The double bottom

Fox News reported that some homeowners are deliberately missing their monthly mortgages payments even though they can easily afford to make those payments. Evidently, they’re hoping for some kind of bailout or readjustment of the interest rate and/or the principal balance. Where did they get that idea? From the banks, insurers and investment houses that have been bailed out by the government for making stupid mistakes. From auto company executives who are asking that the rules of capitalism and a free market system be broken with a government bailout. Even the Gaffmeister himself, VP-Elect Joe Biden, blathered about resetting the outstanding principal balance on home mortgages so that payments totaled no more than 31% of household income. 31% is a rather precise figure. Not 30%, not 32%, but 31%. From what dark recess did he pull that number? How could that possibly apply to the myriad of financial conditions that describe each and every household in the US? This is how central planning works - it indiscriminately applies the stupidest principle across the board.

Now, re-setting what people owe on their homes sounds like a noble gesture. Except that it encourages people to go into delinquency, knowing that the socialists in Washington will come riding to the rescue. Also, what does this do to the homeowners who are living within their means, sacrificing on luxuries so that they can meet their financial obligations? It punishes them. If mortgage balances are allowed to re-set, banks will incur huge losses, much larger than the calamity we’re now experiencing. Banks will tighten credit and raise interest rates to cover their losses. Further, the value of all real estate plunges even lower. The combination will hurt homeowners who’ve been making their mortgage payments and paying their property taxes on time.

The clowns in Washington are trying to help. They don’t know how, so they’re playing with the knobs and levers of government, screwing up the economy further and delaying a rebound. Can they please take a rest?