[quote=pri_dk]I think I will need to hear a better argument why banks should be modifying loans. It depends upon the goal.
I see wholesale loan modification as effectively a redistribution of wealth from the responsible to the irresponsible. It doesn’t matter if the reward is deferred, there still is a reward for poor decisions.
And so what if there is foreclosure? Those that didn’t mortgage themselves into a hole will be in a position to buy a foreclosed house and rent it right back to the original homeowner. No one is left homeless and the assets are now being managed by those with better business judgment[/quote]
That’s the essence of the banking industry today, because the whole thing *should* be bankrupt. The people getting loan mods are riding on the back of handouts to the banks. The banks are looking at bottom line and efficiency over market rules. A foreclosure cost like 70K on top of what the losses are. One could also make the argument that the FB is getting mod’ed into another overpriced home when looking at where values *should* be with out the massive government intervention and thus not getting a handout but another bad deal, like when the purchased.
[quote]That’s how capitalism is supposed to work: it rewards those who best know how to allocate the capital.[/quote]
Capitalism never has and never will work like it is supposed to. The distortions in “Capitalism” that we see now are a direct result of of the extreme accumulation and centralization of wealth that Capitalism creates. It seems like our economic history has taken a complete back seat to the economic theory that spawned that history. A system that cannot overcome the problem of monopolization will never be capable of ensuring a “Free Market”. The extreme accumulation of wealth ultimately and intrinsically becomes the distortion within the economy. Wealth is power and that power is the capacity to bend a socio-economic system (to one degree or another) to the will of a select few. Capitalism breeds those who destroy its theorized idealistic state by creating the means to do so. Quite the paradox.
