Michael Braun's Blog

“This whole notion that everybody’s entitled to own a house — that’s a bunch of crap,” says Michael Bednark, who lives in Tigard, Ore., and works in sales of heavy truck equipment. He says he’s upset about efforts to cut more deals for people who can’t pay their loans, especially where taxpayer money is involved.

“People who bought more home than they are entitled to own are getting bailed out on my back,” Bednark says. “It’s insane, what they were doing. So where is the personal responsibility?”

This insightful commentary was part of a story on NPR’s Morning Edition this morning. Oh, Mr. Bednark, if only I too could share your simplistic worldview and shallow understanding of economics! Kind sir, let me explain to you why you cannot afford to let these mortgages default.

1. Personal responsibility extends far beyond those home buyers who bought more house than they can now afford.
Here’s a simplistic explanation of the history so that most anyone can understand. First, we’ve got a tech boom, which leads to a lot of money. That means a lot of people have cash to burn. What safer place to put it than in home construction? This means a lot of homes need to get sold. Builders put out a lot of incentives to BUY, BUY, BUY! Deregulation leads to lending companies with the ability to lend money to ANYONE on ridiculous terms. Because they aren’t responsible for the payback of the loan and are making beaucoup bucks lending money to anyone, they keep doing it and get a little dishonest in the process. Furthermore, home buyers see housing prices rising, meaning they can buy a home now and refinance to pay their mortgage when prices rise. Increasing housing prices means increasing rent, making buying an even more attractive option. When the bottom falls out, these people are stuck with a home worth much less than they paid for it, skyrocketing mortgage payments, and no help in sight. They got duped. A lot of folks should have had some personal responsibility, but it didn’t exactly work out that way, and it doesn’t start and end with homebuyers.

2. Where are the good rental properties in your area?
If I want to rent a house in the city of Madison, I will be shelling out a whole lot of money. Housing prices are high here and haven’t fallen much since the mortgage crisis. But if you are a family of 5, where do you go to find a place to live? This isn’t a big city, with lots and lots of apartment options. Nor do we have good public transport, such that you could live far outside the city and take the train in. Buying a house, if you can get a mortgage, feels like the logical choice for many, many families. And when your payments start out where you can afford them, what is the incentive to rent a poor quality, bad location, too small apartment?

3. Do you ever plan to sell your house?
Let’s face it, the largest part of most American’s assets is their home. Especially in the last 50 years, homeownership has become a way to grow wealthy over time. When you sell your house, you reap the money, time, and sweat you’ve invested over the period of ownership. But, if we see a lot of foreclosures or defaults, home prices will keep dropping. Maybe they’ve already fallen in your area, Mr. Bednark. What will happen if your home price drops so far that you can’t sell it for a reasonable price? What if you need to move to a different city or into a different house? Good luck to you!

4. There are solutions to the problem that you can agree to.
There are a lot of homeowners who are stuck in a mortgage with ridiculous terms. A moratorium on foreclosures for a period of months while the banks sort out what kinds of loans they can give will help everyone. For those homeowners unable to refinance because they really don’t make enough, they will be able to search for another place to live. Perhaps they could be allowed to stay in their home, paying what they can, until the house can be sold (if we do this, we now have a lot of good quality rental properties). No one has proposed that the government pay off people’s mortgages or give people money to stipend their increasing payments. This wouldn’t make sense for the financial industry or for America. After all, most of the governmental help has gone to banks who bet everything on rising home prices and ridiculous derivatives. If professionals in the financial services industry couldn’t make good choices, how do we expect prospective home buyers to navigate through this minefield?

In the end, you must remember, Mr. Bednark – the government has the stability of the US economy as their primary goal. Even if you blame mortgage holders, a stable, growing economy will help you too. Are you willing to foreclose on your neighbors just so you feel righteous about your own choices?

I think I know how McCain could have won the presidency (the only way he could have won, if it was at all possible).

1. Declare that he will only serve one term.
This allows him to say that he won’t make decisions based on what is popular for his party, but rather based on what is required to get the nation back on track. It means he won’t be politicking while in office and shows that he understands that he is very old. And there would be no penalty for him running again, should he be very popular.

2. Pick an experienced running mate, even if they are boring.
Joe Lieberman or Tom Ridge may not be the most exciting of candidates, and they sure can’t stir up the “base” with their pro-women’s rights positions. But they would have helped McCain make the claim that he was going with experience. They also would not have drawn attention away from the campaign and to clothes, stupid statements, and baby-making daughters.

3. Experience, experience, experience.
McCain should have never left the message that he was the experienced candidate. “My friends, Barack Obama is a good man, a great politician, and someone who has a bright future. I look forward to working with him in whatever capacity I can. But this election is about putting our country back on track. In 4 or 8 years, Barack Obama will be an experienced candidate, and I would encourage him to run again, if he doesn’t win in this election. Right now, however, this country needs experience. I will come into the job, ready on day one, with my only mission to get this great nation back on the rails. I will get it into good shape, and then be more than happy to hand the reins to someone else. But in order to do that, I need you to vote for me, the candidate with experience to lead.”

All of a sudden, if you liked John McCain in the past, he now seems to be doing something both “maverick-y” and realistic. He forgoes politics to serve his nation – who could reject that argument? I think Obama would have had plenty of counter-arguments. “If John McCain has the solutions now, where has he been for the past 8 years? George Bush, a man he voted with 90% of the time, was in office. Why couldn’t John McCain have told the secrets to him, so we wouldn’t be in this mess in the first place? It’s no argument to say you’re the only one who can fix the mess when he and Bush are the one’s who made it in the first place!” And I also doubt McCain’s ability to stay on message, so the whole thing might not have worked. But I think a strategy like that would have been McCain’s only chance to win.

Although, consider this anecdote. While visiting family on Sunday, I got into a discussion about politics with my uncle, a self-identified conservative Republican who works in the financial services industry. He asked me who I thought he voted for. I didn’t wager a guess, as he had previously said good things about McCain. Turns out he voted for Barack Obama, because of the prayer that Obama put in the Wailing Wall. If McCain can’t even get my uncle’s vote because Obama was such an inspiring candidate, then maybe there really was no hope for McCain. Thank goodness.