I kid you not, the headline above is a faithful representation of the thrust of an article today in the New York Times, “The Scars of Losing a Home,” by Yale economist Robert Shiller.
With friends like this, liberals have no need of enemies.
Shiller’s argument is ludicrous: implement the legislation before Congress, which guarantes up to $300 billion in mortgages for stressed borrowers, to prevent psychological damage to them. Wouldn’t it be cheaper just to hand out Prozac? Or copy New York’s Red Cross 9/11 mental health program?
This piece illustrates much of what is wrong-headed about the “rescue the homeowner” concept. First, attempting to prop up assets at levels not supported by the underlying economics (in this case, incomes) does not work (see here for an illustration). The prices will in the end revert to a sustainable level, if not trade below them for a while in some (perhaps even many) markets. Japan is an extreme example of the consequences: low growth due to good capital being thrown after bad and delays in clearing out bad loans and recapitalizing the financial system so it could get back to its job of funding productive enterprise.
Second, keeping housing expensive hurts first-time buyers, such as the young and the lower income. It not only makes it more difficult for them to engineer a purchase, but in communities which participated in the housing boom, assures that their housing investment will be lousy, if not a loser. It’s unlikely to appreciate from an inflated level; the best outcome would be for it to hold its nominal value for a long time while its real value gets eroded by inflation. Shiller, of all people, ought to know that. He did a long-term study of US housing prices and concluded that they had grown at a 0.4% real rate since 1890.
Let’s parse some of the key paragraphs of Shiller’s article:
The trend is unmistakable, and suggests that, without government intervention, many millions of American families will be losing their homes before long.
What would this mean in human terms? Picture a line of moving trucks extending for hundreds of miles: they are taking the furniture of countless families to storage lockers. Picture schoolchildren saying goodbye to their classmates. They aren’t going on vacation: they are being abruptly moved to the other side of town.
It’s easy to take a stern view of this spectacle. The arguments go something like this: Foreclosure is not the end of the world. There are valuable lessons to be learned from such a life experience. After all, we live in a capitalist economy that thrives on the sanctity of contracts. The founders of our nation put the contract clause into the Constitution to make it clear that people need to live up to the documents they sign…..
Now, let’s take the other perspective — and examine some arguments against the stern view. They have to do with the psychological effects of strict enforcement of a mortgage contract, and economists and people in business may need to be reminded of them.
I happen to be an expert in this topic (and to my knowledge, Shiller does not have a degree in psychology). I moved frequently in my childhood and went to 10 different schools before I finished high school. But no, we weren’t chased by creditors; my father was often transferred and promoted.
Yes, moving if you are a kid sucks. But Shiller wouldn’t argue that government intervention is called for to prevent family relocations due to getting a new job, divorce, deciding to be closer to aging parents. Note that other forms of financial trauma that might lead to a residential downsizing also fail to merit government subsidies, such as a renter having to move into even smaller digs (or moving in with parents or children) due to a job loss, high medical bills, or overspending. No, thanks to the sanctity of homeownership, giving up a house you can’t afford is a tragedy deserving of Federal aid, while other forms of psychological or financial loss don’t cut it.
Shiller argues that we are making homeowners the fall guy for a problem created by many:
….we have to consider that we cannot squarely place the blame for the current mortgage mess on the homeowner. It seems to be shared among mortgage brokers, mortgage originators, appraisers, regulatory agencies, securities ratings agencies, the chairman of the Federal Reserve and the president of the United States (who did not issue any warnings, but instead has consistently extolled the virtues of homeownership).
I’m as happy as the next guy to blame a lot of what is wrong with the country on Bush, but do you really think Bush or even Greenspan talking up homeownership actually influenced a single buyer, or even a single broker?
Shiller goes on to tell us that those who don’t agree with him are hardhearted:
But instead of having sympathy for these homeowners, many people blame them for their predicaments. That isn’t surprising. It’s an example of a general tendency that was documented by social psychologists decades ago.
In his 1980 book, “The Belief in a Just World: A Fundamental Delusion,” Melvin Lerner, a social psychologist, argued that people want to believe in the inherent justice of the economic system in which they live, and want to believe that people who appear to be suffering are in fact responsible for their own situations. He provided empirical evidence, derived from experiments, that after an initial pang of sympathy, people tend to develop negative views toward others who are suffering. That negative tendency seems to be at work today.
That’s a crock. The papers are full of sad stories about beleagured homeowners. There is plenty of sympathy. I feel sorry for the homeless too. But if I gave every homeless person I saw in New York a fifty, I’d be on the way to being homeless myself.
The mortgage bill has a tab that could be as much as $300 billion. That’s a $1000 liability of per every man, woman, and child. That’s on top of the $1500 in contingent liabilities taken on by the Fed to bail out the banking industry, which is also in part to shore up the mortgage markets. When you are talking numbers this large, this isn’t merely a Puritanical exercise in enforcing contracts; it’s also about basic equity. Shiller asserts that not bailing out the chumps will lead them to take a cynical view of contracts. You could just as easily argue that the responsible will conclude that there is no point in being honorable, they might as well try to game the system (including lie about their income and enter into agreements they probably can’t fulfill) like everyone else.
Back to Shiller:
…it is important to consider the psychological trauma of foreclosure. No one is likely to starve or sleep on the streets as an immediate result of a foreclosure, and the authorities no longer dump a family’s furniture on the sidewalk when it happens. Nonetheless, there is deep trauma.
Homeownership is fundamental part of a sense of belonging to a country. The psychologist William James wrote in 1890 that “a man’s Self is the sum total of all that he CAN call his, not only his body and his psychic powers, but his clothes and his house, his wife and children, his ancestors and friends, his reputation and works, his lands and horses, and yacht and bank account.”
Homeownership is thus an extension of self; if one owns a part of a country, one tends to feel at one with that country. Policy makers around the world have long known that, and hence have supported the growth of homeownership.
I find it noteworthy that the most contemporary psychologist Shiller could find to buttress his position is from the nineteenth century. And if we accept James’ view of possessions that are central to identity, Shiller should be arguing for rescues for yacht and horse owners too.
Now admittedly, this is not a validated instrument, but a widely used stress scoring test puts loss of spouse as 100 and divorce at 73. Foreclosure is 30, below sex difficulties (39), pregnancy (40), or personal injury (53). Change in residence is 20.
Note that if we as a society were worried about psychological damage, being fired (47) is far worse than foreclosure (30), and if it leads to a change in financial status (38) and/or change to a different line of work (36) those are separate, additive stress factors. Yet policy-makers have no qualms about advocating more open trade even though it produces industry restructurings that produce unemployment that does more psychological damage than foreclosures. As a society, we’ll pursue efficiency that first cost blue collar jobs, and now that we’ve gotten inured to that, white collar ones as well (although Alan Blinder draws the line there).
But efficiency arguments don’t apply to housing since we are sentimental about it. And it’s that sentimentality that bears examination, since it engendered policies that helped produce this mess.
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I am a simpleton. The financial pain will go somewhere. It will fall on improvident borrowers and lenders or Uncle Sam will shift it to US dollar holders. I await Shiller’s crying for prudent people each of whom lives within his means and are being fleeced by Bernanke generated inflation. Economists complain about the low US savings rate. As the prophet Milton Friedman said many times, “We economists don’t know much. But we do know two things. If you want more of something, subsidize it. If you want less of something penalize it”. Shiller wants more reckless behavior and less savings. He can say what he wants. I have given you the expected result of what Shiller favors.
Sooo, Bob Shiller, you want to alleviate financially induced social stress and stigma? Listen up now, there’s a cohort of Americans _well ahead_ in the queue of the luckless middle class wealth managers you want to soothe, to wit: Let us first find every American who spent ten of their first twenty years in an inner city tenement or public housing, and pay for their college education plus a low-interest starter mortgage. While we’re at it, let’s include in that program every sad soul who spent long hard time in state prison for trivial drug possession. Say what you say? They’re not ‘stakeholders,’ so that’s ‘welfare,’ and welfare is ‘a social cancer.’ Would you care to at least pay for their medical care since they didn’t get any too much of that during those ten-twenty years, that not too hard on your heart? No?? What am I missing? I thought we were forgiving folks their mistakes and bad luck here—or those with mistakes and bad luck made by others on their behalf?
The _real_ stress here, dare I say it, is presently being felt by elected officials, principally of one political party, whose stomaches have gone wobbly over the prospect of voters taking out their disenchantment at the polls on THEM. Regarding which outcome those sometime electees are willing to spend no end of public money to avert, all their phoney cant about the perils of government entitlement programs and financial industry regulation repudiated push come to shove-em-overboard.
This ‘Billions for Tears’ proposal is so acutely insulting to everyone not putatively covered by it, if perhaps unintentionally so, it’s with difficulty I restrain myself from calling you, Mr. Shiller, a bigot. Self-serving, self-dealing, and intellectually dishonest fool will have to suffice.
If Shiller simply wants to help homeowners, the Dodd / Frank bill HR 5830 does not seem like an effective way of doing it. A lender gets 85% of the current assessed value of the house, and the borrower gets a loan for 90% of the current assessed value of the house fully guaranteed by the US government. This seems more like a lender bailout than a borrower bailout because housing prices will likely fall beyond 90% of “current assessed value” and so defaults will likely continue, except with the US government bearing the losses.
If someone actually wants to help mortgaged homeowners in distress, it is more effective to repeal the credit industry’s 2005 modifications to bankruptcy law reducing access to chapter 13 bankruptcy and reducing the benefits of chapter 13 bankruptcy. And also, repeal the credit industry’s 1978 legislation preventing bankruptcy judges from reducing mortgages on an individual debtor’s primary residence to the fair market value of their house. If borrowers have their rights in bankruptcy stregnthened like this, it greatly increases their bargaining power with lenders to get a reasonable workout without even filing bankruptcy. Goldman Sachs and other sophisticated players entering the workout market will realize they will save transactional costs by agreeing to a non-bankruptcy workout in the shadow of what a borrower would get in bankruptcy.
I think the main reason that some economists are supporting a bank bailout is that they are afraid the banks’ balance sheets are so impaired that without a bail out, the banks will be forced to drastically reduce lending to the real economy, and this will cause a nasty recession. However, economists know that banks are extremely unpopular, so I think the economists are spinning bank bailout legislation as being borrower bailout legislation. If the government is going to bail out the banks, there should be open and honest debate over the terms and conditions in order to make sure the US government gets a fair deal.
Permit me to stand on a soap box for a minute. Home
ownership is a vastly overrated value in American society as it is today constituted. It is so for several
reasons, which are as follows:
1. In an epoch of long term stable economic activity, where jobs in a region can be counted on for periods
lasting as long as the term of a mortgage, home ownership is very sensible. When the reverse occurs,
and large numbers of jobs migrate within the nation, or move outside it, ownership becomes a burden. Just as it is always and everywhere dangerous to mismatch maturities between borrowed and lent funds, as Richard Kline points out, it is also dangerous to mismatch job security
with a long term fixed IMMOVABLE ASSET. When
this happens, as it has in the past, we get something called GHOST TOWNS. The difference
between the ghost towns of the past, and those which will emerge today, is that they were cheap to
throw up , and were not financed for periods further into the future than the eye could see. Today’s Tombstones are financed for 30 years, based on pay stubs which may disappear tomorrow.
2. A result of the Depresssion was that short term
balloon mortgages were replaced by long term self
amortizing loans. The amortization, as every home
owner knows, occurs late in the life of the loan, while the interest is loaded at the front end. In the
name of maximizing the tax deduction, therefore, we have minimized the equity cushion build-up.
This has far reaching consequences, in particular
since housing has such HIGH TRANSACTION COSTS
relative to other classes of “investment”.
3. The extension of 30 year credit on homes has a
causal link with inflated prices, just as the rapid rise
in the conforming GSE maximum loan amount (a
compounded rate of 9% over the past 5 years) was
an enabler of same. The fact that the largest single
(unsustainable) source of inflation is neutered out of core or headline CPI by using “rental equivalent”
should be lost on no one.
4. Housing as investment is good for at least 1 thing- It enforces small mandatory savings. However, this is only so if the transaction costs of
switching do not eat up the savings. This requires
long term occupancy.
5. From the point of view of emotional hardship, I’m
sure foreclosure, bankruptcy etc. are significant.
But there is another hardship, which the renter does not suffer, and that is being tied to a house he cannot sell in a region where jobs have left, and
the alternative means of earning a living are both
depressing and beneath the skill level of the displaced worker. (A pets or meat moment.)
Sorry, I just had to get that out of my system.
Bobo 7874:
You got it.
Yves: Great dissection of Shiller’s comments. You sliced it and diced it.
I rent. These people can rent too. Life goes on and they will survive.
Enough with all the sentimental worship of home-ownership. Whether you rent it or own it, it is a place to live all the same.
As Yves said, it was this irrational cultural bias toward home-ownership at all costs that got us into this mess in the first place. Feeding that bias further (a la Shiller) does not solve the problem.
The trend is unmistakable, and suggests that, without government intervention, many millions of American families will be losing their homes before long.
Like I know I said before, maybe here, as soon as I see or hear the word “families” in a discussion about foreclosure I immediately tune out.
Fascinating post and thoughful comments all. That’s why I love this blog.
☺bobo7874 said…
“If someone actually wants to help mortgaged homeowners in distress, it is more effective to repeal the credit industry’s 2005 modifications to bankruptcy law reducing access to chapter 13 bankruptcy and reducing the benefits of chapter 13 bankruptcy. And also, repeal the credit industry’s 1978 legislation preventing bankruptcy judges from reducing mortgages on an individual debtor’s primary residence to the fair market value of their house.”
Agreed. This is the most sensible way back to financial health.
There seems to be a reluctance to take the bull by the horns, perhaps because the finance industry is so adamantly opposed to the changes you propose and because it is, afterall, the finance industry that has a near monopoly of power.
Personally, I think things are going to have to get a whole lot worse before they get better. The needed epiphany in America will not be occasioned by anything short of an all out disaster.
What’s the best way to answer an editorial? Another editorial apparently, everyone has an opinion. Let us not forget that this wasn’t simply a phyche of ‘homeownership’ is our American Dream, but a dilemna of how Wall Street fueled an overpricing of homes, as banks began to find comfort in lending other people’s money. As a laymen and in retrospect I know this now, but I didn’t know it then. I move around often as well. Buying a home for me has never been under the preconceived notion that I’m going to live here for 30+ years. During my 20-year career of moving from town-to-town every 3 or four years – this is the first time foreclosure has come into play. Sure, I’ve made on some and lost on others – but 40% or purchase price isn’t a loss you can recover from for most. Especially not me.
I agree with bobo, this isn’t a bailout for homeowners at all, as participation is purely voluntary by the lenders they will surely only utilize this on their worst performing assets. As an upside down homeowner, I tend to agree with your view (that this legislation is a bad idea), but not with your rationalization that all borrowers who were swindled into overpaying for homes by the mortgage and lending industry should have foreclosure as the sole alternative. Like it or not, foreclosure today, doesn’t quite mean the same thing it meant 10 years ago. There’s a new spice to an old remedy, and it smells like corporate ooze!
Nonetheless, given present options, that one (foreclosure)makes the most sense thus far. Anyone upside down in CA (for example) by $150-200 on median priced home during boom will spend twice that in interest over a 10-year period to get back to where they were in inflated dollars. With inflation taking off like a race horse – that’s a losing bet for sure. Better to take your foreclosure at Wall Street’s expense and have a nice day than to become an indentured servant to their mess.
☺Yves Smith said: “Second, keeping housing expensive hurts first-time buyers, such as the young and the lower income. It not only makes it more difficult for them to engineer a purchase, but in communities which participated in the housing boom, assures that their housing investment will be lousy, if not a loser. It’s unlikely to appreciate from an inflated level; the best outcome would be for it to hold its nominal value for a long time while its real value gets eroded by inflation.”
Personally, for the reasons you enumerate, I hope housing prices go down another 50%.
Someone please explain the logic behind the dominant belief in America that high housing costs are good but high energy costs are bad.
The cognitive dissonance is mind boggling.
Speaking as a pinko, I can imagine much better uses of gov’t resources than keeping people in suburban split-levels — like a lot of entitlement programs this looks to end up as a net transfer from the poor to the well-off.
*If* what’s going on is a temporary liquidity crunch, then there’s a modest case for federal intervention. But when we start talking about bailing people out of bad investments I lose sympathy.
Many smart points from rk! Just to reinforce, perhaps THE great benefit of being a worker in the US of A is that you can move easily within a huge labor mkt, leave depressed areas for booming ones, learn new skills, find new niches. If you’re doing that renting is rational.
A simple chart of price to income or whatever your preferred metric is would have sufficed. Shiller sounds like a moron. So did the WSJ companian piece which written by some obscure hedge fund guy proclaiming a housing bottom. PErsonally I find the WSJ unreadable, especially the editorial page. It is bordering on jingoistic. I agree with PHD from yale in prior post that too much is made of looking smart. All of this stuff is rather straight forwrad. Complicating it merely acts to soothe the outrage that would otherwise rage if the unvarnished truth were told. The averted systemic meltdown that was Bear Stearns is now part of the narrative stroke lexicon. Evidence 0. Maybe Shiller is exhibiting non linear thinking, although I always assumed such description was a euphamism for WTF).
Housing should be boring. Think of all the time over the last few years that we’ve wasted talking about the housing bubble. It was time that we could have spent more productively thinking about and discussing other topic.
Excellent post.
