Chutzpah redefined-See Housing Bill

Chutzpah is a Yiddish word that is usually defined by this example: A young man murdered both his parents, and after being tried and convicted,  demanded mercy because he was an orphan.  

Now we have a better definition. Homebuilders, by raising the price on their product based on a demand created by artificially low interest rates and bogus predatory ARM mortgages, made great profits a few years ago.  Now they want their taxes paid on profits from those years returned, since the balloon that they fostered is now ending.  

The judge refused to show mercy for the apocryphal killer, but the Congress of the United States is about to reward homebuilders with ten billion dollars of rebates.

I find this issue profoundly disturbing because of a unique aspect, there is a general consensus forming between the two parties, which in a two party system define American policy alternatives.  Certainly the Iraq war is a larger issue, but voters have a clear choice in November whether we end our involvement or continue.  Same with universal health care, rights to abortion, income redistribution and other fundamental issues of our country.

With John McCain's sudden reversal of his position that he articulated clearly as recently as a week ago, there is a consensus forming for this bill, with only President Bush offering a threat of a veto if it goes too far in the extent of the "bailout."

There is one articlefrom the Washington Post that clearly articulates what is wrong with every aspect of this bailout. It gives the only explanation for this homebulder's giveaway.

All this (the elements of the bill being crafted) will do little to solve the housing crisis, but it may help to alleviate the campaign funding crisis created when these same tax provisions were jettisoned from the economic stimulus bill. The angry and ham-handed response from Brian Catalde, the president of the National Association of Home Builders, was to very publicly announce the indefinite cutoff of all contributions to federal candidates. Were those same provisions to be enacted now, it would be a stunning acknowledgement by members of Congress of the direct connection between political money and legislative outcomes.

This bill will make the American public co signers of many of the mortgages originated over the last few years, but the owners will have absolute property rights.  They will be able to rent to those, many who refused to be sucked into the bubble, at the highest price they can get.  And if the renter doesn't have the money.  If they lose their jobs or get sick, well they will be evicted.

It is, after all their property.  The fact that you, me and every American is underwriting their mortgage gives us no say in how they use the property, and whether they will be altruistic, or like most homeowners, profit maximizers.

Enough.  It's really all too clear, if anyone is interested.

•  Comments welcomed........................n/t

  by arodb on Fri Apr 11, 2008 at 01:44:44 PM PDT

•  Yiddish Spell Check

  It's spelled "Chutzpah"

  As in, I've got a lot of Chutzpah to make a comment correcting your spelling :-)

  by Noah Jenda on Fri Apr 11, 2008 at 01:51:30 PM PDT

  •  Already caught it, thanks....n/t

    by arodb on Fri Apr 11, 2008 at 01:52:25 PM PDT

  •  Hey, I was just about to hit "post" because I

    noticed the same thing just as the diarist fixed the typo.

    by be the change you seek on Fri Apr 11, 2008 at 01:53:35 PM PDT

    •  Ain't technology great...

      now how about the substance of the diary.  So few people seem to care about this that it's frustrating:

      It's like the man who for decades kept going to the wailing wall in Jerusalem,

      Someone went over to him and asked what he was praying for.  He responded, "Peace between Arabs and Jews"

      And the man asked whether he is getting any response from the lord and he said:

      "It's like talking to a wall."

      by arodb on Fri Apr 11, 2008 at 01:56:56 PM PDT

•  I installed a new sink

  two weeks ago.

  I'd like my income tax money refunded.

  by SingleVoter on Fri Apr 11, 2008 at 02:18:27 PM PDT

  •  Yes, I agree that those whose sink failed...

    are the victims of predatory plumbers.  They need to be made whole by the public.  And I bet now you don't have the money to take care of your sick mother.

    Damn anyone who would oppose reimbursing you for your expense.

    by arodb on Fri Apr 11, 2008 at 02:26:41 PM PDT

    •  Predatory plumbers:

      My landlord got a bill for $550 to fix my toilet.  It was not fixed on the first 2-1/2 hour trip, so I had to call them back.  The next trip was about an hour-and-a-half but at least the second guy knew what he was doing.  (It's some kind of jet-propelled toilet that will suck the hairs right off your legs if you stand too close when you flush, and the whole insides ended up replaced, but still...)

