The Deadman Night Rider

A forum for evening students of the SMU Dedman School of Law and other outlaws..

Friday, October 31, 2008

God, please let some have taped this...

I would pay $100 to get to see this on tape--Arnold Schwarzenegger describing Obama at a campaign rally:

"Every year in March I come here to organize the Arnold Classic, which is all about building the body and pumping," Schwarzenegger said.

"That's why I want to invite Senator Obama because he needs to do something about those skinny legs. I'm going to make him do some squats.

"And then we're going to make him do some biceps curls to beef up those scrawny little arms. But if he could only do something about putting some meat on his ideas.

"Senator McCain on the other hand is built like a rock. His character and his views are solid."

Saturday, October 25, 2008

Sign me up please!!

Click here for a wholesale plan put forward at Opinion Journal to forgive 20% of every mortgage, with the proviso that they then be refinanced over a 20 year term. The writers propose two conditions that are supposed to reduce abuse:

There are two additional conditions that must be added to these new mortgages, to make them less of a windfall for borrowers. The house could not be further encumbered by a home-equity loan until the government mortgage is fully paid off; and the mortgage-holder would be fully liable for the loan, unlike almost all other mortgages, which are backed only by the house itself. Requiring the new mortgages to be "full recourse" loans will tend to screen out of the plan those homeowners who can currently make their mortgage payments, and will attract those homeowners who are willing to assume personal liability in preference to foreclosure. (my emphasis)

Help me out here: if (as now) I am comfortably making my mortgage every month, and after this government-backed refi, my monthly payment will go way down--making it even easier--why wouldn't I jump at the chance to pass 20% of my principal balance on to all of you other taxpayers out there? Make it full recourse all day long, baby--I've got equity now, and I'll have 20% more after your plan. How does my position really change??

Thursday, October 23, 2008

The horoscope today

Pisces : The sun's going into Scorpio, in your solar Ninth House of travel. You may not get the whole next four weeks to travel the world, but get in as much as you can.

Well, no world travel for me in the next four weeks, unless you count Topeka, Kansas for the negotiation competition. In fact, it's becoming increasingly obvious that YouTube is as close as I'm going to get for a long, long time:

Ah, well--someday!

UPDATE: Well, it looks like the horoscope people must quote by household, since the Deadman wife found out today that she'll soon be required to circumnavigate the globe!

Sunday, October 05, 2008

Put me down for some of what this dude is smoking

Everyday provides new evidence for my theory that people are fundamentally unable to think rationally about residential real estate. Check out this column from the Wall Street freakin' Journal's opinion page from a Harvard economics professor who has an idea on how to stem the mortgage/foreclosure crisis:

We need a firewall to break the downward spiral of house prices. Here's how it might work. The federal government would offer any homeowner with a mortgage an opportunity to replace 20% of the mortgage with a low-interest loan from the government, subject to a maximum of $80,000. This would be available to new buyers as well as those with mortgages. The interest on that loan would reflect the government's cost of funds and could be as low as 2%. The loan would not be secured by the house but would be a loan with full recourse, allowing the government to take other property or income in the unlikely event that the individual does not pay. It would by law be senior to other unsecured debt and not eligible for relief in bankruptcy.

With all due respect, Professor Feldstein is cuckoo for cocoa puffs on this one. He claims that this plan is needed to provide an equity cushion to homeowners who are on the brink of slipping into negative equity from falling home prices, which would keep them from defaulting and putting more homes on the market, thus depressing prices even further. The big bugaboo, he fears, is "a downward overshooting of house prices and the resulting mortgage defaults."

Wow. So now, to shore up the holy of holies--home prices--Mr. Marginal Homeowner is supposed to sign on to a non-dischargeable federal loan that jumps ahead in priority over every one of his existing creditors and essentially pledges all of his other assets to guarantee it (car, boat, bank accounts, etc.), just to save $3000 a year--less than $300 a month--in interest payments? Honestly, you need to get out more, Professor. Are there really that many homeowners out there that are at the risk of default over $300 a month? Do homeowners have to have those homes so bad that they'll be willing to get equity by mortgaging everything else they have, or will have in the future for that matter? Maybe so.

But what happens in the "unlikely event" of default? If you think a mass of home foreclosures by private entities is ugly, just wait until the feds have to start garnishing bank accounts and seizing cars to satisfy these mortgage-replacement loans. Have we lost our minds here? Are houses so important that we're ready to fork over to the government the power to collect mortgage payments like the IRS collects unpaid taxes?? Or, in the article's somewhat antiseptic terms, by giving the government "a fully offsetting claim on individuals?" To borrow a line from Friends: remember, they're just houses, they're not love.

The big disconnect here is in how we define the problem. Professor Feldstein (and obviously alot of other folks) say the problem is falling home prices. Stop the fall, solve the problem. But that's wrong--prices are falling because homes are overvalued. We built too many and sold them to people who shouldn't have them. Stopping falling prices just expends resources to keep them overvalued, and can only delay the inevitable. Let's find the floor now and be done with it.

Prediction: the big winner in this presidential election

The Electoral College. The last two elections (especially Bush-Gore) spawned a brief Democratic flirtation with the notion of scrapping it in favor of the national popular vote, but I think this election will put that idea to rest.

CNN's 'poll of polls' shows a pretty tight race--49% Obama to 43% McCain. But, their electoral map tells a much different story--250 votes for Obama to 189 votes for McCain (270 is the magic number). The Sunday talk shows seem to agree that the polls will tighten up over the next few weeks, so we'll probably see another close race in terms of the popular vote, but to make it competitive in the EC, McCain will have to do something dramatic like winning both Ohio and Florida, or taking back Pennsylvania from Obama. So, something tells me that the Dems will soon find a renewed respect for the institution.