Tuesday, September 30, 2008

On Taking Responsibility for One's Own Actions

Please note that this rant is based solely on my personal, uninformed opinion, and has probably no basis in fact.

One of my pet peeves is dealing with people who feel no responsibility for themselves or their own actions. It is always someone else's fault. Even axe murderers get off with a hand-slap because they came from a battered childhood. Puleeeze.

So imagine my joy when I hear all this silliness about the Government Bailout for the banking mess. Seven hundred Billion dollars of our collective taxpayer money going to what? As I see it, we would be helping:

(1) The Banks. The banks who were stupid enough to loan money to people who could not afford to make the payments. I had one Real Estate agent explain some of the creative financing to me, and I tell you, it is crazy. Let's say you want a loan for $300,000 (I am making up all these numbers), and the payment on that loan would be $3000 per month. You are given the option of paying (a) $3000/month, (b) interest-only, say $2000 per month, or (c) what you can actually afford, say $1000 per month. So let's say you pay the $1000 per month...what happens to the rest of your monthly payment that you are not paying? It gets tacked on to your loan. The one that you already cannot afford. Now the bank is on the line for a loan that actually grows each month while the homeowner gets to live in the house for next to nothing. This works as long as the value of said property continues to escalate at, or faster than, the amount that the loan is growing. In theory, the house can be sold and the loan paid off.

(2) The Home Buyers. When confronted with a $1000 budget and a $3000 monthly payment, who is stupid enough to agree to a deal like I mentioned above? Anyone with half a brain could see that they simply could not afford that house. I know what the banks will tell you, and they will tell you that you can afford way more than you might be confortable paying. You, the Home Buyer, need to have enough sense to know what you cannot afford, and how to say No.

I see greed here. I see "but I need a house" here. And then the bottom falls out of the housing market. Now the Home Buyer is living in a house they cannot afford, making less than their monthly payment, and The Bank owns a loan that is more than the house is worth, so they panic.

Am I supposed to feel sorry for any of these people? Okay, I am not totally uneducated, nor unscathed by market fluctuations. I built a house in 1980, at the peak of that housing market. I sold that house 5 years later for less than I paid for it. It happens. It was no one's fault but my own.

We had the option of an Adjustable Rate Mortgage. You pay less the first few years, then your rate goes up. I looked at the monthly payment based on the future interest rates to see if, once the rates went up, I was still able to make that larger payment. Then, and only then, would I agree to take an Adjustable Rate Mortgage.

Are all these people so dumb they did not think about the consequences of "what if"? What if the market stops growing this fast? What if the bottom falls out? What if my rate adjusts up?

I guess I just do not understand why this is the taxpayers' problem. I heard that the banks can borrow from the Fed at a low interest rate to get money back into the system and free up some capital. Okay, so why is this not an option?

Here's another one: Home Buyer forecloses - they made some bad choices, so live with it. Banks take over the bad loans. Banks sell the house for the going market rate. Bank takes in a large percentage of the outstanding loan(s). Bank takes a loss. Bank does not fold.

Why - WHY - should I help bail out these banks and home buyers so they can stay in the homes we all know they cannot afford? Could someone please explain this to me? I promise to post a retraction if I am way off base. I just need someone to tell me why these people should be allowed to stay in their homes, and the banks be bailed out, and why no one should take any responsibility for their bad decisions.

1 comment:

Anonymous said...

When I told family I was against the bailout, they wondered why I was being so Republican. I'm not. So then I must be an unfeeling Democrat-and that woe is them,they deserve what I have. I'm not a Democrat either. Other than a mortgage, I owe no one and the reason is, I only buy what I can afford. I am a pretty simple person with simple tastes. If I want a new car, I save up for it and pay cash. I wear a pair of jeans until they wear me. Recently I decided to borrow some money to add on to the house I cannot sell. Since I was going to have to live here for a long time past the time I thought, I needed a new roof, flooring and some other things I had put off for years shoring up retirement accounts and savings. I had the cash to pay outright but at 5% loan, after tax deductions it came to a 3% loan. I have my savings in a better deal than that, so I reluctantly did the loan. Sadly, what my house was appraised at in 1992 is about what it is worth now-16 years later! even after the new kitchen etc. Great city/safe, huge house/best schools etc. But the major local manufacturer left it in the dust. I will see myself staying in the place well beyond retirement. Which hub just informed me is in a month. Just like that. Because its either take what they say is a great deal or risk getting no deal. Half the salary in pension...and now a loan of only 2 months. I am angry at myself for going into this when I could have paid it off-but have now put that cash into a fund for 5 years I can't withdraw from. I will survive and thrive but I am being responsible for myself. I am not expecting a buy out or a bail out or whatever. I will cut back again, and continue to save what I did before because I know we will need more savings down the road...we will no longer have health insurance and aren't eligible for Medicaire for 10 years. But I am not entitled to my neighbors money or to have my kids pay for me. From day one I was and am responsible for my own actions. I get so angry at what is basically total greed. On so many levels. And the fear factor bullying by this Administration all the way back to 9/11. Anyone that voted for this bail out just lost my vote.