Tuesday, June 17, 2008

A moral question, and a Spotty (tm), too!

For this letter in today's Star Tribune, Tom Obert wins a Spotty™:

A moral question

David Strom's June 13 column on the Borrower Relief Act ("It's a wonderful life when government is kept in check") is a perfect example of why certain individuals feel the need to identify themselves as "compassionate" conservatives -- the implication being, absent the modifier, that conservatives view themselves as uncompassionate.

The issue of mortgage relief is not about whether to help people caught up in the subprime mortgage mess is the legal thing to do (in Strom's opinion), but rather whether it is the right thing to do.

Foreclosure, or the threat of foreclosure, is not occurring in a few isolated incidences -- it is a nationwide pandemic. Foreclosure not only affects the specific party involved but the entire neighborhood or community in which it takes place. Thus, thousands of homeowners face the prospect of decreased property values through no fault of their own.

From both a practical and an economic standpoint, it makes sense to do everything possible to prevent foreclosures.

Strom did not write this column when the government bailed out Bear Stearns and other lenders who were hoisted by their own petards. Apparently, he had no qualms about using "other people's money" in those instances because they are major business institutions and their demise would allegedly affect the entire economy. That is debatable -- but it is certainly true that the absence of mortgage relief will lead to the demise of many neighborhoods and communities.


What is possible, what is fair, and what is just or "right" to do with the mortgage crisis at the federal and state levels are all legitimate questions.

But when peevish Governor Pepsodent and Davy "Herbert Hoover" Strom start quoting the U.S. Constitution (the prohibition against impairment of contract) as the basis for doing nothing, perhaps they should look at another part of the Constitution, the Preamble:

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

Let's see, addressing the mortgage crisis:

Form a more perfect Union? Check.

Establish Justice? For a lot of borrowers, anyway, check.

Insure domestic Tranquility? Double check.

Promote the general Welfare? Check.

The securitization of the mortgage industry makes it impossible for the average homeowner to talk to his lender and try to do a "work out" as was the case in an earlier time. We're caught in a situation where the loan originator took a fee, other parties took a fee for packaging, syndicalizing, and selling the mortgages to a pool of investors. Risk and reward were effectively divorced from one another. The parties left with anything at stake can't possibly deal with each other.

Our Spotty™ winner Tom makes a good point when he says that the likes of Davey Strom and Pepsodent were silent when Ben Bernanke and the Federal Reserve Bank make the discount window available to a whole class of new supplicants - probably illegally - and started taking some really dodgy collateral. We'll see how much of that the taxpayer gets stuck with.

Remember, boys and girls, a Spotty™ is awarded to the author of a letter to the editor, an op-ed piece, or a blog post or comment that Spot wishes he had written himself.

No comments: