Tuesday, May 05, 2009

Cramdown: Responsible Mortgage Holders Fight Back

Surveys show that homeowners have a very high turnout rate in elections. That is probably one reason the so-called "cramdown" mortgage restructuring by judges was nixed by the senate yesterday…Of course, it doesn't hurt when banks all across America were screaming bloody murder about it. And, I would like to think that regular homeowners who pay on time every month despite the hardships didn't want to foot the bill for those who are less responsible….Mortgage Cramdown: The Market in Voters Forces a Change of Philosophy, Rich Moran, American Thinker, 5/1/2009

Unintended consequences didn’t seem to matter much in the irrational exuberance of the current Congress, at least until they go home to hold audiences with constituents. It’s a funny thing, many US Representatives and Senators have discovered, as Moran’s article makes wonderfully clear. When 90% or more of homebuyers are responsible, paying down their mortgages, and managing their household budgets to afford the lives they want, it is possible that there will be considerable resentment, even outrage, at a government that arbitrarily decides that the other eight to ten percent should be let off the hook without penalty. This outrage may grow when the same government’s Homeland Security Secretary issues a report suggesting that people who disagree with the Administration and Congress might be terrorists. What might unintended consequences be in the longer run?

That’s always a tough call, but a fairly predictable consequence of government actions that outrage voters is that Congresses with majorities in one party might change to another party altogether in the next election.


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