strodeunplugged

Everyone has a tipping point for things.  I think I just reached mine in regards the current economic environment and the associated governmental actions.

I haven’t had a good rant about the economy (like here, or here or here) for a while, so here goes.

Here’s a video prelude to my rant which probably does a more eloquent, although a little harsh, job of describing my feelings.

Now, I feel for people who are stuck in a bad spot due to un-expected circumstances (job loss, major un-planned – and un-insured expenses, rising costs, etc, etc) and I’ll try to temper my comments by remembering that I’ve been, and remain, very, very fortunate in life.

However, I’m having trouble with the concept of modifying mortgages for people currently in default or at high risk of default.  This is the recently announced Homeowner Affordability and Stability Plan.

For comparison’s sake, this is the definition of moral hazard.

How do we balance the greater good against rewarding behavior that resulted in a lot of people over-extending themselves?  I’m not smart enough to know where the centerpoint is, but this one feels tilted in the wrong direction.

I suppose I could reconcile myself to bank bailouts by believing that the looming damage to our economy would be significantly bad for everyone.  I’m struggling to make the same connection with home foreclosures.

It’s clear to me that foreclosed houses have an impact on housing prices in the entire neighborhood.  We have several in our neighborhood.  However, I’m having a hard time getting completely worked up about it when the current US mortgage default rate is 4.7%.  And, that’s after at least half a year of rapid increase.

Do we really need a $75B plan to address less than 5% of homeowners ?  Particularly when government statistics indicate that this effort will have a high failure rate.  According to the OCC, within 6 months of having a mortgage modified over 50% of people re-default.  That seems like a bad return on our $75B investment.

I’m not completely sure why the Homeowner plan has resonated so strongly with me as opposed to the banking and automaker bailouts.  Maybe it has something to do with the fact that I own a house, but not a bank (but I do own part of a professional soccer team).

So, here I sit, in the house I “own” (only 244 more payments til this baby is all mine !).  A small house.   A relatively in-expensive house.  Living beneath, not within, my means and taking another one for the team via the taxman.