by Mark P. Dangelo
It is a double edge debate – help those truly in need against prolonging the situation and making taxpayers who are diligent and frugal pay the price. What about the other one-half of the country with paid off mortgages who have watched 20+% of their largest investment vanish? Do they get a tax break? Taxing future generations for the failure of an existing one also is not just a moral hazard, but one that will weigh on global competitiveness, interest rates, sovereign debt ratings, and more.
Does writing off principal help create jobs in a country that lost 9 million in three years? Who is this equity / write down going to help or hurt (e.g., unintended consequences)? Is the forcing of principal write-offs by the government a new form of capitalism or something else?
The logic of this extended bailout, like the value-chain across the mortgage finance processes, is holistically flawed and in need of a serious transformation. Yet, who will stand up and make the changes to the flawed processes? With mid-term elections coming up, who will ethically stand up for all the American population and corporate investors and say, “there must be a better way” regardless of what party affiliation they subscribe to?
We need positive ideas that create and redefine industries (e.g., housing, real estate, GSE’s, mortgage financing, private securitizations). Many of us have tried to provide innovation in this area, but those in positions of influence are ensuring the old ideas are the only ideas. It is a discouraging time for many of us within the industry … as domestic and global events and regulations go from bad to worse.
For original FT article, see http://www.ft.com/cms/s/f1cd545a-38e6-11df-9998-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F3%2Ff1cd545a-38e6-11df-9998-00144feabdc0.html%3Fftcamp%3Drss&_i_referer=&ftcamp=rss
Tags: Financial Times, GSE, MBS, Mortgage, Mortgage forgiveness