Actually, I’m with Shiller all the way. So refreshing to come across a compassionate as well as smart economist.
I didn’t bother to read all the post, because you did not read the so-called bailout plan. $300 billion would be the exposure if everybody who got a guarantee never paid one mortgage payment and the houses were worth zero after they were recovered by the government.
The CBO estimates the exposure to the government for the guarantee to be less than $5 billion.
There is no propping up of current asset prices, as lenders must take a severe haircut to participate. It is the lenders, not the government which is resetting the price.
Swing and a miss.
Alan,
If you didn’t read the post, you have no business casting stones. I said “could be as much as,” not “is” or “will be.” Liabilities are liabilities.
In an environment where loss severities are said to be 40% plus (and that’s on the stuff that is being foreclosed on and sold; the losses on the REO not sold is presumably worse, and in the worst markets, houses aren’t even being foreclosed upon. The official stats also don’t include condos; the losses to banks are believed to be even worse on them). the downside exposure is real and meaningful, particularly since we haven’t hit the bottom of this housing crisis. Based on historical patterns, we won’t know how bad things will get until 2010 or 2011.
There will be adverse selection on what is put into this program. A mere 15% haircut is generous, not severe. Per Joseph Mason’s paper on loan modifications, the foreclosure, independent of the loss on the house in the sales process, typically costs 20-25% of the house price. Lenders should not need government intervention to reduce loan balances 15%, which is the net effect of this plan.
However, there is a large fly in the ointment. Servicers achieve only a 31-40 percent success rate on loan mods, meaning they default in 12-24 months. These are the ones that the servicer chose to mod, as in they thought the borrower would make it. Here we have the reverse, adverse selection is guaranteed, and thus even higher failure rates.
The CBO must have used wildly optimistic assumptions or assumed very low takeup to get to a $5 billion loss. And it’s a combination of both. The assumption is that only 28% of the commitment will be deployed.
More important, the economics of the plan was not the thrust of Shiller’s or my argument. My point was that it is ridiculous to bail out housing to protect people from psychological damage, which was the ONLY reason Shiller advanced in this piece.
Alan,
I think you are incorrect in saying $300 billion is total of the interest + principal guarantees. For instance, a CNN article said that “The legislation would set aside $300 billion for the FHA to refinance loans.” Thus the exposure to losses on principal is $300 billion; you could have everyone default in 6 months or even 60 months and then you’d take your lumps on foreclosure costs and other losses on principal.
http://money.cnn.com/2008/05/12/news/economy/rescue_plan_details/?postversion=2008051213
If you are going to criticize someone for not having facts right or sloppy writing, you’d better be accurate yourself.
All of these bailout proposals seem to assume that switching from and ARM to a 30 yr fixed, and perhaps reducing the principal by up to 15% will make the problem go away. It won’t. I saw a report a few weeks ago that said the majority of subprime borrowers were getting into difficulty NOT when their mortgages (typically 2/28 or 3/27 ARMs) hit a normal periodic rate adjustment, but rather when their mortgages reset from the initial non-indexed non-amortized teaser rate to the fully-indexed fully amortized rate. And this doesn’t even take into account all of the IO, negative amortization, and option-ARM mortgages out there. Many of these mortgages were predicated on 1) steadily rising home prices and 2) the ability to refi into new gimmick mortgages with below market non-fully-amortized rates at will, and their holders simply cannot afford a payment based on a full amortization at market rates. As the recession deepens and income/employment drops, the situation only gets worse.
Am I the only one that feels the current situation is very weird?
Nearly every economist I’ve read that correctly identifies the root causes of our current problems has been proposing crazy plans that perpetuate those problems, and nearly every other economist has their eyes closed and insists there are no problems.
Meanwhile, Joe Blow on the street has a great grasp of the current situation. A significant majority is even concerned about the strength of the dollar even though all the economists tell us that it doesn’t matter.
$300 billion is a when pigs fly number. It is the gross value of mortgages. The write-downs will be at least 20%, and likely more. This is the haircut from the lender.
The FHA will be required to examine homeowners, only those residing in the home who are able to service a fixed-rate mortgage will be eligible.
To say that $300 billion is a possible loss is equivalent to saying that the current paper value of all real estate is potentially at risk.
The CBO is not wildly optimistic.
If you read the post, it put the comment about the mortgage plan next to the discussion of loans made under various Fed facilities to date. No one expects them to go to zero either. But the government is merrily making financial commitments as if they cost nothing. The fate of the monolines shows the danger of that approach.
