# Mortgage bailout.. **URL:** \ **Category:** Great Debates\ **Created:** [September 21, 2008, 1:24am UTC](https://boards.straightdope.com/t/mortgage-bailout/464505 "2008-09-21T01:24:38Z")\ **Posts on this page:** 20\ **Page:** 5
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [September 24, 2008, 4:33pm UTC](https://boards.straightdope.com/t/mortgage-bailout/464505/81 "2008-09-24T16:33:04Z")
It is not a mortgage bailout at all. It is a bailout for financial companies. So you guys that think it boils down to someone getting away with scamming a poor defenseless loan company can take a break. It even allows Paulson to give money to foreign banks if he so chooses. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [September 24, 2008, 5:57pm UTC](https://boards.straightdope.com/t/mortgage-bailout/464505/82 "2008-09-24T17:57:17Z")
> [@treis](#): > > (1) If Joe is paying his mortgage on time, and he sees that Jim down the street got his knocked down 40% by not paying, what do you think he’s going to do? The practical effect of this policy is that more people will default on their mortgage, and the problem will grow. > > (2) Why should these people get the equivalent of tens of thousands of dollars for taking out a stupid loan? The alternative. Joe is happy, as Jim gets kicked out of his house. Jim’s house sits vacant for six months, accumulating weeds and, if he’s not lucky, crack addicts. Joe’s house plummets in value. Or, the bank aggressively pushes Jim’s house, and it sells for a big discount, and Joe’s house plummets in value. Or, you can let Jim keep his loan, give the government a share of the profit from the reduced valuation, and Joe’s house keeps its value pretty well. Sometimes you can shoot yourself in the foot by being vindictive. BTW, the PTB are very worried about the fall in the tax base, both from vacant houses and from valuation. That’s even in California, where the assessment for older houses is absurdly low, thanks to Prop 13. It will take a deep dive before I can go filing for relief on my house, I’m happy to say. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [September 24, 2008, 5:58pm UTC](https://boards.straightdope.com/t/mortgage-bailout/464505/83 "2008-09-24T17:58:45Z")
> [@gonzomax](#): > > It is not a mortgage bailout at all. It is a bailout for financial companies. So you guys that think it boils down to someone getting away with scamming a poor defenseless loan company can take a break. It even allows Paulson to give money to foreign banks if he so chooses. That was the original proposal - we’ll see what gets passed. The Dems are pushing to give judges the power to reset mortgage rates, and if the feds can figure out what houses they now partially own, they might be able to do something in that way also. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [September 24, 2008, 6:13pm UTC](https://boards.straightdope.com/t/mortgage-bailout/464505/84 "2008-09-24T18:13:36Z")
The default rate is 1 in 11. So a little over 9 percent of the mortgages have to be dealt with. The plan is not to deal with them directly but to reward the financial companies with tax payer money. What will that do for the mortgage crisis. You could buy up the mortgages cheaply and redo them so the people stay and make payments. Instead we give the looters more money. Of course the money channel is against cutting the huge salaries and bonuses to the financial leaders. They just have to be given a fortune to do their jobs. Even though they have shown themselves willing to gamble with the viability of the company in the past. ---
**Author:** ![Shayna](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/shayna/32/17976_2.png) [@Shayna](https://boards.straightdope.com/u/Shayna)\ **Post date:** [September 25, 2008, 1:19am UTC](https://boards.straightdope.com/t/mortgage-bailout/464505/85 "2008-09-25T01:19:00Z")
Another interesting perspective, and piece of the puzzle. Former (shamed) New York Governor, Elliott Spitzer, wrote and Op Ed a month before the fact that he was employing hookers forced him to resign. > [@Elliott Spitzer](#): > > **How the Bush administration stopped the states from stepping in to help consumers.** > > Several years ago, state attorneys general and others involved in consumer protection began to notice a marked increase in a range of \*\*predatory lending practices \*\*by mortgage lenders. Some were **misrepresenting the terms of loans, making loans without regard to consumers’ ability to repay, making loans with deceptive “teaser” rates that later ballooned astronomically, packing loans with undisclosed charges and fees, or even paying illegal kickbacks.