Poor “Homeowners” II
October 18, 2011 8 Comments
Matt Taibbi in Rolling Stone complains,
These gigantic institutions [too-big-to-fail banks] have put millions of ordinary people out of their homes thanks to a massive fraud scheme for which they were not punished, owing to their enormous influence with government and their capture of the regulators.
Now let’s take this slowly. Suppose I ask the following innocent question:
How on earth could a bank ‘put’ a person out of his home? How, exactly, could that happen?
Not every institution in every situation can ‘put’ a person out of his home, after all. Wal-Mart can’t ‘put’ you out of your home. Major League Baseball can’t ‘put’ you out of your home. These things are just not possible. When you think about it, an institution ‘putting’ someone out of his home is a rare thing, only possible under a certain very well-defined and specific set of conditions.
But Taibbi is, of course, correct that banks have put people out of their homes. So how then? How were they able to do that?
Could it be…because the bank was the one who paid for the damn home in the first place?
Why yes it could. In fact, that’s pretty much the only circumstance under which a bank, or anyone else, can put you out of your home as Taibbi describes.
So why does Taibbi skip that part and start the story in the middle? Why not, instead, relate the following chain of events:
- The banks gave millions of individuals half a million dollars each (give or take) to use to move into nice big comfy houses.
- The individuals lived in those houses for a while.
- Later, for one reason or another they stopped making the payments they had promised to pay.
- The banks tried to take the house back as collateral to sell and recoup some of their losses, and in some cases (say 12+ months later), succeeded.
Scandalous!
Well, blown away by Taibbi’s impeccable logic and critique of banks’ behavior, once again I’m forced to agree that banks should not have done any of this. Most of these people should have been renting apartments in the first place.
You know, once I had a car repossessed. Did I fulminate against those mean, unfair banks that had hypnotized me into taking on more car than I could afford? Well, I did whine a little bit. But I knew that it was my fault. I blame my parents. They didn’t allow me to grow up with a sense of entitlement or the idea that the world owed me not just a living, but a luxurious living.
The thing I just can’t wrap my head around is the blame being directed at the institution which bought them the house.
I’m sure many people are struggling and some of those people have genuine grievances against this or that person or at least circumstance.
But, in each of these situations, there’s no getting around the fact that in ’05 or ’07 some bank or mortgage broker simply *handed* each of these people $X00 thousand dollars they didn’t have, and this was the *only* thing that enabled them to go bid on a house and live in it for a while. So fine, things aren’t going their way now, understood, but out of all the people to be mad at now, why them first?
Why not get mad at me first? I certainly didn’t give them $X00 thousand dollars or chip in to buy their house for them really, at all. Why not get mad at, say, Brad Pitt? He didn’t either. Etc.
But Brad Pitt is a cute movie actor. Cute movie actors are allowed to do anything they want — throw babies in a lake, push old women off cliffs — as long as they keep flashing those dimples in formulaic movies. Banks on the other hand are dark, dank buildings full of vampirish old men (think Gary Oldman as the elderly Count Dracula before he’d drunk all that blood and became cute young Count Dracula) who sit around eating roasted baby flesh and drinking expensive champagne and plotting how to make the lives of Ordinary Hardworking Americans™ miserable just for the LULZ.
Shorter answer: many Americans are stupid, and should be punched in the face repeatedly for the rest of their lives.
“I f*cked up. It’s YOUR fault, and YOU should pay.”
Leftism in a nutshell.
(I think I actually saw this on an OWS sign somewhere. If not, I should have — what’s the diff?)
“Major League Baseball can’t ‘put’ you out of your home. ”
The NBA can.
[Barclay's Center]
Hey, look, it’s named after a bank!
Again, this is good, but I think the bailouts complicates your narrative. The banks let millions of people live in big homes. Then when thousands of people lost their jobs and stopped making payments, the banks were in big doo-doo. So Congress bailed them out.
It’s not unreasonable to claim that both borrower and lender were at fault. (The bank shouldn’t have loaned money they wouldn’t get back; the homeowner shouldn’t have borrowed money they couldn’t pay back.) But here’s what it looks like from the leftist perspective: The bank made a bad decision, and the government bailed them out and they still walked away with a profit. I made a bad decision, and I lost my house. Ergo, I’m mad at the rich guys that are getting a better deal from their bad decisions than I am.
Of course, the conservative response is not that Everyone should get freed from the consequences of bad decisions but that No One should.
Who bailed out the banks? Rich aliens from space? No, it was the government. The government that we elected. And the banks were bailed out with our taxes.
And I’ll just add that banks got into this in the first place by trying to please the government, i.e., us, by giving loans to people who couldn’t afford them — that is, to people with bad credit or shaky credit or lower incomes or all of the above, many of whom also happened to be members of minority groups. In other words, banks were told, that since so many of the people who they previously turned down for home loans just happened to also be members of ethnic minorities, said banks were therefore being racist in their behavior, and if they didn’t want to continue to be labeled as racist, they had damn well better lower their requirements for eligibility for a loan. (The fact that this meant that a lot of the people who are losing their giant, huge-satellite-dish-adorned homes are what we used to call “white trash” is neither here nor there.) Anyway, we Americans signed off on this leg of the Stop All Racism tour. I don’t know anyone who dared disapprove of it. In public, anyway. Full disclosure: I used to work for a mortgage company, and then a home-building company. Everyone knew the real deal, and there was no getting out of it. The government — i.e., us — had said it, so it had to be done.
In other words, Americans need to be punched repeatedly in the face for the rest of their lives.
I have a different view. I don’t think either were at fault.
As Andrea points out below, to a large extent banks/lenders were just following government incentives/regulations. I have plenty of criticism of the government in this equation. Another point worth making (as i did originally) is that we are being sloppy referring to ‘banks’, to a large extent they sold on this risk to e.g. Chinese or German investors or someone. If anything, I would say those end investors were the stupid ones who made mistakes, and should pay.
But as for the borrower, the banks were saying ‘Here, please take half a mill from us to go bid on a nice newish house to live in.” And so, they did. And they got to live in that house for a while. Good for them! I don’t see how the borrower screwed up by saying OK. OK seems like a perfectly intelligent answer to “please take a half million dollars”. And I don’t see how the borrower was harmed. He got a net-benefit out of it (i.e., to live in that house).
I think this is where my views diverge most from conventional wisdom & where I would wish to convince more of the complainers: I see the borrower as having gained positive value from the experience – EVEN IF he got kicked out later on.
The sequence (1) you don’t have much money, (2) someone comes along and gives you half a mill to buy a house, (3) using it, you get to lever up your meager capital and live in a nice house for a while, then (4) after some time it turns out you have to go move somewhere else – I don’t see that as a net-negative experience. I see it as a net-positive experience, and I think the foreclosed-upon generally ought to as well.
After all, what happened to these same folks in the counterfactual universe where ‘the evil banks’ didn’t do any of that?
(1) You don’t have much money, (2) you live in a shabby apartment and pay rent, (3) repeat ad infinitum.
So seriously – what exactly are they complaining about?