Reduce For Excuse

I don't often disagree with Atrios, but he's still going on and on about principle write-downs on mortgages;

Extend and Pretend

The only thing that can help most people with mortgages they can't afford to make payment on or who are significantly underwater is significant principal modification. Without that, none of these programs will work, and more than that they just end up squeezing a few more pennies out of people before they're ultimately kicked out. I don't know all the reasons it's preferably to kick someone out and sell the home to someone else for $X instead of just reducing the principal to $X, but apparently it is.

The "extend and pretend" program has only one real goal; prop up the housing bubble. It's a political calculation by the Obama administration. It seems the way they want to do it is to extend foreclosures over a long period of time, rather than have it all happen at one time. That prevents a big collapse in the market, and the political upheaval it would cause the Democrats. That's it. There was never any intention to "help" anyone getting foreclosed on because there's nothing you can do for those people that doesn't involve very low unemployment. To solve the unemployment problem would have required a much larger "stimulus" that Obama was not willing to do, because he's not really a progressive politician.

There are a few reasons why principle write-downs do not make any sense at all. First, the reaction from people who do pay their mortgage would be swift and vicious. Giving out a write-down to people who cannot afford to make the payments they agreed to make when they signed their mortgages would result in a popular uprising. It's also not how we do things in our system of economics. Can I get a "write-down" to current market value on my car if I stop making the payments too?

The second reason a principle write-down is a bad idea is that if you reduce the principle to the "current market value" (which is not determined until the house re-sells), there's still a very low chance the home-owner can make the mortgage payment anyway, and they'll end up getting foreclosed on regardless. If a person cannot afford X per month, they won't be able to afford X-$200 a month either. People are not having their monthly incomes reduced by a few hundred a month. It's a lot more than that, and a principle write-down is not going to matter.

It's important the Republicans reject any attempt of the Fed to force mortgage holders to freeze foreclosures. I'm sure they would be joined by a number of Democrats as well. Any "freeze" considered by Obama is merely an attempt to delay the inevitable.. probably until after the mid-terms.. and then the next election in 2012.. and on and on.

/adding

It looks like Rahm Emanuel is toast. Progressives will be pleased, but I doubt this means that Obama realizes (now) that his "centrist" fetish was ill advised. The popular expression is "rearranging the deck chairs on the Titanic".

Of course, the Loon Brigade will try and spin it pretty much 180 degrees from reality. They'll insist that Emanuel was booted because Obama's "socialist" policies are obviously a failure.

It's strange to me that the Loon Brigade and I fundamentally agree on something, but for reasons that are polar opposites.