** These and other practices, we noticed, were having a devastating effect on home buyers. In addition, the widespread nature of these practices, if left unchecked, threatened our financial markets. > > . . . > > **Predatory lending** was widely understood to present a looming national crisis. This threat was so clear that as New York attorney general, I joined with colleagues in the other 49 states in attempting to fill the void left by the federal government. Individually, and together, state attorneys general of both parties brought litigation or entered into settlements with many subprime lenders that were engaged in predatory lending practices. Several state legislatures, including New York’s, enacted laws aimed at curbing such practices. > > . . . > > Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye. > > ``` > Let me explain: The administration accomplished this feat through an obscure federal agency called the Office of the Comptroller of the Currency (OCC). > > ``` > > . . . > > ``` > In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions **preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks.** The federal government's actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules. > > ``` > > But the unanimous opposition of the 50 states did not deter, or even slow, the Bush administration in its goal of protecting the banks. **In fact, when my office opened an investigation of possible discrimination in mortgage lending by a number of banks, the OCC filed a federal lawsuit to stop the investigation.** > > . . . > > ``` > When history tells the story of the subprime lending crisis and recounts its devastating effects on the lives of so many innocent homeowners, the Bush administration will not be judged favorably. The tale is still unfolding, but when the dust settles, it will be judged as a willing accomplice to the lenders who went to any lengths in their quest for profits. So willing, in fact, that **it used the power of the federal government in an unprecedented assault on state legislature** s, as well as on state attorneys general and anyone else on the side of consumers. > > ``` > > [http://www.truthout.org/article/eliot-spitzer-predatory-lenders-partner-crime-0](http://www.truthout.org/article/eliot-spitzer-predatory-lenders-partner-crime-0) I seriously, honestly, for the life of me, don’t understand why REPUBLICANS are not up in ARMS about this mess. _Especially_ “States Rights” Republicans like **Bricker** , etc. We are not talking about people taking advantage of the system, we’re talking about the GOVERNMENT out and out encouraging lending institutions to participate in **deceptive and predatory lending practices** , going so far as to SUE any State that tried to fight them. Why do some of you keep insisting on blaming the people who took out loans that were misrepresented to them in one way or another? Where is the responsibility of the lenders to say to an applicant, “NO, you’re not qualified. Sorry.”? Just because someone asks for something, doesn’t mean they should always get it. Many of these people should’ve been turned down, but instead they were **lured** to the trough, then **misled** about terms and fees and other aspects of these loans that even the most savvy borrower could easily have been duped by. And our Federal Government actively prevented stopping this! This is so maddening. ---
**Author:** ![Huerta88](https://avatars.discourse-cdn.com/v4/letter/h/82dd89/32.png) [@Huerta88](https://boards.straightdope.com/u/Huerta88)\ **Post date:** [September 25, 2008, 1:42am UTC](https://boards.straightdope.com/t/mortgage-bailout/464505/86 "2008-09-25T01:42:24Z")
I thought it was salutary that some of the Senators etc. were expressing skepticism about the $700 billion plan. But now I see tonight that some are wavering because they have gotten “concessions.” The two I heard discussed were idiotic. The first was making sure the government participates in any upside from the mortgages. Well, there may be no upside, and if there is, there’s a word for when the government takes over sectors of the economy – socialism. Second, they’re hell bent on “limiting executive compensation” at institutions that join the plan. Don’t get me wrong – if the government bails out your company, I guess they can place limits on exec compensation. It’s just that the degree of exec. compensation/bonus at any of these organizations is just so minimal (millions? Tens of millions? Hundreds? Even a billion or two?) compared to the government funding that I hope non one is offering serious concessions based on some symbolic willingness to dock a few dozen CEOs a couple of hundred million dollars. ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [September 25, 2008, 2:15am UTC](https://boards.straightdope.com/t/mortgage-bailout/464505/87 "2008-09-25T02:15:09Z")
Perhaps “limiting executive compensation” is a euphemism for another procedure altogether, one involving lamposts? ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [September 25, 2008, 2:39am UTC](https://boards.straightdope.com/t/mortgage-bailout/464505/88 "2008-09-25T02:39:40Z")
