Thursday, March 5, 2009

Bailing Out Failed Entrepreneurs

Remember when Obama first said that this bailout was not going to reward speculators? Check out this little quote from NPR's All Things Considered this morning:
Tucker Roberts, 31, of Crested Butte, Colo., purchased a townhouse for just under $500,000 two years ago. He was hoping to sell it for a profit soon, but instead prices have gone down.

"So now I own a house that's worth, probably, $150,000 to $200,000 less than my total mortgage is on the place," says Roberts.

His salesman salary ranges from $50,000 to $75,000 a year, so the $3,400 monthly mortgage is nearly impossible to afford. Until recently he had two roommates but now that they're gone he's burning through his savings and says he may have to liquidate other assets to keep current on the payments.

"By spring of next year if I can't get my house sold or I can't start making a lot more money, there'll be a three bedroom two-and-a-half bath house for sale really cheap through a bank," says Roberts.

Roberts is among those a new U.S. Treasury Department program is designed to help. The $75 billion foreclosure relief plan is for those facing imminent hardship. It offers cash incentives to lenders who modify mortgages on single-family houses up to $729,750.
With all due respect - are you kidding me? He bought a half a million dollar townhouse at the ripe old age of 29 making 50k a year. Put two roommates in the house to cover a 3400 dollar mortgage. Hell - how many people does anyone out there know with a THREE THOUSAND FOUR HUNDRED DOLLAR MORTGAGE?

Then he friggin admits he was flipping, but this new Treasury plan was DESIGNED TO HELP HIM??????

This entire plan has lost sight of its originally intended goal of helping people who were screwed into bad mortgages. The reason it has is simple - the vast majority of people who are "stuck" were speculating. We've seen the enemy and it is us. The only real victims here are those of us who did not speculate. We are going to bail out a bunch of folks who made bad bets and now want "the government" to bail them out. Of course "the government" will ask those of us "suckers" to pay for the entrepreneurs' failure. Since when was that the American way?

The banks, Countrywide, real estate agents cannot be solely blamed. You can't con an honest person, but you can sure as hell con a greedy one. We have to point the fingers of blame at ourselves when there were at least four television shows about house flipping on cable just last year. Two of the shows basically had the same name - one was called Flip that House, and the other was originally called Flip this House. They couldn't even come up with original names for it. Bravo had a show called Flipping Out which now seems prophetic. Now I wonder if they'll have shows called "Bail Me Out," or maybe "Up Side Down in Phoenix!" or possibly "Foreclose This!"

This has become total and utter risk abatement by the government. Young Tucker took a calculated risk in the marketplace. It did not work out for him. The asset lost value. It was never, NEVER in his mind supposed to be a home in the traditional sense. He might as well have been buying gold, or internet stocks, or tulip bulbs.

Now instead of putting him through the same entrepreneurial process that Henry Ford went through several times in his life, losing his shirt, before he made it big, Tucker will be "bailed out" by the Feds. To what end?

He's now trapped in a house he doesn't want. Some young couple that's saved diligently for this opportunity will be denied the chance to purchase that home. The rest of us will not benefit from this supposed price support because this will simply put off the inevitable - he'll have to sell the house at a loss eventually. And besides, we are also paying 75 billion dollars to put off this problem. Of course with the Feds throwing around trillions, 75 billion seems like pocket change doesn't it?

The lesson Tucker learns is that there really isn't any risk anymore. There was no downside. No one loses. Everybody gets participation ribbons, even the kids who finish last. No more jokes about France people. At least in France people still have to pay their debts. Check out this quote from a piece on the situation in the French debt and housing market from last year:
Only 57 percent of French people own their own home, around 10 points below the euro zone average and banks have generally required large deposits for home purchases, limiting the build up of large loans.

OECD data shows the debt of French households was only 89.1 percent of income in 2006. In Britain and the United States that ratio stands at 168.5 percent and 139.7 percent respectively.
France has not made the idea that everyone must own a home the national mantra. France, the land of markets and responsible government. How early to the bars open around here...............



Folks I'm going to be asking donations be sent to poor Chadi Moussa. Read about his horrible, heart-wrenching saga in this New York Times piece that has brought my frustration with this "bailout" to new heights. Mr. Moussa bought a 2.25 million dollar home that's lost half its value..................unfortunately, the piece seems to say, he doesn't qualify for a bailout. Sob, sob, sob.

I urge, nay, implore you, to send him whatever help you can to help him in this difficult circumstance..............when's the next flight to Paris?


  1. Daaaaaamn.....I should've taken a page from the ol' Tucker play book a couple of years ago! On paper, we were almost exactly identical: very close in age and income, and I could've qualified for a friggin HALF A MIL DOLLAR HOME???? And then, when I found out that I couldn't afford it, the big O was gonna let me keep it anyways? No offense dear hubby, but boy did I settle a little too early ;)