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Saturday, November 10, 2012

More Big Government and Maniacal Mortgage Manipulation from The New York Times Posted by rycK on Wednesday, February 27, 2008 10:29:21 AM




From 2.27.2008

We can relentlessly depend on the New York Times, the key propaganda arm[1] of the far left to signal us, and their attendant stooges in the various legislature across the land, to advise us when a novel form of taxation is possible. In today’s preposterous dissertation, we read that there is some new debt burden issue in ownership of private property that needs to be adjudicated. The usual leftist intrinsic bias against private property [2]is relaxed in rare cases when such antisocial behavior can be juxtaposed against public ownership.[3]  But in this case there are some new and wonderful indirect taxes that can be levied upon the corporations at no political cost! That is an indirect tax that the usual tax whores would not have to express regrets about when election time rolls around. It doesn’t add to the national debt. For that, the Times will go to the legislative mat. Soak the capitalists!

The wailing is noted in today’s new tax scheme screed: Getting Real About the Rescue [4]

The problem stated:

Some big banks are supporting new proposals to rescue homeowners who owe more on their mortgages than their houses are worth, but let’s get one thing straight: the banks haven’t been struck by a sudden urge to help the needy. Rather, by advocating bailouts, the lending industry is trying to head off a possible change in the law that would let troubled borrowers modify their mortgages in bankruptcy court — where lenders, not taxpayers, would be stuck with the losses.”[5] [Emphasis is mine in this and  all  following quotes.]

In propaganda rants, this one gets a C+ as the basis for an urgent rescue is properly set up as is the social basis for change, but the solution to is too cryptic and lacks the usual maudlin songs and sobbing and arrives, too bluntly in my view, at the solution. An A rating on this would begin with starving workers trying to experience the American Dream as they are living their lives in their precious homes but starkly contrasted with the horrors of seeing their meager possessions (and children) being summarily cast off into the streets by officers of the law while greedy mortgage lenders are seen wheeling away stacks of money. This one is a bit abrupt, but the leftist contents might become important talking points in the upcoming election farces so let us plug along and see how it unfolds. Capitalism is going to get whacked here; the interest is in how the Times wants to veil it.

Congress must not kowtow to the lenders. It should insist that borrowers be given a chance to modify their mortgages under bankruptcy court protection before it even thinks of asking taxpayers to pick up the tab for the mortgage mess.”[6]

The briar patch is now unraveled. Certain members of Congress are the stumbling point. Here we learn that the lenders, presumably some part of our economy that deals in capitalism with all its open markets replete with numerous buyers and sellers should stand last in line in the Congressional legislation. They should have no influence in the legislation. The little guy comes first. Note that the blame and fault are now instantly placed upon the evil money lenders before the solution is revealed in a bright and scented shower of fairness, sensitivity and concern. The lenders must pay for the problem. Justice must be served.

Under current law, borrowers cannot rework the mortgages on primary homes in bankruptcy proceedings.”[7]

Ah, the jaws of the Demon are exposed. The term rework used here must have its political  roots planted in compassion, socialism and the eternal quest for votes for Democrats must be embedded somewhere. This sentence, the gripper passage that inflames the reader, implies that the law must be changed.

The warriors choose sides in this battle:

Senate Democratic leaders are pushing a bill to let many at-risk homeowners do just that. The House Judiciary Committee has passed a similar measure. Republicans, who are balking, should get on board, or risk leaving their constituents without an effective way to save their homes.”[8]

This reads like a Greek Tragedy as the stately home owners, through no fault of their own, must seek the help of the gods for relief. The nasty old Republicans stand in the way of Justice as she attempts to minister to her flock. Perhaps their very eyes will adorn the peacock’s tail for this cruelty.

The details of the Redistribution of Wealth and the Poisoned Apple:

If the bankruptcy provision becomes law, as it should, lenders will have a powerful incentive — which they currently do not have — to modify troubled loans voluntarily. If they can’t or won’t come to new terms with borrowers, then they would run the risk that a bankruptcy court would do the modifying for them.”[9]

There is some prize here proffered to the money lenders. They can take a loss on their loans or they can have the government direct the loss on their loans. This is given in the spirit of the French Revolution where you can have your head roll into the basket after you have selected your favorite raison d'ĂȘtre from the list:   Liberty, Equality or Fraternity. We can only speculate what the word modify means in this context.

The political payoff:

So far, despite a lot of promises, the industry has been unable or unwilling to rework the junk loans of the bubble years in ways that come near addressing the enormity of the problem. In contrast, access to bankruptcy court would mean relief for some 600,000 homeowners — not by wiping out their debts, but by modifying the loan terms so borrowers can pay them off over time.”[10]

A catchy slogan matching the notion that: “… all the workers have to lose are their chains.” How poetic! Let us break out into song and have the workers of the world unite.

