It's the only solution I think makes most sense to me

from JoeUser Forums
So ever since this whole Housing/Credit/Economy crisis began to show it's ugly face, several people on JU and other blogs and media outlets have tried to propose solutions to this terror, destroyer of the American lifestyle. Some of these ideas seemed too complicated for me to understand and others just didn't seem like a real solution to the problem. An example would be the few articles I saw where the write said that the Gov't should just either give a huge amount of money to every American ($1 million or something within that range) or to just pay off the houses for these people. Well, that may sound all nice and dandy, people will simply pay off their house (we would assume), the houses will no longer be in foreclosure, the banks get their loans paid, people pay their bad credit off, and they can even buy a car and all would be solved, right? Well, with the exception that the Gov't would now be in a deficit so big it we may as well become slaves to another nation. Not to mention that the root problem of the crisis remains unresolved, the irresponsibility of both the lenders and the buyers.

Here is what I think should be done. I am a firm believer that of you do the crime, you do the time. You took risk and you lost. I am not too sure why should anyone be rewarded for failing. But we have to take into consideration the damage these mistakes will do, this will not only affect the buyers and the lenders, but the entire nation as a whole, so a compromise must be reached. Someone will have to lose here and while I think buyers are just as guilty as lenders, I think the lenders should take loss. The buyers, while at fault as well, are the ones who maintain these companies, to let them take the fall (lose their houses) would only put a bunch of people out in the street and a bunch of worthless houses in the hands of the lenders.

My solution is to start slashing prices all across the board. Not just houses (which have already had their values lowered) but the existing loans, cars and store items. banks should just take the existing loans and slash them 25 to 50%, this will allow the home owners to keep the house, to afford the morgage payments (considering the job and economy issues we are currectly having) and the banks don't have a house on foreclosure, will still get something out of the house and may be able to start lending again. For the car industry, it's either cut the prices no less that 35% or face bankruptcy. At this point, hardly anyone can afford a new car, especially one that still uses too much gas and not enough miles. Stores should also consider lowering prices, half price on flat screens and game consoles.

Someones gotta take the fall and realistically it can't be the consumer. They are, after all, the ones who provide the money for businesses to grow.

What do you guys/gals think? Does this sound like a more sound solution? I know ti won't be easy for businesses to accept loses and jobs may still be lost. But at leats the businesses have the opportunities to stay alive so that later on they can grow again and hire people again; better than going under all the way and everyone being out of a job with no chance to get it back later. What say you?
1,254 views 8 replies
Reply #1 from JoeUser Forums Top

Government run markets never work.  They try to cheat the law of supply and demand and only result in shortages and overages.

The market is self correcting.  The less government (there is a bottom) the better, and the more government intrusion, the worse the situation becomes.  The current situation was caused by the government trying to dictate prices (mortgages), and we see the result.  The solution is simple.  Get government out of it and let the market correct itself.

The problem with the solution is that some will get hurt.  But that is going to be the case in any event, and with the government involved, more people will get hurt than if the market is allowed to correct itself.

Reply #2 from Stardock Forums Top

I don't think a true free market could work well on a national scale.  Supply and demand will  indeed dictate it...however, I think there needs to be some sort of regulation...nothing heavy, mind you.

Pretty sure we've never had a true free market in action.  The US is pretty close for all intents and purposes...but with taxes and all that, it's never been truly free.

~Zoo

Star Control: Origins
Reply #3 from Stardock Forums Top

The buyers looking at our house agreed to our terms yesterday.  We pretty much slashed about a third of the price to get it sold.  We still made out pretty good overall but are quite anxious to get this from under us before Obama's new tax laws take place in January. 

So, of course I don't want anymore slashing to be done right now.  I've been slashed enough. 

Charles, what about us who have paid off our houses or lived within our means?  We worked our fingers to the bone, lived within our means  and paid off all our debt or maybe have realistic mortgages in tune with their rate of pay.  These are the ones who are not in trouble. 

Aren't you speaking about rewarding those who don't and not those who do? I hate that. 

 

 

Reply #4 from JoeUser Forums Top

What happens when housing values increase?  Then Joe Deadbeat suddenly reaps a $100k chunk of change in addition to the value of the reduction of his principal.  

