waded into a political swamp on Aug. 31 when he announced a plan to help homeowners who can't afford their mortgages ... The President was aware that he had to do something about the plight of homeowners facing foreclosure, but he also knew that if he did too much, he would bail out people who didn't deserve to be bailed out.

In the end, the President announced a plan that attempts to strike a balance between help for the distressed and adherence to free-market principles.

...

The two key ideas are:

—Give a bigger role to the Federal Housing Administration, which was created in 1934 during the Depression to make houses affordable to lower-income families but shrank in recent years as it was elbowed aside by aggressive private-sector subprime lenders.

—Temporarily suspend the income tax that families face on the portions of their mortgage debts that are forgiven by lenders.

Bush is also jawboning lenders to voluntarily give relief to their borrowers. He's getting the federal government to publicize the options that hard-pressed homeowners have.

...

The President also shied away from various kinds of direct financial aid to distressed homeowners, which could have become expensive.

...

...the Bush plan is bound to encounter criticism from conservatives who say that people should bear the costs of their own mistakes,

...

Well-to-do speculators could also benefit from the tax break for forgiven debt. The way the tax code works now, if you fall behind on a $300,000 loan, and your lender agrees to cut the amount you owe to $250,000, the $50,000 you saved is treated as income, and you have to pay tax on it. Bush wants to waive that tax liability temporarily. Dean Baker of the liberal Center for Economic & Policy Research says that this break will be of little value to low-income families that face relatively low tax rates, but of great value to affluent speculators. White House spokesman Tony Fratto told BusinessWeek.com that there would be a limit on the size of mortgage loan eligible for the tax waiver, though the amount hasn't been set yet.

...

He also announced an FHASecure plan, which apparently does not require congressional approval, that according to the FHA "will allow families with strong credit histories who had been making timely mortgage payments before their loans reset—but are now in default—to qualify for refinancing."

http://www.businessweek.com/investor/conte...index_top+story

[Mr. Big Dog 10,747]

Generally, I am not in favor of the government baling people out that made poor choices on their finances and bought more than they could reasonably afford.

[Ban Hammer 14,396]

Generally, I am not in favor of the government baling people out that made poor choices on their finances and bought more than they could reasonably afford.

agreed

[w¡n9Nµ7 §£@¥€r 123]

Big Dog,

I agree, generally speaking. However, there does come a point where the economic impact of a problem is large enough where action is warranted, if only to prevent larger damage to the overall economy.

[Mr. Big Dog 10,747]

Big Dog,

I agree, generally speaking. However, there does come a point where the economic impact of a problem is large enough where action is warranted, if only to prevent larger damage to the overall economy.

The damage to the overall economy is already done. Now we're just trying to cover it up for a little while longer. The bubble of borrowed wealth - which is all we really have - is going to burst. In our lifetime.

[w¡n9Nµ7 §£@¥€r 123]

Where do you hide your money during a Depression?

[Mr. Big Dog 10,747]

Where do you hide your money during a Depression?

What money?

[w¡n9Nµ7 §£@¥€r 123]

Doh!