The complete economic destruction of America continues for one reason. The people have lost their fortunes as were once protected in their home values. And it is all the government's fault. So the government ought to fix it. Now this hurts me to say, because at the heart of all I stand for is: less government, right wing ideology, etc.... But when the mess has been caused by government interference, and the ongoing chaos continues because the government won't fix it, it is time to tell the government to grow up and (for a change) responsibly clean up their mess.
You see Barney Frank, Chris Dodd and all of their left wing ancestry back to the Carter administration made housing for the Masses their goals. Unfortunately they dropped that all important 'M' on masses - as in their eagerness to give everyone more, they typically ended up with less for almost everyone. They particularly destroyed housing values in the longer run, and consequently the mortgage industry, and consequently Fannie Mae and Freddie Mac, and consequently the rest of the economy for one reason... In their attempts to fix it, they simply over baked it. They clearly knew nothing (and still don't know anything) about the motivations of people, the machinations of money, the strengths of a mortgage, or the value of a home. And that is why in their attempt to fix it all, they have protected the banks, wall street, even the Federal Reserve, but ignored the rest of us. Cause they don't know how to fix it.
But I do! So here it is: Housing Value Guarantees.
What? More big government? Hardly a right wing concept - and besides its impossible to do - so they try to tell me. But here are the real reasons why to do it, how to do it, and why we cannot go on effectively without doing it.
1. The value of the American economy has always been measured in consumer spending that was made possible by the average Americans excess income, and confidence in their net worth - almost exclusively made up of their homes' value less liabilities. Today that value is trillions of dollars less than it was just a few years ago.
2. Americans have lost confidence in their personal net worth - as it was - ever returning, and they have adopted a new attitude - hunker down, and spend nothing except on essentials. The economy has been in a tailspin since, and their is not a hint of a good idea in the air from anyone (until now).
3. As a result - mortgages are not being renewed because homes have no equity, people have no jobs, credit scores have been decimated, and the idiot President is working on his golf game and basketball brackets. Wall street and the banks have quit lending - principally due to ill placed government incentives NOT to lend - as government pays the banks interest on their reserves with relatively no risk - at least compared to the risk of lending the money to you. And the banks get the bonus of cash flowing their operations easily because the money never leaves their banks. So why lend for mortgages to homeowners whose homes are worth less than the amounts owed on them? And then we learn that the banks actually make even more money by foreclosing than they do in honoring the mortgage agreements....
4. But the reason all of this happens is because the government - using our money - has already guaranteed almost all of the value of homes in the first place - to the banks - by guaranteeing the mortgages. the only losers are you and I. The banks win, Wall Street is winning, and the government never feels a thing... so you lose and they all win.
5. But if the government were to guarantee the last average 10% of home values to the market place instead of the banks - the result would be ENORMOUSLY different. And here's why:
6. By guaranteeing home values today at comparables (comps) based on last recorded sale values adjustable by already documented market changes to an actual value to an agreed upon baseline date, and then guaranteeing an increase of 2% per year to minimize inflation, and offset depreciation, everyone would be given a new confidence in owning a home, knowing where the value is going, and what can be done with that value.
7. Banks could then only make money by giving mortgages - not foreclosing, and they would have every incentive to work with their customers instead of against them. The credit factor would still be a rate consideration, but like car title loans, the real protection in most of a mortgage would be in the asset and not just the borrowers ability to repay. To offset the potential for damages to properties, appraisal comps would still be factors in the government guaranteed value, and property taxes would be increased by 10% to create a property maintenance reserve fund that could be used for improvements, but would be used for basic maintenance in the event the irresponsible failed to keep the property up. Banks would have to monitor their accounts for value deterioration, but the essence of the market value as compared to similar properties of similar condition would be maintained by government guarantee built on market forces.
8. So how would the guaranteed value be established? The key is to build a baseline of values off of already recorded and traded values - ideally for a period back 3-7 years from date of implementation - before any type of speculation could have manipulated values. These values are already all safely locked into data in registry offices across America.The guarantee should then lock the values into average sale prices consistent with prices from a baseline date of around say 1/1/2010 when values had already taken a beating, but the underwater disaster since that time is made up for with a surge of immediate value recovery, and the rest of the public has a new lease - no mortgage - on life with the opportunity to pursue the American dream once again - own a home, mortgage it up, and spend like a drunken sailor. The economy will be back on track in no time.
9. But how you ask, can the government support the guarantee? Its simple - the same way it has guaranteed the FDIC and mortgage values - 90% or more of all home values - through Fannie Mae and Freddie Mac - Sleight of hand, and occasionally honest market manipulation. They have been guaranteeing an average 90% of home values at the highest prices they ever sold for just a few short years ago - just not to you. So whats another 10% or less in today's price market - especially when this time it's to your benefit instead of just theirs.
Lets face it the American government has been broke for years. The only reason it doesn't give up is that it is the only country in the world that has the privilege of printing what is still recognized as the world's primary currency. And frankly - they print as much as they want to and have to. Every honest economist in the world knows it. Every thinking American knows it, and even China knows it. That's why they keep on investing in America - they can trust us to keep on doing it. And we will. We have to. So why not fix the american economy while were screwing the rest of the world? It really is this simple. Get a few administrators in a room, and hammer out the details. Run it through Congress, and lets get on with it. We all need it, and we all know it.
Oh and by the way, if any idiot in Congress decides that this is too dangerous economically? Deal with them the same way so many other interfering government folks have been dealt with - general disappearance. It is the American way. We pay a lot for our CIA, FBI, NSA, and Armed Forces - roll the dice and assign the task. I don't personally like it, and likely you don't either, but its been going on for years, so you might just as well pinch your nose, close your eyes and starting yelling. In a few short weeks and months, everything will be right back on track before we let the idiots into the bar in the first place.
