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This terrible idea will not die: that the only way to revive the US economy is to reduce mortgages on homes and property purchased at speculative values. The fact that so many homeowners (like me) did not buy more house than they could afford, did not buy into the speculation economy, did not use homes as ATM’s, continue to pay monthly mortgages, honored their contracts and provided an example of fiscal responsibility to their families: these facts do not add up to a hill of beans according to sober commentators including former president Bill Clinton.
Clinton, especially. It was his administration (thank you, Robert Rubin) that endorsed changes to banking laws that turned the speculators loose (thank you, Phil Gramm). And it was Bush, afterwards, who paved the way for “the ownership society” (thank you Mel Martinez and Jeb Bush) and the wholesale surrender of the Federal Reserve to the gamblers and thieves. All remain more or less in situ: that is another matter.
So here is a deal that might be acceptable to fools like me, who find the idea of mortgage principal reduction at the bottom of a vomit bag. Pay me off.
Do mortgage principal reduction (MPR) in a way that rewards the ethical behavior implicit in renters who decided not to buy and homeowners who do not need reduction. This would work through cash rewards based on residential zip codes, GIS mapping, and proof of residence. (Now that I’m day-dreaming: turn Homeland Security guards at airports into office actuaries to handle the billions in claims.)
In each zip code, establish a grid comprising “speculative market value” and new “present fair value” for homes based on square footage, bedrooms, bathrooms, etc. Based on the difference between the two (SMV-PFV x months in residence or ownership), establish a baseline monthly payment. From that baseline, the federal government (ie. taxpayers) would reduce mortgage principal for the underwater homeowners and make a one time payment to all renters and all other homeowners who can prove residence and do not claim a mortgage principal reduction. In my imagination, for our honesty we would also receive a bonus tacked on. Say, a fifty percent add-on to the monthly payment for common sense and frugality.
The only thing I am serious about, here, is that the conversation about mortgage principal reduction must include benefits for those who played by the rules. My preference would be for this dialogue to take place in a public square with the bankers and speculators in stockades.
Millions of Americans are paying a severe price for having been suckered punched by a culture of speculation. Many wage-earners, too, are like victims of drive-by shootings. Many couldn’t speculate on housing but would have, if they could. Many wouldn’t, because they were cautious about predators. Isn’t it their turn for a free ride, too?