> [@magellan01](#): > > I did not say they were thieves. They were imprudent, some of them greedy. They made unwise decisions. And those decisions have ramifications. They should lose their homes. The prices should be allowed to drop closer to real value where others will pick them up. And as I said, if people were shown to do something illegal, they should be prosecuted. > > And the way you keep using the phrase “mortgage experts” is hilarious. You do so in order to equate them with doctors or lawyers so you can absolve them of responsibility. Their salesmen. You turned them down. I turned them down. Millions of people turned them down. Like in other aspects of life it doesn’t pay to be dumb or imprudent. Actions have consequences. Sometimes they’re bad. When they are, let others see what happens and learn from it. I do it because that is how they present themselves to customers. They acted like they were and they surely got the trust of customers who knew nothing. When they got a hold on these people they talked them into some dangerous loans. Now we can all pay for them. But these experts could only go as far as the rules allowed. They offered no money down and no proof of income loans because they could. If the regulations were in place it would not have happened. ---
**Author:** ![magellan01](https://avatars.discourse-cdn.com/v4/letter/m/45deac/32.png) [@magellan01](https://boards.straightdope.com/u/magellan01)\ **Post date:** [September 25, 2008, 2:55am UTC](https://boards.straightdope.com/t/mortgage-bailout/464505/89 "2008-09-25T02:55:59Z")
> [@elucidator](#): > > Say we have a mortgage agent, a “salesman”, just as you say, give him the name S. Nidely Whiplash, MBA. Presumably, Mr Whiplash has some passing familiarity with mortgages, as mortgage institutions do not commonly recruit from Starbucks baristas and bicycle messengers. He has at least a passing familiarity with what your banker thinks of as “the miracle of compounded interest”. Even if we don’t saddle him with an epithet like “mortgage expert” in a transparent ploy to slander doctors, he clearly must have _some_ expertise. > > In walks Ms R. Riding-Hood (known as Lil to her friends). Her first anxiety is not that she will get a mortgage, but that she will not, she is “leaning forward” in the ensuing collaboration. She doesn’t know ARM from term from fixed from hole in the ground. > > Are you seriously suggesting that they are on an even playing field, relative to each other? And that each of them has an equal responsibility for the outcome of their negotiation? Clearly, they do not, one of them knows, the other does not, there is nothing “equal” about that. Now, we might quibble over precise quantification, is Whiplash 95% responsible, 90%, more, less…? But by no stretch of the imagination are they equally responsible. I’ve not said nor implied that they are equal in their knowledge of mortgages. But each has a responsibility—to themselves—to strike a wise deal. I’d say that the borrower has a much greater responsibility, as his or her future may depend on this one deal. The mortgage guy has hundreds of these deals. When you go to buy a diamond, or a used car, or a mortgage, these people will know much more about the subject matter than you. That does not lessen the responsibility you have, it raises it. If you walk onto a used car lot and the salesman tells you this car id a cream puff, that it was only driven by a little old lady to church on Sundays, and you believe him, you’re probably an idiot. The burden primarily falls to the purchaser. I think most people understand that, which is why most people didn’t give into temptation and bite off more than they could handle. > [@elucidator](#): > > And, of course, there is the dull truth that one of them is going to cash a nice check from all of this, and the other will be saddled with a crushing burden. Hardly an equitible outcome, I hope you will agree. > > And while you seek to magnify and exaggerate what meagre responsibility Ms. Riding-Hood may deserve, you repeatedly assure us that Mr Whiplash has done nothing illegal, you throw down the gauntlet to prove that he did, as though this had any real bearing on the matter at hand. It does not. Sure it does. If you go into a jeweler and salivate over a four-carat diamond and buy it, without regard to cut, color, or clarity, and wildly overpaid, you are at fault. Unless—unless—the seller did something illegal. > [@elucidator](#): > > If Mr. Whiplash steered the unfortunate Ms Riding-Hood into a mortgage doomed to fail, then he is either a blithering incompetent or he is a thief. The legality of his actions reflects badly on our legal system, but doesn’t decrease his culpability in the slightest. I diminishes his _legal_ repsonsibility greatly. He also risks his reputation and the retribution of bad karma. The bottom line is that scummy people exist. That’s a reason one must be prudent. There’s a reason that we’ve all heard the term “caveat emptor”. > [@elucidator](#): > > There are many, many things one ought not to do that are entirely legal. I trust this is not news to you. I agree completely. But that doesn’t mean that one has an avenue to relief to pursue. I have no idea what world you live in. There are no do-overs. That’s why one must be very careful. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [September 25, 2008, 3:30am UTC](https://boards.straightdope.com/t/mortgage-bailout/464505/90 "2008-09-25T03:30:27Z")
