Bloggers' lobby: Stopthehousingbailout.com

Recently I had a conversation with a fellow journalist about government efforts to ease the mortgage crisis. I was explaining to this person that mainstream media accounts of the issue very often ignore the anti-bailout sentiment that dominates blogs like this one. The journalist was confused. Opposition to a bailout? Here in liberal L.A.? On a blog on the L.A. Times website? "Your readers must be rich," she told me.

If I had been drinking coffee, I would have spit it out. I explained that, no, as far as I know, that's not the case. In fact, many of them can't afford to buy a house in Los Angeles, and they're upset (not the word I used) at government efforts to support inflated housing prices in one of the nation's least-affordable housing markets.

With that conversation in mind, I pass along an e-mail I received this morning:

"Along with NationalBubble.com and Patrick.net, I invite you to join our efforts to stop the planned government bailout of the housing industry. We believe that it is not the government's role (i.e., not the taxpayer's burden) to bailout irresponsible lenders, brokers, and borrowers.

"Accordingly, we have created a website www.StopTheHousingBailout.com (currently hosted on NationalBubble) that is designed to be a clearinghouse of information for a movement against the bailout. The website is in its infancy, but currently consists of a statement why the bailout is wrong and several links to efforts to stop the bailout (e.g., a petition, a pledge, anti-bailout apparel, links to contact political representatives, etc.).

"We ask that you consider joining forces with us to stop the bailout. A band of bloggers against the bailout can be a powerful political weapon. Moreover, a united front will present a newsworthy story for the media. By banding together against this ill-advised bailout, we can be heard beyond the readership of our collective pages and make a difference. Together, we can present a stronger message than the sum of our individual voices."

Your thoughts? Comment? E-mail story tips to peter.viles@latimes.com

Comments

[puckhead]

I think that the problem is that everyone has a different opinion of a “bailout”. If you ask people, “do you support gov’t assistance to people who bought homes that they cannot afford?” And then ask people, “do you support gov’t assistance to financial institutions to help prevent a collapse of the economy and a drepression?” You probably get two different responses even though both could be defined as a “bailout”.

[IToldu2CashOut]

I've written letters, emails, etc, but the only one who seems to listen is John McCain. Unfortunately on almost every other issue I don't agree with him. Probably going to vote for a third party. I'd love to vote Obama but he'll have to change his tune. Locally I plan on voting against the incumbents.

[mike]

itoldu2cashout??

this has nothing to do with who you vote for. the person you vote for will bend to political pressure after they are seated anyway. this is about BEING the political pressure that the robot in office bends to.in other words, throw a dart at the ballot and pray that enough people see things your way to make the robot THINK about POSSIBLY really making some kind of descision for the greater good of the masses.

[alvin]

stop "the" bailout?

shouldn't it be stop "a" bailout, since no specific bailout plan has yet passed congress let alone been signed into law.

people point to the FHA plan and the change of conforming loan limits and the rate freezes and most recently the fed's intervention on bear stearns as tax funded bailouts, but the reality is that none of these "bailouts" have put even a dent into the deflating bubble, let alone required any serious tax payer funds.

for that, a bill will have to be drafted and passed in both the house and the senate (several have tried and failed so far), then signed into law by the president.

consider that during the S&L bailout it took YEARS to get the funding passed by congress. And that was for a government obligation to fund the FDIC. The only obligation the government has this time around is if agency MBS start defaulting - which hasn't happened yet - and even that is merely an implied obligation.

that all said, i am totally against any kind of large bailout (short of staving off a massive depression!), and hope this whole idea never gets the momentum to actually go any further than just talk...

[tew]

The description of your conversation with the other journalist is a reminder of just how completely out of touch most journalists are, especially ones from rich cities. It seems many must spend all their time outside the newsroom with artsy folks (bohemians with trust funds), at charity events, hanging with their NGO friends and, in LA, with the entertainment crowd - not exactly a well rounded representation of the wealth of knowledge and diversity of opinion in society. They tend to have no businesspeople, engineers, or real working middle class friends. Hey, I'm sure their are plenty of journalists for whom this characterization does not apply, but it sure seems like it.