I think we are headed down a slippery slope with all the bail outs. I don't understand much about the economy and all its intricateness.  I find a lot of finance issues to be incredibly overly complicated.  I do understand human nature, though.

Who is going to refuse something for nothing?

If the government starts bailing out people who are nearing foreclosure, what moron is going to keep up on his house payments?  He'd be a sucker to keep paying. 

What about the people getting their vehicles repo'ed?  Hey, I have unsecured credit card debt.  Why should I pay for that?  If the government is giving away money, I deserve some too, right?  Student loans?  Why should anyone have to pay back the full amount of anything?  The government owes us! 

I read in an article on MSNBC that a full third of the homes in foreclosure are owned by INVESTORS.  Should the government bail them out?  They're not losing their primary residence.  They're losing a home they bought as an investment, hoping to flip for big profit. How is that different than losing in the stock market?  We don't bail out stock investors who lose their shirts...yet.

Every single anecdotal example I've read in the news of a poor, down-on-their luck family about to lose a home...and I mean every single one...has been families or individuals who have refinanced their home, pulling out equity for cash.  Often times 3 to 5 times the value of the original loan for the home.  I have yet to read of someone simply getting a house they couldn't afford, although we know that happens.  No, these "poor" people that the news media wants us to feel sympathy for have refinanced and refinanced and refinanced to buy crap and take vacations and NOW they are losing their homes.

I wonder what percentage of those in foreclosure or in danger of foreclosure have refinanced to pull out equity.  I REALLY wonder what percentage are families or individuals who have pulled out equity from homes THEY didn't buy themselves, but from homes they were given or willed from more responsible family members a generation up who actually paid for the things they had.

Sometimes you just gotta pay the piper.  Whether that be losing your home and starting over, dealing with legal issues regarding your fraudulent financial choices, or tightening your belt and living a lifestyle that you feel is beneath you until you can catch up.

We, as Americans, have GOT to get ourselves out of this something-for-nothing debt cycle, and the pain of foreclosures and a nosediving economy may be just what we need to do it.

Reply #5 from JoeUser Forums Top

Wait, maybe I'm misunderstanding what you're saying...you're saying alter existing loans that are not being paid to make them "more affordable"...but then artificially alter prices on all sorts of goods to make them cheaper?

WOW. 

That would be disastrous and I don't even know where to start to begin to tell you the ways in which it would disastrous.  The market adjusts itself.  Goods either cost what people are willing to pay for them, or those goods are no longer feasible to manufacture and sell, so they go away. 

You can see now with the Veteran's Day and pre-Christmas sales that retailers are responding to the current state of things.  I don't think flat screens being half price is going to be enable anyone to keep their house...TVs are luxury items.

Reply #6 from Stardock Forums Top

The less government (there is a bottom) the better, and the more government intrusion, the worse the situation becomes. The current situation was caused by the government trying to dictate prices (mortgages), and we see the result. The solution is simple. Get government out of it and let the market correct itself.
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I think that is more or less what I was getting to, to have less Gov't interference (not 100% out, just less). Allow the companies to find ways to settle their issues, but they should consider cutting back, otherwise they may have to wait a long time before people feel confident in spending again and when they have money to spend, too many people out there without jobs with more on the way and too many working low wage jobs. But this is just an idea, something to chew on.

I don't think a true free market could work well on a national scale. Supply and demand will indeed dictate it...however, I think there needs to be some sort of regulation...nothing heavy, mind you.
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I don't think anyone wants a true free market. We all know there have to be some type of regulation or people will abuse the system. The current situation is a perfect example of abuse when they regulation was lowered and ignored.

Pretty sure we've never had a true free market in action. The US is pretty close for all intents and purposes...but with taxes and all that, it's never been truly free.
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Agreed.

The buyers looking at our house agreed to our terms yesterday. We pretty much slashed about a third of the price to get it sold. We still made out pretty good overall but are quite anxious to get this from under us before Obama's new tax laws take place in January.
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Sorry to hear you had to lower the price so much. I'll admit I am not well educated when it comes to real estate so take my comments with a grain of salt as they say. I was talking more along the lines of the loan companies who either own these houses or will end up with them if the owners default on the loans. Not so much a house being sold by the current owners. I hate to see people who struggled to buy the house just to sell it for way less than it was worth and then getting stuck with the difference on the loan. This is a situation where the bank should bit the bullet just so everyone can win in the end, even if they lose some of the money.