The fact that they could sell these stupid mortgages because regulations were lifted does not mean a thing to you. If the regs were not killed there would be no crisis. No body would have strong armed these companies into loans they did not want to make. ---
**Author:** ![magellan01](https://avatars.discourse-cdn.com/v4/letter/m/45deac/32.png) [@magellan01](https://boards.straightdope.com/u/magellan01)\ **Post date:** [September 25, 2008, 3:38am UTC](https://boards.straightdope.com/t/mortgage-bailout/464505/91 "2008-09-25T03:38:36Z")
> [@gonzomax](#): > > I do it because that is how they present themselves to customers. They acted like they were and they surely got the trust of customers who knew nothing. When they got a hold on these people they talked them into some dangerous loans. Now we can all pay for them. > But these experts could only go as far as the rules allowed. They offered no money down and no proof of income loans because they could. If the regulations were in place it would not have happened. So, the lenders didn’t break the rules, they followed the rules. Okay. But these people had a choice: to lick their chops and get in over their heads, or not. No one held a gun to their heads. Or mine. Or yours. And we said no. I thought it too risky. Now why should these people be rewarded for their poor decisions? And, I should point out, doing so penalizes the prudent. Why should someone get a handout for a bad decision and I don’t get one for making a wiser decision? And if I’m not in default now, should I just fall into default so I get some free help? I don’t see how this is morally justifiable. In the end you’ll actually be encouraging the very bad behavior that brought us this mess. ---
**Author:** ![vison](https://avatars.discourse-cdn.com/v4/letter/v/e47774/32.png) [@vison](https://boards.straightdope.com/u/vison)\ **Post date:** [September 25, 2008, 3:39am UTC](https://boards.straightdope.com/t/mortgage-bailout/464505/92 "2008-09-25T03:39:22Z")
[This oughta cheer y’all up.](http://www.forbes.com/home/2008/09/23/bailout-paulson-congress-biz-beltway-cx_jz_bw_0923bailout.html) > [@](#): > > In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy. > > “It’s not based on any particular data point,” a Treasury spokeswoman told [Forbes.com](http://Forbes.com) Tuesday. **“We just wanted to choose a really large number.”** ---
**Author:** ![magellan01](https://avatars.discourse-cdn.com/v4/letter/m/45deac/32.png) [@magellan01](https://boards.straightdope.com/u/magellan01)\ **Post date:** [September 25, 2008, 3:46am UTC](https://boards.straightdope.com/t/mortgage-bailout/464505/93 "2008-09-25T03:46:31Z")
> [@gonzomax](#): > > The fact that they could sell these stupid mortgages because regulations were lifted does not mean a thing to you. If the regs were not killed there would be no crisis. No body would have strong armed these companies into loans they did not want to make. Granted. But so what? What you seem unable to grasp—or hellbent on ignoring—is that NO ONE HELD A GUN TO ANYONE’S HEAD to take any deals. I was offered the same deals. I think you were too. I said NO. I did without what one of these deals could have gotten me. I didn’t gamble. All these years, I thought I was not winning. Now it turns out I did the prudent thing. Removing the regulations made this possible. A bunch of people making bad personal decisions, one at a time, is why we have the problem. If tomorrow, San Francisco makes it legal to carry a concealed weapon and ten people take those guns out and kill people, the fault lies with the people. Or do you think they shold go scott free because it wouldn’t have happened of the regulations weren’t removed? ---
**Author:** ![Shayna](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/shayna/32/17976_2.png) [@Shayna](https://boards.straightdope.com/u/Shayna)\ **Post date:** [September 25, 2008, 3:58am UTC](https://boards.straightdope.com/t/mortgage-bailout/464505/94 "2008-09-25T03:58:09Z")
[ul] [li] **Predatory** lending practices[/li][li] **Misrepresenting** the terms of loans[/li][li]Making loans **without regard** to consumers’ ability to repay[/li][li]Making loans with **deceptive** “teaser” rates that later ballooned astronomically[/li][li]Packing loans with **undisclosed charges and fees** [/li][li]Paying **illegal** kickbacks[/li][/ul] Which of these concepts do _you_ not grasp? ---