      As far as the bailout, I guess whether and how much one gets bailed out is proportional to one's influence ($$).  Unfortunately, this is not new but it stills stings when it gets tossed up into our faces again and again.

      by luckylizard on Fri Apr 11, 2008 at 06:52:06 PM PDT

•  It's to the point now where

  people are just too worried about keeping their own houses and jobs to worry about "someone else's house".....I hear it at the grocery and gas station.  Because this "crisis" only affects 2 million people, and they are not one of them, they really could care less.

  The problem is, these builders and lenders should lose their shirts too.  And most of the fault lies with the "mortgage brokers".  They made the bad loans, the banks accepted them, and the builders built way too many homes.  They should have to bear the brunt of the "correction" that is coming.  And if some of them have to go down?  Well, so be it.

  The only solution I can see that will spread most of the pain around is to freeze ARM mortgages where they are now, and reissue the mortgage as a fixed-rate 20- or 30-year note.  The banks get most of their money back, the people stay in their homes, but still have to pay the exhoribitant price they bought the house for.  While all this is going on, a few builders will go belly-up and that's just too bad.  And within a few months, the real idiots who bought too much house and can't pay their mortgage no matter what the interest rate will foreclose, housing prices will come down to a reasonable level again, and the builders will just have to find another way to make money, like many other Americans.

  I know the banks were counting on the future interest they were going to make on those ARM resets since they've lent it out 30 times over already, but they have a really, big, fat lesson they need to learn.

  A whole new banking regulatory agency needs to be created too.....the banks have been acting like teenagers having a party while their parents (the oversight) were out of town.

  There are Americans who are going to get hurt in all of this.  The carpenters that work for the builders, the electricians, other homeowners in foreclosure-prone neighborhoods, prospective homeowners, etc.  It sucks all the way around.

  But I will do everything in my meager power to keep Congress from handing any more of my money to tax-cut-receiving businesspeople who took a gamble and lost.

  by PsychoSavannah on Fri Apr 11, 2008 at 02:33:38 PM PDT

  •  Very well said...

    as a matter of fact it sounded exactly like my sentiments, only better expressed.

    But it looks like, in spite of the publics feelings, that congress will pass this bill.

    This is is why I keep writing these diaries, even though they are uninteresting to those on this site.

    And the proposed bill is not even progressive by any stretch of the imagination.  If houses fall, they will be purchased eventually, and only the banks will be hurt, which they richly deserve.

    And then working people will have a chance at buying at the lower prices.  The Democrats are actually defending the banks through the poor poor homeowners.

    It's an egregious scam, yet I fear, I'm certain, they will get away with it.

    I've never been for rent control.  But if people are bailed out by public money, they have public housing, and should not be able to maximize profit at the sacrifice of the really poor, who will end up on the street.

    by arodb on Fri Apr 11, 2008 at 02:41:56 PM PDT

  •  problem with this

    The banks get most of their money back, the people stay in their homes, but still have to pay the exhoribitant price they bought the house for.

    This course-of-action will unfortunately keep housing prices propped up at those exorbitant levels. And those levels are totally unaffordable in the market unless buyers have access to the Liar Loans of yesteryear.   This is particularly acute in the bubble markets of california/florida/vegas/ etc.

    I'd prefer to see home prices drop to reasonable & historic levels of 3-3.5x income... of course that means letting the market correct and putting hundreds of thousands of people upside-down in their mortgages.   But they can walk away and rent if they absolutely have to.  

    by soros on Fri Apr 11, 2008 at 02:57:29 PM PDT

    •  Yes, you got it....

      why can't our Democratic Legislators in Washington. I see a giant scam, as described in the quote in my diary.

      And it makes me a little sick about this party, as if I have a choice.

      by arodb on Fri Apr 11, 2008 at 03:07:54 PM PDT

•  You are right!

  This diary is waaaaayy better than the pmac. Much more intuitive discussion here.
  I would like to delete my comment in the thread there and post here.

  The problem with artificial prices is...

  no one can no longer afford a house. You can't get bubble prices without bubble lending.

  Consider this. The government or FED is able to stop the housing prices from falling, literally freezing them in place. Price controls do not work. Who can afford to buy?

  The historical norm was 20% down. Well 20% down on a $200K is $40K ... hard enough. In CA 20% on the median $500K home is $100K.

  Where are all the new buyers going to come from. Nobody sells because nobody can buy.

  by joeshwingding on Fri Apr 11, 2008 at 04:57:50 PM PDT