Mae and Mac

I had a full post here for this discussion topic, and as usual Blogger, who really are a POS owned by Google, who are worse than the Borg, blew it away. Did I say something Google didn't like? I wonder.

I am normally a believer in unrestricted trade and free markets, with a tiny bit of protectionism for domestic workers thrown in (please tax domestic companies that offshore non manufacturing labor, pretty please). However, the time has come to make an argument for a federal bail out of Mae and Mac.

And here's why.

Mae and Mac hold a disproportionately large share of the U.S. mortgage market. People who have Mae and Mac mortgages are faced with very few options under current market conditions should an emergency refinance (i.e. if it fails, who will buy their loans) become necessary. Traditional banks have become very reluctant to lend money to anyone with less than 20%, or 20% existing equity, or sterling credit. Essentially, because everyone saw an opportunity for easy money, and failed to remember the first rule of finance...shit, the Golden Rule of Finance, which is playing for profit is a short term fool's game, and playing for growth is for long term very smart cookies (only). Banks saw all this liquidity, or the potential for liquidity, in the market, and began to run ad campaigns to persuade folks to tap the money in their homes as a source of cash; thus the run of false affluence you saw in the late 90's and early 2000's. Not everyone was doing great; we were merely spending that which we had paid for in our housing allowances throughout our lives. A false front, if you will.

So now that they put in a new marina at the yacht club, the banking industry has decided that it doesn't need the support of the bread and butter customer, and it doesn't want to help us anymore. While I applaud Bank of America for making the risky decision to purchase CountryWide; I think they could do more.

When I read about how they are aggressively reworking mortages that are at risk of or are actively in default, I think that maybe the idea of corporate responsibility isn't dead after all. Then I dig further - no, they are merely RESTRUCTURING the debt. Just deferring things until later, you know, until you catch up. Which misses the point. If you borrowed $300K, and your house is now only worth $200K....what on earth keeps you in that house? If the bank won't work with you (the odds of your house suddenly re-rising in value are: Slim, meet your kissin' cousin None), what is to prevent you from walking away? Banks shoot themselves in the foot by refusing to reduce principal in true hardship cases. And prove themselves to be greedy arrogant unfeeling corporate bastards in the process.

G'wan, ask me how I really feel. :-)

Simply, if you let Mae and Mac fail, I guesstimate that 1/4 of the folks in the U.S. who have mortgages through them will suddenly be homeless. The terrorists won't have needed 9/11 to have tanked our economy; we'll have done it to ourselves through greed and negligence.