Sunday, February 15, 2009

A genius idea for the housing crisis

The March Atlantic showed up with (as usual) stimulating and thought-provoking articles. One in particular relates to the crash of our financial systems, and I saw in it a genius idea for dealing with troubled assets, etc. Here is Richard Florida:
Instead of resisting foreclosures, the government should seek to facilitate them in ways that can minimize pain and disruption. Banks that take back homes, for instance, could be required to offer to rent each home to the previous homeowner, at market rates—which are typically lower than mortgage payments—for some number of years. (At the end of that period, the former homeowner could be given the option to repurchase the home at the prevailing market price.)
How the Crash Will Reshape America, by Richard Florida
Atlantic, March 2009
The problem with this idea, of course, is getting banks to go along with it. Well, some of these clowns (think Bank of America and Merrill Lynch, per Cuomo in WashPost HuffPost CBS) deserve a little pain. I mean, the taxpayers are giving those guys billions to bail 'em out of a mess they got themselves into, and 700 employees got million-dollar bonuses. Compared to people losing their homes (that the banks never should have loaned them the money for in the first place), these guys are feeling no pain. None.

-Ahem- Excuse me, but I'm with our President on this (HuffPost NYTimes WashPost). I'm having trouble coming up with kind words or thoughts toward these irresponsible people. Yes, I know, I'm lumping all these financial people together. I don't really hate the finance industry; some of my best friends are in the financial industry.

But I find it utterly bizarre that 28% -- over a quarter -- of all jobs in Bloomington-Normal, IL, are financial positions (Florida, op. cit., part 1 link).

So, how to help high-foreclosure areas? Impel the banks to offer the foreclosed properites to the occupants at the going rental rate for some years (seven?). At the end of that period, the banks should be made to offer the properties for sale to the former owners (should they still be there) at the then-current market levels.

And by the way, as the US massively subsidizes the housing industry (by allowing a tax deduction for mortgage interest); we should stop doing this, as it distorts the economy -- we spend too much on housing construction and real-estate commissions. Besides, it's regressive.

The above opinions are worth every penny you paid for 'em. But profiteers remind me of Isaiah 5:8

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