Minyan Mailbag: A No Win Situation?
Those involved need to take their medicine and to break their addiction, but is it possible to achieve that without the collapse of the country's financial system?
I don't disagree with any of what you've said, but if the foreclosed properties start getting thrown out onto the market in rapid fashion, it could serve to really accelerate the tailspin.
Think about the guy who is in his $650k house with a $600k mortgage and is making his payments on schedule. Suddenly, three identical clones of his house in his neighborhood are flushed out at $350k-$400k... guess what's going through his mind. Why should I stay in this house and pay on my $600k mortgage when I can buy its identical twin for <$400k?
Of course, that's exactly the problem with all of the bail out plans as well. I'm totally in your camp about those involved needing to take their medicine and to break their addiction, but I'm not excited about seeing that lead to the collapse of the country's financial system. As I've said from the outset-this is a huge problem. One of the things that makes it so tricky is the absolute size of the problem-it seems like it's much bigger than the S&L debacle.
Another really bad thing is that it's all occurring right as the primaries are in full swing, so all of the politicians will be looking for ways to "help all these poor victims" in order to buy votes.
It's going to be interesting to see how all this plays out. I'm afraid it's a no win situation. We really need to clean house and send a strong message to all those who created this situation that they can pay for it the hard way, but somehow, we've got to try to do it without dire consequences-that may be much trickier.
- Minyan Jay
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