Let's give the current tenant or former homeowner first dibs.
You have never been more wrong!
Bypass the banks - yes. And give the houses to the OWNERS - the pensioners and
whoever else holding deed, full or partial. It was their sweat, time, and work
represented as bonds that hold their retirement hopes.
You keep saying the money has already been lost, or, 75% lost. That is not true.
What has been lost are 4 different things. Bank earnings, stock prices, house prices,
and bond values. I agree with fuck the banks (and prosecute the bankers). And
non-insider stock players are always meant to be fleeced eventually because it's
a Ponzi scheme anyway. Bond holders are real people (and the only people),
represented by institutions, who have indirectly put their life sweat into these
houses, deferring present spending to provide for later. These houses are theirs,
not the tenants who have put out nothing. The houses should be auctioned immediately
and all at once and proceeds go to the bond holders. Only that will determine what
the houses are worth and how much they have lost.
You are very good but this one made me ill.
Houses should sell for whatever they can get in the market, not be handed out as political gestures by government. As I understand it, there are several problems:
- Banks don't want to recognize the loss, so they don't foreclose. Some kind of regulatory pressure would solve this, but the government does not want prices to fall any faster than they are now.
- Foreclosures take too long, so that houses sit empty and decay. Again, changes in regulations to speed up foreclosure would help, but that's a political nonstarter.
- Banks don't sell the houses they own at a market price. Again, they don't want the losses. They were praying for a quick recovery. At some point, they will decide that's not in the cards. The houses will be dumped for whatever they can get.
- Banks don't rent the properties out, because they've never been in that business, and can't estimate the costs of insurance, cleanup, property management, etc. A useful government program would buy foreclosures and rent them out, just to clear the market. They should buy them at fire sale prices though, and they won't do that.
If and when these prices do come down, realize you still have problems:
- A foreclosed house that has sat empty for a year is not a place to live. It will take thousands of dollars to clean it up, replace missing appliances, plumbing, wrecked walls, etc., and make it livable.
- Condo fees, insurance costs (in flood, earthquake and hurricane areas) and taxes may be prohibitive for current renters, even if they got the house for free, and the repairs for free.
- Many houses are outside of reasonable commute distance, now that gas is expensive. Second homes in vacation areas were never within commute distance.
- If a house is in an area of trashed houses, it won't be attractive even if sold cheaply, and repaired, with affordable taxes. When the neighborhood is blighted, the houses are all worthless.
- A fire sale of all foreclosed houses is fairly impractical. The government (no one else could do it) would have to force transfer or auction of all these houses. As soon as a new market price was established, another wave of banks would collapse due to their revised asset prices. No one wants to be blamed for all that. For better or worse, you are going to have to let this process go at its own pace.
Finally, there is a shortage of housing, which is one of the things that drove up prices in the first place. There's especially a shortage in the coastal urban areas. This is because that is NIMBY land, where you can't build anything cheaply, or sometimes, at all. Cities have to slice their planning processes in half or more to make affordable housing possible there. Even after a 50% drop, the SF Bay area will stil have $400K average house prices.
The bottom line for me is (again) that government helped make this mess. The answer is less regulation, not another government program to force auctions or hand out foreclosed houses.
As for banks, I assume you want to keep your savings and so on? If banks are dropping dead all over, I doubt the FDIC is going to be able to handle the load. A bailout there would be inevitable, but it's still not going to be fun.
Without functioning banks, you don't have functioning businesses. No business nowadays runs out of cash on hand. They all have financing loans that cover the time between when parts are purchased (and salaries paid) and when product is sold. Cut that loan and the company dies.
An economy reduced to lending out our currently very small pool of savings is a much smaller economy.
Imaginative, constructive, practical, just, and based on careful
consideration of data and facts synthesized into a well presented
solution to a vexing national problem extending to worldwide
proportions, your beautifully presented case has one MAJOR fault....it
actually offers a solution.
The Congress is not interested in an
effective, practical, easily understood and applicable solution. Both
thrive in the manipulation of chaos and continual damaging situations of
the utmost degree to engineer profit and power generating benefits for
themselves and their corporate and banking allies in an ever inflating
sphere. Inflation is definitely not limited to currency and commodity
issues. Any benefit to the public is often an accident of small
proportions in regard to legislation named in its interest. It is
evident in the solutions offered, for example, in the last week by the
Congress, that this is the case.
Nevertheless, I, for one, appreciated
the time you took to present your cogent suggestions. Bloggers are now
recognized as having an effect out of proportion to their numbers, which
is necessary for our national health to combat an unequal situation
emanating from a few media companies and entrenched politicians with
undue influence on our present and future as a voting public. Bloggers
are becoming the publics' megaphone, and have been engaged with some
energy by the opposition...Google, e.g. is censoring blog sites not
favorable to Obama, for e.g.....at blogspot.com sites. No telling what
else they censor. Anyway, I enjoyed the piece and hope it has some