**Author:** ![Spoke](https://avatars.discourse-cdn.com/v4/letter/s/a88e57/32.png) [@Spoke](https://boards.straightdope.com/u/Spoke)\ **Post date:** [September 25, 2008, 4:01am UTC](https://boards.straightdope.com/t/mortgage-bailout/464505/95 "2008-09-25T04:01:57Z")
> [@magellan01](#): > > Granted. But so what? What you seem unable to grasp—or hellbent on ignoring—is that NO ONE HELD A GUN TO ANYONE’S HEAD to take any deals. The point _you_ are missing is that we are _all_ about to pay and pay dearly for the lack of regulation. It is not just the homeowners who made poor decisions who will suffer. This crisis represents a failure of _laissez faire_ economics. Society at large has an obvious stake in protecting the unsophisticated from predatory lenders. We are seeing what happens when our government abdicates that responsibility. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [September 25, 2008, 4:04am UTC](https://boards.straightdope.com/t/mortgage-bailout/464505/96 "2008-09-25T04:04:08Z")
He wants blood. He wants to show how he was too smart to fall for these tactics, if they are not as smart as him ,they deserve to be in the street. The mortgage companies were just doing business. They are blameless. ---
**Author:** ![magellan01](https://avatars.discourse-cdn.com/v4/letter/m/45deac/32.png) [@magellan01](https://boards.straightdope.com/u/magellan01)\ **Post date:** [September 25, 2008, 6:28am UTC](https://boards.straightdope.com/t/mortgage-bailout/464505/97 "2008-09-25T06:28:42Z")
> [@gonzomax](#): > > He wants blood. He wants to show how he was too smart to fall for these tactics, if they are not as smart as him ,they deserve to be in the street. The mortgage companies were just doing business. They are blameless. Ha. I want justice, that’s what I want. You fuck up, YOU pay. NOT me. The more we allow this natural order to rule, the more we remind people that their decisions have consequences and the fewer people who will make the same mistakes in the future. ---
**Author:** ![magellan01](https://avatars.discourse-cdn.com/v4/letter/m/45deac/32.png) [@magellan01](https://boards.straightdope.com/u/magellan01)\ **Post date:** [September 25, 2008, 6:38am UTC](https://boards.straightdope.com/t/mortgage-bailout/464505/98 "2008-09-25T06:38:16Z")
> [@Shayna](#): > > [ul] > [li] **Predatory** lending practices[/li][li] **Misrepresenting** the terms of loans[/li][li]Making loans **without regard** to consumers’ ability to repay[/li][li]Making loans with **deceptive** “teaser” rates that later ballooned astronomically[/li][li]Packing loans with **undisclosed charges and fees** [/li][li]Paying **illegal** kickbacks[/li][/ul] Which of these concepts do _you_ not grasp? The lending rules were relaxed at the behest of democrats so that people who wouldn’t ordinarily qualify for a loan could get one. The risk assessment that had been in place for so long was gutted or ignored. This is a result of that. For decades the market knew that you should get 20% down, maybe ten in extraordinary situations. They knew that the likelihood of someone defaulting would be higher if they had little or no money on the line. The rules concerning how much one could borrow based on their income was also relaxed. What we have now is the result of those well-intentioned changes. And now you want to let people who made dumb or imprudent decisions off the hook, rewarding them for those decisions. This is just one more way the democrats will seek to redistribute wealth. It’s disgusting. And as I’ve said repeatedly, if there’s anyone that is a victim of an item on your list that is a crime, we already have a mechanism to deal with that. And those convicted should be treated like the scum that they are. ---
**Author:** ![magellan01](https://avatars.discourse-cdn.com/v4/letter/m/45deac/32.png) [@magellan01](https://boards.straightdope.com/u/magellan01)\ **Post date:** [September 25, 2008, 6:40am UTC](https://boards.straightdope.com/t/mortgage-bailout/464505/99 "2008-09-25T06:40:21Z")
> [@spoke-](#): > > The point _you_ are missing is that we are _all_ about to pay and pay dearly for the lack of regulation. It is not just the homeowners who made poor decisions who will suffer. > > This crisis represents a failure of _laissez faire_ economics. > > Society at large has an obvious stake in protecting the unsophisticated from predatory lenders. We are seeing what happens when our government abdicates that responsibility. I agree. I am not opposed to regulation whatsoever. We will put it back in place. Many of the very same common-sense rules and guidelines the democrats sought to strip away over the years. Well-intentioned as it might have been. ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [September 25, 2008, 6:57am UTC](https://boards.straightdope.com/t/mortgage-bailout/464505/100 "2008-09-25T06:57:50Z")
Again with the crime thing! What is it that you think you’re proving with that? [Previous page](https://boards.straightdope.com/t/mortgage-bailout/464505.md?page=4) [Next page](https://boards.straightdope.com/t/mortgage-bailout/464505.md?page=6)