[bode]

To paraphrase Winston Churchill, what if using public money to prevent a catastrophic recession is is the worst option, except for all others? Peter (and everyone else) focuses on this as if we can separate the US housing market from the US economy, and I don't believe things are as black and white as the blogosphere would like.

We do have a solid data point of what it can mean to not use public money to intervene is a time of financial uncertainty: it was called the great depression. Past performance is no guarantee of what the future holds, but doing nothing is just as dangerous and doing something, that much is certain.

I know everyone here likes to talk their book; that is, they don't own a house in Southern California, and would like to buy one for less than the cost of construction. It would have been interesting to have Bear Stearns actually go bankrupt, the same way it would have been interesting to watch a nuclear warhead test in Nevada. A vicarious thrill, but not good for you.

I don't want my tax money wasted helping out shady morons who engaged in obviously stupid and/or illegal behavior during the housing bubble. But I also don't want a collapse of the US economy. You talk like they're totally separate, but honestly, I doubt it. There's moral hazard in Bear Stearns going for $10, and Countrywide for $6. Maybe, just maybe, that's better than a chaotic collapse.

[John]

i believe that people who think that if we do not do SOMETHING we will all be fine and dandy are ignorant to the realities of the situation.

The economy is in a mess. SOMETHING must be done.

Personally I would favor something along the lines of the stimulus package that just happened. If you are giving handouts, handout to everyone.

The reality is that this is not going to happen. The people who were stupid and made bad decisions get help.

Wake up! The gov operates like this. Think about welfare, subsidized ANYTHING, and you will see it always happens.
When was the last time a mother got turned down for welfare because she made a bad decision to drop out of highschool and get knocked up?
We still foot the bill and will continue to do so in this crisis.

[ckim]

I'm worried about what puckhead said:
", “do you support gov’t assistance to financial institutions to help prevent a collapse of the economy and a drepression?” "

Is there a way to let the bubble burst and not devastate the economy. I mean what good is it to have low home prices if a lot of people are out of work? If someone can put my mind at ease on that point I'll gladly start email politicians.

[go]

Mere coincidence the taxpayers' $100 billions are spent by former wall street executive (treasury sec/goldman sachs former ceo) on his friends' (and future employer) wall street banks & other wall street companies during election year (just in case dems win, the republicans are afraid they won't be able to do this anymore for a while)
using excuse of foreclosure problem before possibly dem president uses that same $ to help family homeowners avoid getting kicked out of homes.
Republicans learned their lesson from when after bush sr, bubba spent the peace dividend cutting the deficit. This time the republicans are trying to spend any dem president's peace-dividend ahead of time on tax cuts for rich, oil industry (already making $100 billions profit) subsidies, wall street bailouts, no-bid $10 billions iraq contracts.
The military does seem more advanced, but they could have done that without actually fighting iraq war. Without actual iraq war, military could have been even stronger than it is now.

[Santa Barbara Real Estate Voice]

Great post and a tough call. I am a Realtor here in the Santa Barbara and Montecito area and we have started to see our share of short sales and foreclosures in the last 6-9 months. Most of these tend to be in the lower end condo level or entry level home values...which for Santa Barbara is $300,000 to $750,000.

Our high end ($2 million and above) on the other hand has not even blinked and prices are stable and even rising. Currently I have 2 "deals" with short sales right now and there are a lot of issues. I am for sure getting the phone calls from neighbors who have been diligently paying their mortgage for the last 7 years and now they are seeing some serious bail outs down the street and they are back to owning 0% equity in their homes.

There are seveal people to blame but first and foremost it starts with our credit card culture and lack of saving in my eyes...from here it trickles down and depending on what angle you take, a different person seems to take the brunt of the blame.

[Hugh Jorgan]

Peter,

I have already written letters to my Senators and Congressman (posted on the blog a few weeks ago), decrying the bailout being considered in Congress. To date only my Congressman has responded, and the content of the response was that Congressman Miller (42nd) was diligently working to make the bailout happen! This from a Congressman that represents South OC!

Our elected "leaders" have never been more out of touch with the sentiments of the voting public. Let's not just visit an anonymous website, or wear slogans on our t-shirts. Send a message your politico will really understand.

Send a tea bag along with your letter. The tea bag symbol works! Last time it was done because the rat bastards gave themselves a huge raise. Let's do it again and force these bozos to reckon with their constituents!

Send a tea bag to each Senator, to your Congressman, and to the Presidential candidate of your choice. Do it today before it's too late.

[anonymous]

Hugh,
I'm with you. Waxman, Feinstein and Boxer all came back to me with BS about the poor homeowner who got into a jumbo they couldn't afford with zero down and how they plan to help them out. Meanwhile Uncle Sam prints more money, lowers interest rates and my salary deteriorates and I will never be able to visit Europe because the worthlessness of the deutchmark, excuse, me, ahem, US dollar. I am voting against the three mentioned above, against Hillary and against any pro-ballout pols. This from a lifelong bleeding heart liberal democrat.

BTW - please explain the 'tea bag' reference. And I'm sure it's not in reference to private parts. When was it last used as a reference and is it's root from the boston tea party. Thanks in advance.

[John]

Without a bailout, the economy as a whole won't go into an economic tailspin.

We're still going to need to eat, drive, work, live, etc., and the markets for goods and services will still exist.

A few million homeowners that should never have had homes will go back to being renters, while a few million renters that have been patiently waiting for homes they can afford will become homeowners.

The mortgage brokers / realtors / bankers that are out of work will have to retrain, causing a boom in the massage school / life coaching / flakey job of your choice training industry. The union training programs and trade schools will see a surge in applications for people who actually want to work.

Mexico's economy may benefit by having some of its hardest workers back South of the border again, especially if the Mexican govt. can continue the crackdown on the drug/kidnapping trades so Americans will want to travel more and do more business there.

GM, Chrysler and Ford will finally have to make some decent small cars, as SUVs aren't going to sell very well with gas at $4 a gallon and people living on an austerity budget. Or they won't and Honda and Toyota will own them by 2015.

A lot of B.S. will be flushed out of our economy if we don't have a bailout. (No more B.S. economics, no more B.S. jobs, no more B.S. predictions about the future, no more B.S. neighbors living large on home equity loans, no more B.S. politicians telling obvious falsehoods about how money works.)

Of course, the same will be true even with a bailout, as the length of time it will take to orchestrate, and the complexity and standards that will be in place, will ensure that the bailout is largely irrelevant.

Hard work, honesty, and foresight will be important.

Denial, laziness, and greed will be punished.

[Gallop]

Peter,

This blog isn't exactly a representative sample of the population. Dissenting opinions get shouted down pretty quickly.

[let it burn]

bode:

In every debate over the merits of a taxpayer-funded bailout there's always a person like you - the guy who turns to the anti-bailout priced-out bitter-renters (like me) and says "even though you've already been screwed once, you need to bend over and get screwed again because the alternative is to get screwed over even worse."

No. Not buying it. Not anymore. Bring on your chicken little-like "chaotic collapse." I'll take my chances. Ever consider that maybe a collapse is just what we need to build a populist movement strong enough to address the out of whack balance of power that favors the mega wealthy at the expense of this country's abused and dwindling middle class?

The flaw with your attempt to persuade us to accept even more abuse, is that people like me really don't have anything to lose anymore. Oh, we're going to lose our jobs in the big scary depression? Big whoop. Why am I working so hard anyway? It's not like I have anything to show for it, nor will I if I follow your advice.

A bailout just sends the signal that it's okay for the next round of economic raping and pillaging to begin. Maybe you're a glutton for punishment and you're fine with living on your knees - but count me out!

We don't need anymore apologies for the robber barons who are wrecking our country. Grow a backbone or shut up.

[eternal summer]

why can't these uber rich idiots that got even more uber rich through this whole thing use THEIR MONEY???? People, we need to focus on the man behind the curtain; the ceos of the banks, investment firms, home builders, all of the top people in this mess & MAKE THEM PAY! the people who are getting the 22 million paychecks while their companies become toast. we keep giving & giving these big companies all kinds of stuff so you can keep your lousy 50k per year job while you get to subsidize the functioning of the company with YOUR TAXES while the leader makes 10 times or more what you do? meanwhile they are exporting your jobs to cheaper countries while trying to stop any small business competition they possibly can. yes, we need to raise our voices & demand that the top dogs pay! who the hell do you think is buying these 10M+ houses? have you seen a 1M house in LA these days? they're garbage. some don't even have A/C or HEAT! the super rich are letting us argue the price of bread while rome burns....

[Chris]

I'm an ultra-liberal West Hollywood resident and I can't wait for the housing bubble in Southern California to continue to burst. A government "bailout" probably will only serve to help keep prices artificially high and we'll all be paying for it with our tax dollars.

I make double the median salary in LA and there's still NO way I can afford a reasonable two-bedroom house in LA. People are still listing their houses at 2006 levels.

I'm so sick of everybody wanting a handout. What happened to saving your money until you can buy a house you can afford?

I'm glad I didn't get caught up in the ridiculous bidding that's gone on in the LA housing market the past few years, but if the government is going to bail everyone out, then maybe the smart move would have been to buy a house I couldn't afford with no money down and wait for Uncle Sam to "help" me out. Crazy!

[Motowne]

Please explain the tea bag method?

[dclogang]

Borrowers, Lenders, Agents and some appraisers are the ones to blame.

The good news is that in the next few years home prices will plummet to affordable prices. In the meantime my wife and I will save and will move into a home we can afford it.

Japan had a similar boom and bust. Japan's Gov't also gave a bailout. It didn't work for them so why would it work for the US? Read this. http://homeguide123.com/articles/US_Housing_
Bust_vs._Japan_Housing_Bust%3A_What_We_Can_
Learn.html

[Sara in the IE]

If memory serves, and I like to think that it does, didn't a similar housing bubble burst in the late 1980s-early 1990s? One in which real estate seemed to flat line? Yes, it did, property values went from inflated to deflated in a number of months. Perhaps there wasn't talk of "bailouts" then as the economy was not as "global" as it is now.
It is not fair to bail out corporations that chose to make risky investments involving sub-prime credit; if the government doesn't bail out individuals or corporations the market and economy will eventually correct itself. Corporations, individuals, the government- all should be responsible for their own financial failures. If I can't make my payment, I don't appeal to the gov't to bail me out- I deal with it as a mature and responsible individual; why is this such a hard concept to grasp?

[silverfern]

I signed the petition, even taking into account the different POVs re: the term "bailout".

At least they encourage folks to write their congressional representatives. I'm feeling more cynical now than I was a few weeks ago.

I'd like a market correction w/out causing a huge economic mess; the question is, "how"?

[Dean Venture]

When did housing and speculation on housing by investment firms become the foundation of our economy?

And if our foundation is so flimsy, then how many coats of paint (bailouts) will it take to keep it standing?

I'd rather have a depression now rather than hand my kids a house of cards economy.

[Andrew Z]

John,

That might be the best post I have read on this blog to date. Nice work.

[Mike S]

Thanks for 'getting it' Peter and speaking up on our behalf.

[NoWayinLA]

I didn't sign the petition, if only because it needs major work. They've repackaged the moral hazard argument too many times in order to fill space. If you're sloppy like that when approaching a lawmaker, it just gives them the impression that you're too angry to understand the real issues, like they imagine they do. The anti-bailout crowd understands the situation much better than the reality-disconnected Congress, but they don't know that. So make the argument smarter.

The risk to the overall economy of not having a bailout is grossly overstated. The Great Depression happened because of systemic failure in the banking system. The entire banking system, however, does not have exposure to poor lending. We'll see a lot of the giants fall... Citibank, BofA, WaMu, etc. But there's a lot of little guys, banks with local scope, and credit unions, which did not get caught up in the frenzy, and they're poised to fill the void.