Charles, what about us who have paid off our houses or lived within our means? We worked our fingers to the bone, lived within our means and paid off all our debt or maybe have realistic mortgages in tune with their rate of pay. These are the ones who are not in trouble.
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Well, if you have the house paid off you don't have to worry then. Sure, you paid a lot more for it while those who screwed up will get their houses for less with lower mortgages, but considering the current situation, the possible ugly future of this nation ("will get worse before it gets better" concept) and other countries taking advantage of our downfall to strike blows at us, I think it's a small sacrifice we may have to consider taking. But the trick is to avoid this happening again, although it seems to be in our nature to repeat history. Still I think we get better and better at it every time we fail.

Aren't you speaking about rewarding those who don't and not those who do? I hate that.
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Hey, my morals tell me that we should just let everyone who screwed up pay the price. I know I have for all the mistakes I have made and am currently paying the price for a recent one. But I have to look at the big picture, as much as I think they should all be punished, we have to realize the punishment will extend to those who did nothing or very little wrong as well and the punishment could last even longer.

So what will it be? Should everyone pay the price and have a long lasting economic downturn (kinda like how my son complains when he's at the boys and girls club and his whole group gets punished because of 2 or 3 kids who don't follow th rules) or should some people get hurt (punished) and others get partial reduction in the hopes this will allow the economy to bounce back faster? In the end these people will still pay for the house, just bnot the price they started with, not exactly a punishment, but better than leaving them in the streets, and the banks holding on to a valueless house they can't sell.

I'm just looking for a way where not one comes out of this a 100% winner and allow the economy to get back on it's feet a lot faster. These bailout ideas are starting to turn my stomach when I start seeing every industry wanting to stick their hands in the golden treasury pot to grab a piece of the $700 billion bail-out while their executives take private luxurious vacations at the tax payers expense. But then I don't want every American rewarded with $1 million either.

Reply #7 from JoeUser Forums Top

but better than leaving them in the streets, and the banks holding on to a valueless house they can't sell.
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That's not what will happen, though.

Like I said, a full third of the foreclosure homes are owned by investors.  They're not losing THEIR homes.  Not only that, but some of the places in foreclosure have buyers/owners who have simply walked away.  Meaning, they don't live there anymore.  They mailed their keys back and stopped paying.

For those who refi'ed and now can't afford their home, or bought a home way beyond their means...it's not the only place they can live.  It's not -- keep people in a McMansion or they live on the streets.  They will just make alternate living arrangements.  Lower their standard of living.  Maybe they have to live with family for a while.  That kind of thing.  They won't be homeless. 

Banks will lose money, but that's just how it is.  Our home is a VA repo that we bought for far less than its actual value, and certainly less than what the initial buyer paid.  Did the bank lose money?  YEP.  Did the house become "valueless"?  No (not yet, anyways).  Was it impossible to sell?  No.  They sold it.  At a loss to them.  That's the price they pay for giving a deadbeat a loan. 

Heh, and the price we pay for buying instead of renting may be negative equity if housing prices continue to fall.  But a home is a home.  People will always need homes.  Things will rebound.  And if prices drop enough, a lot of people who carefully saved may find themselves able to purchase more home than they ever dreamed of thanks to bottom basement prices.

Reply #8 from Stardock Forums Top

Wait, maybe I'm misunderstanding what you're saying...you're saying alter existing loans that are not being paid to make them "more affordable"...but then artificially alter prices on all sorts of goods to make them cheaper?
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Actually, you were pretty much right on with you previous reply. The only reason I suggest a reduction in prices is to keep this country from going under. I know we may have had similar issues in the past, but I am not too sure allowing our economy to tank in such a way (based on reports of course) will be good for both our society and our national security. My goal is to, not only partially punish the screw ups (at least some of them), but to also save the economy and our country. It sucks, but I just don't see how we can fix our problems without a winner and a loser.