The condemned raise a point of order:

Lenders object that by giving homeowners the right to modify their mortgages under court supervision, the bankruptcy amendment would raise the cost of mortgages for everyone, forever. That concern is surely overstated, but not entirely without merit. To address it and other industry worries, lawmakers have proposed constraints, such as limiting the bankruptcy relief to junk mortgages of the past few years.”[11]

We must now wonder what a ‘junk mortgage’ might be and if this can be directly compared to junk bonds or junk dealers or junkies. Do you buy a junk mortgage with junk money? What could this mean? We are also blessed with a new (Constitutional?) right—the right to modify corporate contracts if money is lost. I would hope that we would have a similar ‘right’ to modify our tax returns to correct some perceived injustices in federal government spending. How about this: I will acknowledge my full tax liabilities if I can pay off my accrued taxes at a dollar per year at zero interest.

A hint:

The idea is that if lenders voluntarily agree to loan modifications, they would become entitled to a share of the house’s appreciation, if any, when the house is ultimately sold.”[12]

Who defines the modifications? What share?

Like other Bush administration plans, this one suffers from its emphasis on voluntary cooperation, which has been shown to be inadequate. The bankruptcy amendment, however, would give lenders more incentive to go along, by providing a real downside to not acting voluntarily — losing control to a bankruptcy judge.”

The justice of the guillotine was not exactly voluntary in the same way that the options to lose money on loans are not exactly voluntary in this case. This is a propagandistic sentence that reveals no facts--only slogans and threats. If the wording is vague in the ‘law’ then the bankruptcy judge can act like Citizen Robespierre and just fill the baskets with heads using vague reasons and barking the trendy explanations of the day. It is too bad that a fraction of our tax liability is not voluntary.

This amounts to a leftist mass groping of some business sector wealth. This is a classic propaganda piece that always incorporates the predictable Retribution of Wealth clichĂ©. Once implemented, a person’s debts may now be adjudicated in some court or by those who owe their jobs to the political machines. This is a form of financial justice offered in democratic terms. The notions of risk and other attributes of capitalism are crushed in this Marxian screed. There is no risk! If you are some leftist parasite, a hopeless druggie, sexual predator who cannot get a job or some felon you now buy a house, default in defiance of the system, and somebody else will subsidize payments for you, enforced by federal law. Here we are instructed that if any housing market turns down then those who sold the products are liable for any loses encountered by the buyers. This places a floor upon which money lost in market activities can be reclaimed merely for the reasons that somebody lost money. I wonder if we could do this at the race track and get a long-term refund for a misplaced bet on some three-legged donkey that somehow missed the winner’s circle, the bright flowers and applause.

No essay from the New York Times, the Walter Duranty Papers[13], could offer more promises for less leftist political risk than this wreckage. This is a freebee.

What is missing here is the nasty effects of the predictable shortage in mortgage loans if this monster becomes law. The lender can now voluntarily lose money, or he can involuntarily lose money—a fair and level choice sanctioned by the leftists. And, the little guy wins. Lenders might then unfairly scrutinize future loans for deadbeats or marginal barrowers or find other ways to secure their loan repayments. The political celebration here comes from a novel test case where in the usual free enterprise arena the markets rise and fall, driven by the expected supply and demand effects, but the socialists are now insisting that any downside risk must be indemnified by somebody else. I am surprised that the Democrats don’t want to establish some federal slush fund that subsidizes loses in any home loans—no let us be generous and add in TVs, autos and beer coolers—so we can have the nasty old capitalists redress for the Sins of the Past. That would necessitate more taxes, so that is a bit tacky in an election year.

I anxiously await the NYT ‘solution’ to restoring lost union auto jobs in Michigan as they may offer some solution related to this. How about the case where car buyers are liable for lost jobs if they buy a car outside Michigan? That sounds fair. We need more taxes and legislation like this one.

I want to be able to ‘rework’ my 401(k) so as to make it tax free. I don’t want to kowtow to the tax mongers.

rycK

Comments: ryckki@gmail.com







[2] http://en.wikipedia.org/wiki/Karl_Marx. which cites Marx, K. & Engels, F. (1848), The Communist Manifesto.
[3] Bernard Shaw by  Michael Holroyd  , Vols 1,2,3 , Random House, 1988
[4] Getting Real About the Rescue.   Editorial Published: February 27, 2008. http://www.nytimes.com/2008/02/27/opinion/27wed1.html?_r=1&hp&oref=slogin

[5] Getting Real About the Rescue. Ibid.
[6] Getting Real About the Rescue. Ibid.
[7] Getting Real About the Rescue. Ibid.
[8] Getting Real About the Rescue. Ibid.
[9] Getting Real About the Rescue. Ibid.
[10] Getting Real About the Rescue. Ibid.
[11] Getting Real About the Rescue. Ibid.
[12] Getting Real About the Rescue. Ibid.
[13] In honor of the Communist stooge who wrote lies about Stalin’s gulags and worse much to the eternal applause of the NYT and other yellow rags

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