The Fed acts as if no mortgage lending can happen with a systemic failure in the bond trading market... but home financing happened long before CDOs were born, and will continue long after they're gone.

[jdj]

Yes, please. Enough of these people who claim we must take the bailout bullet (while smiling) to avoid Great Depression II. That's a great economic policy -- blackmail: bail me out or I'll take the economy out.

As a country we don't negotiate with political terrorists why the hell should we negotiate with housing speculators who are economic terrorists.

[Bode]

NoWayInLA,

The fed is acting as if no lending can happen with the GSEs. Guess what? They're right:

http://media.mcclatchydc.com/smedia/2008
/03/27/14/Hall-Nothaft-032708.source.prod_affiliate.
91.pdf

Look at the fourth page, the one that says more than 90% of all MBS in Dec, 2007 was GSE. Compare to March, 2007, where it was 54%. You think the balance sheets at regulated banks are so awesome as to handle the risk associated with making loans today? Did you ever watch "It's a wonderful life?"

If you want to ponder a bailout, think about what happens when one of the GSEs goes under. Right now they are not the lender of last resort, they are the lender of only resort.

I understand everyone is upset, and I am too. But it's ignorant to minimize the importance of wall street in lubricating the engine of commerce. Bear Stearns fails and a trillion dollars of synthetic transaction defaults, outcome unknown but absolutely not good.

Fact of the matter is, some bailout is going to happen. The commenter who said you can't sound angry when contacting your congressman is right: this forum, and the froth, have no part in the rational debate about what to do. No one in our government is going to say, "well, life sucked before, the great depression can't be any worse." That's the previous commenter talking his book -- life isn't good, so let's bring the country down to the lowest common denominator.

My suggestion is that you accept the fact that it is not in the interest of our elected official to go into a deep recession. With that in mind, try to comment objectively on the proposals, and hope that nothing really stupid happens. Get angry when the CEO of Wells Fargo asks for a sweet handout like JP Morgen got, but don't get angry when Bear Stearns is backstopped by the Fed.

Oh, and one last thing -- Bank of America holds ten percent of the insured deposits in the United States of America. That's 400 billion dollars insured by you, the taxpayers, full faith and credit of the United States of America. Before you start rattling off how it'd be great, fine, no problem if an institute like that failed, ponder what THAT bailout would mean. It'd put to shame what's being proposed, that's for sure.

[Terry]

It IS remarkable how so many media people are out of touch, on many topics, with what the average guy on the street thinks. One reason this blog gets a lot of traffic is probably that Peter doesn't come across as a typical irritating journalist type. He seems actually to be a likable, normal guy.

[starter homeowner]

There was a post here here a little while ago, to the effect that the bailout is already underway, it is incremental and occurring every time the Fed takes action to prop up another bank like Bear Stearns. The debate (bailout or no bailout, consumers vs. banks) is basically settled when you consider that the banking lobby now owns Congress on both sides of the aisle. Congress is not going to hold hearings and interfere with the Fed while it is taking action to bail out large financial institutions, even if the authority for their action is dubious.

Where are all the Free Marketeers, who most typically fall within the upper income bracket? Keeping mum, trying to prop up their investments with some love from the Fed. In practice, Free Market ideology only applies to the poor, so the only the middle- and lower-income bracket homeowners are going to be refused a pull on the teat of the Nanny State.

[Jacinto]

Thanks Bode. You’re a person of wisdom.

Shall we consider the two alternatives available:

1. Bailout (insert definition here ________).

2. Economic malaise.

Item 1 hurts my sense of self-importance, i.e. “I behaved responsibly therefore I deserve to feel superior.”

But item 2 hurts my wallet. In most cases I’d be smarter to protect my wallet.

Yes, a “bailout” may involve taxpayer money, which affects my wallet. But in even in the highly unlikely event that 1% of the federal budget may be used for a “bailout,” it would cause a far smaller economic impact than a 1% decline in GDP. Don’t take my word for it. These facts are easy to confirm.

[NoWayinLA]

Bode: Rather off topic, don't you think? Last time I looked, Bear Stearns was not a GSE. Neither was BofA.

