I Bought an Expensive House. My Bad, Not Yours

I Bought an Expensive House. My Bad, Not Yours

I don’t like populists. First of all, they seem a lot more popular than I am. Second, they derive their popularity from exploiting our base fears — Joe McCarthy’s fear of communist takeover, George Wallace’s fear of black people, Lou Dobbs’ fear of other cultures, Joe the Plumber’s fear of working. Whereas I derive my popularity from ending paragraphs with middling jokes.

But CNBC reporter Rick Santelli’s now famous rant against President Barack Obama’s Homeowner Affordability and Stability Plan from the floor of the Chicago Board of Trade only seemed like populism. Sure, he was screaming, and his theme was every man for himself, and the mass of white men behind him assembled into an angry mob, and — like all the great populists — he is oddly unhandsome. But Santelli wasn’t pitting the majority against a minority. He was angry at Obama for offering aid to a middle class that neither deserves nor needs it.

A lot of optimistic people bought houses near the historic height of the market, say November 2005, for absurdly high prices, say $1.12 million, in places like the eastern Hollywood Hills section of Los Angeles. These people are very, very sad. Trust me on this. But the sudden drop in housing prices hasn’t made it any harder for these people to pay their loans. That’s because your home’s value is utterly irrelevant until you want to sell it — the same as your baseball cards, Hummel figurines or casual encounters.

The only people affected by plummeting real estate prices are the ones who bought a house that cost more than they could afford, hoping for a spike in value so they could sell at a profit or take out a new loan based on an increased value. Their home wasn’t just a place to live; it was an investment they thought they could liquefy at will. If we’re saving these poor souls from the 26.7% drop in their investment, we should give twice as much aid to everyone who has lost approximately 50% in the stock market since its peak. Especially those in Vanguard’s Tax-Managed Capital Appreciation Fund.

Meanwhile, mortgages held by the responsible people Obama says he is trying to help only go into foreclosure when the owners lose their jobs. But the best way to help them is through increased unemployment benefits and job creation. In fact, James Lockhart, who regulates Fannie Mae and Freddie Mac, says he hopes this backward plan keeps at best 40% of the people it dishes out money to from redefaulting on their mortgage. The only plan worth pursuing that works at best 40% of the time is hitting a baseball. I would love to yell that in front of the traders at the Chicago Board of Trade. I would also like to yell at them to get computers like everyone else so they can stop executing trades by waving their hands like idiots.

If we reimbursed people who lost cash on risky investments — or, as Santelli put it, “subsidize the losers’ mortgages” — we’d create a moral hazard, telling everyone there’s no risk to gambling. It’s why parents fight their instinct to save their kids from the consequences of their mistakes. Unless they’re famous kids, in which case you should encourage mistakes, since it will land them a reality show.

Sure, some of those 5%-down speculators were poor people fooled by adjustable-rate mortgages — which, it turns out, are too complicated for people to understand. The best way to fix that is by making them illegal, just like those sweet microprint Publishers Clearing House Sweepstakes contracts that trick people into subscribing to your finer newsweeklies. Meanwhile, the people we really should be worrying about in an economic downturn, the poor, don’t own homes — they rent.

Much as it pains me, housing prices need to come down a lot more for the sake of the country. It’s not that the housing market has suddenly gotten sick and needs medicine. It was sick, and it’s getting better. Just like $4 gas, Pets.com and Jim Carrey’s career, we are undergoing a needed correction. So I want in on the Chicago tea party that Santelli, in his rant, promised to organize, only I’m hoping it isn’t in Chicago and is more of a cocktail/wine thing or maybe just a Facebook group. But I’m with him on standing back and letting the housing market lose some of its vaulted ceilings, guarded gates and Argentine Balmoral granite tops. It’s not going to be a pretty few years. So let’s save our government money for things we need. Like high-definition television converters.

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