FWIW here’s what I am writing to our congresscritters. I’m actually going to use snailmail, in case my Mom is right that they take that more seriously.
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Dear [insert name of congresscritter],
I am writing to express my extremely strong disapproval of any “bailout” for any participant in the recent housing bubble.
This includes industry bailouts such as the recent Fed backstopping of Bear Stearns’ bad mortgage debt. It also includes the Fed’s negative real interest rates, which punish savers in order to ease the housing and mortgage-related credit markets’ burdens. It also includes the Treasury plan, Hope Now, the conforming limit increase, and the current Foreclosure Prevention Act.
It’s been obvious that we in California were in a housing bubble for several years now. I myself have for years made great efforts to publicize the danger of the bubble both at San Diego’s local nonprofit news daily (http://voiceofsandiego.org) and my personal blog (http://piggington.com). I am happy to say that these resources helped many people make the prudent decision to not stretch into a house they couldn’t afford (and after all, during the boom, most buyers couldn’t afford the house they were buying by traditional measures).
Unfortunately, however, many chose to ignore the level-headed advice that many commentators were offering up, and instead chose to speculate. And they were speculators, even if they lived in the house they bought. Anyone who used an interest-only or negative amortization loan to stretch into more house than they could have otherwise afforded and simply planned to sell before the reset date – and this tactic was used by many boom-time buyers – was speculating on rising home prices. It was speculation plain and simple, and in this country, speculators are and should be rewarded for taking the right risks and punished for taking the wrong ones. Otherwise, the system breaks down entirely.
Now, the various proposals above explicitly set out to reward these speculators and to punish the prudent. They use taxpayer dollars in an attempt to increase housing demand, whether by low rates, industry subsidies, or direct subsidies to owners or potential buyers. In short, the effect of all these policies will be to keep housing unaffordable.
This is a gross injustice to those who prudently chose not to buy into an obvious speculative bubble. It’s also an injustice to savers everywhere, homeowners or not, whose hard-earned savings are being plundered to bail out the people who took huge risks both in the housing industry and among the homebuying populace. These very people – the savers – are now being asked to pay to keep homes unaffordable. It’s really quite amazing, when you think about it. And I and many, many others are fiercely opposed to such efforts.
We are counting on you to do the right thing and to allow risk takers to suffer the consequences of the risks they took – a crucial part of the capitalist system – and to allow home ownership to become affordable once again.
If you’d like to discuss this issue I would welcome the opportunity to talk further. I am at 619-xxx-xxxx.