$400B in assets for BofA? Pocket change. Some estimates indicate the housing market is overvalued by the trillions. And that's just the houses. Multiply by the number of layers of CDOs and credit swaps to find the true cost of this meltdown. The Fed has already loaned out well more than $400B in exchange for this worthless collateral.

You are correctly concerned about the fate of GSEs, as am I. Yet the government has chosen to increase their exposure to the credit crisis by lifting their lending caps and pleading with them to buy more worthless Countrywide loans.

Fed lending and GSE increased activity are having the dual result of transferring risk from the corporations that made this mess to the taxpayer. And each bailout move so far has gone only to exacerbate the situation. Better that BofA founder at a $400B loss (less recovered assets through liquidation) than to put the taxpayers on the hook for trillions. By the numbers alone, the bailout is a disaster waiting to happen.

The bailout has the additional consequence of extending the slowdown for new business. It slows the price correction, forcing interested buyers to sit on the sidelines for that much longer, while watching the value of their savings erode via inflation. Everybody loses.

By the way... that guy who said you can't be angry when you contact Congress was me.

[Laker]

It all comes to the law of unintended consequences.
If a bailout will occur, the overshoot in pricing will be deeper and longer. The longer part is the problem here, since a recovery follows every recession, and interfering with the market will just prolong the mess.

On top of it, the government or the FED do not have the money to bailout the lenders. Since the over valuation is in the 3-8 Trillion $, (T like 1000 billion), there is simply no cash.
1) If the FED attempts to print the 3-8 Trillion $, that will inflate the money supply by 3, That means everything will pretty much cost 3 times more...the dollar will stop from being world currency and we will become a 3rd world country.
2) The money if indeed payed to lenders will need to come from TAXES. And by the numbers alone, a LOT OF TAXES...something like a 10% federal sales tax...for couple of years. Or an increase in income tax brackets by 10%.
Will you support that?

[Michael Snyder]

Gallop
If you're gonna whine, go sit in the truck.

bode,
If the principle of "a rose by any other name" applies I count at least two "bail out" plans placing taxpayer funds at risk as we speak. This week http://www.bloomberg.com posted "Taxpayers May Be Liable From Bear, Mortgage Rescue (Update3)" detailing the risks to taxpayer funds posed by the Treasury's guaranteeing JP Morgan's offer. Talk about a "no load" transaction that would make Ted Turner proud!
Add to that the Fed's offer to accept a "broad range of collateral" in their opening of the discount window to a whole range of largely unregulated players. Players who's over leveraged paper is only being propped up by massive infusions of capital into Moody's and the entire bond rating/insurance community. Paper that will collapse on the first margin call that reveals just how insanely it's been leveraged, just like the Carlyle Fund did last week.
So, who in your world will be left holding the proverbial bag when the air whooshes out of the dollar in 180 days when the Fed finds they've just laundered at least $200 billion in junk bonds and converted it back to AAA paper with a Treasury seal? BTW that loan interval used to be 28 days max.

[HolyCow!]

Aren't we screwed no matter what? Remember financial institutions see nothing wrong with charging us 20 or 30 percent interest on credit card debt. Potential home buyers probably have funded their downpayments with market investments not local bank savings accounts. Anyone not planning to retire on just their social security check has money in the market. Market drops and we all pay the price. Take the hit now or later, it's a win-loose. Someones going to benefit and it ain't you. Iraq is projected to cost us 3 trillion dollars or $30,000 for every man, woman and child. There's your down payment on an entry level home or condo in Sun City.

[lakanino]

a year ago, in one of many blogs/postings like these, i posted that real estate prices will drop to 2002-2003 prices. this translates to about (i believe) 20 to 30% drop in prices. a blogger who is also a potential buyer waiting for this ,arket to tank at that time said it should be more like 50%. i mentioned that if that happens - i would worry about the economy as a whole than house prices. and the funny enough that blogger said "nah... the FEDS wouldnt let that spill over the economy". you just cant have it both ways. i like this downturn/correction but you have to be concerned about the overall economy too...