The reality is I expect there will prove to be almost no bargaining space between the lenders and the FHA. The lenders have been very resistant to taking writedowns, particularly since any losses recognized would indicate they ought to take similar writedowns on other mortgages they hold. They will almost certainly submit mortgages only with the intent of taking the minumun haircut permited (15% or as close to that level as possible).
So yes, there will be perilously few losses because very few loans will be made.
Shiller’s article is infuriating. I am 40 yrs. old, with a solid income. I’ve lived in California for the past 8 years and watched the whole bubble pschology unfold in front of my eyes, while I’ve had to stay out of the market for a house for the past 8 years. This is simple. The people in my town being foreclosed on will not be homeless, just because they can’t pay for a $400K house. The idea that these people will be homeless is a joke. People took on way too much debt because they believed that housing would go up in price forever (this IS California afterall and EVERYONE wants to live here, right?) They never had any expectation of having to pay off the balance of the loans because they thought that the appreciation would pay it for them. Simple as that. They were NOT duped. They DID understand that their incomes would not amortize their loans. They threw the dice. I did not. Why should the government make life any easier for them or for any gambler who throws the dice in Vegas and loses. They won’t be suffering to any degree described by Shiller. Again, just because you can’t pay off a $400K house, does not make you destitute, or humiliated, or any other weak psyche problem. It makes you a gambler who lost. Big deal. Now get the hell out! There are people like me out here who actually can pay off a house, but who are unwilling to take huge gambles on speculative pricing. When the speculative froth is blown away, and the price/earnings/income begin to control pricing again, then I’ll gladly live in one of these houses that someone was kicked out of.
“There will be adverse selection on what is put into this program.”
I think this is the most important point. Lenders will put into the program only mortgages which they think they will lose more by holding than by getting rid of them. I presume the 5 billion CBO projection takes this into account, but that just seems too low a figure, so I’m suspicious.
Depending on the state, renters get 30 days or 45 notice before they are out on the street if the landlord wants them to move out… even IF the renter is paying their rent on time.
Mortgage debtors on the other hand get about 1 year to keep staying in the bank’s house… even AFTER the mortgage debtor stops paying their mortgage entirely.
Is this fair?
There’s little if anything “fair” about what’s happened in the housing market, least of all any govt bailout of the industry. Very little of the bailout bills will really help consumers, and keeping prices artificially high is the wrong thing to do.
The industry created the bubble and ignored warnings that it would pop and cause economic damage. Why would corporate CEO’s, etc, care if it popped, as long as they got their millions before it did? Attempts to prop up housing are nothing more than attempts to start the music again in a game of musical chairs.
The govt looked the other way even as mortgage fraud was going on. When banks and investors started losing money, suddenly the govt was interested. Instead of bailing out anyone in the industry, congress should instead be investigating which of the players committed fraud or at the very least dug their own hole.
As for buyers or psychology: who among us would believe the govt can figure out in an efficient way to sort out victims of fraud from all the rest? The rest do not deserve a bailout. The victims have been falling for years, and like I said no attention was paid until it was banks and investors complaining.
Enforcement of laws would help. Stricter laws would help only if enforced. Getting rid of lobbying by these industries would help enormously. But some feel-good bailout of anyone is not going to help. It’s a waste of tax payers money and there wouldn’t even be a ‘bailout’ in congress if not for the industry lobbying for it, packaging it as being for consumers, while all the time it’s for the industry.
You know, Yves, it takes me as much time to read 26 comment on this site as it takes me to read 5 times that number on others’. You’ve created a wonderful thing here, and I hope the riffraff and flamebaiters continue to stay off.
S said, Shiller sounds like a moron.
He’s not. That’s part of what’s so disappointing about his op-ed. The good news is that if we’re keeping people in their homes in order to prevent stress (and where does that end… do I have to buy them a jet ski too? Maybe that fancy lake that you’ve pitched a couple of times, Yves.) Anyway, if this is the best argument that Shiller can come up with, then I guess that eventually some congressman will decide to let the market work it out.
I know a few middle Americans. Red staters. Former fans of Bush (and most of them are pretty embarrassed about it). Solid, hardworking folks who live responsibly. These are known as “voters.” Guess how they feel about homeowner bailouts?
Those who lived responsibly will pay for the irresponsible, of course. In real life, the ant can’t tell the grasshopper to get stuffed when grasshopper is starving. But the tax on the responsible must be as small as possible, otherwise, we will all figure out that responsibility doesn’t pay.