Now, whenever Congress, or a candidate for Congress, talked about “fixing” something, the first thing that comes to my mind is, “like a cat.”  So let’s examine Mr. Barnett’s words on the topic, and see who’s going to lose their family jewels.

The bank-fueled housing bubble should never have happened in the first place — and must never happen again. Average people put the majority of our wealth into our homes. But government stood by while banks played roulette with our life savings. It will not happen again on my watch.

Tell us again, Mr. Barnett, which entities were underwriting those subprime mortgages.  That’s right — Fannie Mae and Freddie Mac, quasi-governmental agencies that The Banking Queen said did not need more Congressional oversight.  Now, most homeowners I know actually put most of their wealth into their mortgages, not their homes, and most of their mortgage payments goes to interest.

To make sure this never happens again, we need to stay ahead of financial manipulators in our hyper-speed, hyper-competitive world. I support Congress’ plan to create the Consumer Financial Protection Bureau. This agency shouldn’t add a single bureaucrat – it will only combine existing offices into a single agency focused ONLY on protecting consumer finances. We need constant financial watchdogs to help us protect our homes, savings, and pensions.

That is a new one, Jeff.  A new agency that won’t add a single bureaucrat?  Did I mention I have some land in Florida for sale?

Government rescued the banks that were “Too-Big-To-Fail” but told the middle class we are Too-Small-To-Save. That is wrong morally and short-sighted economically.

Well, we finally agree.  We should not be bailing out banks — not even Fannie and Freddie.

We must take positive steps to help people keep their homes.

Why?  The idea that everyone should own a house is ludicrous.  When your area of the country has an economic downturn, you don’t want to be stuck in a house you cannot sell.  You want to be able to give your landlord notice and go where the jobs are.

We must re-institute common sense regulations to prevent another bank-fueled housing bubble.

Common sense are Congress seem to be mutually exclusive.

With one of five mortgages “underwater,” tens of thousands of our neighbors live in constant fear of losing everything. They are one bad break — sickness, job loss — away from going bankrupt. They lose their home and their life savings.

About four out of five car loans are underwater.  What should the government do about that?  Nothing.  And again, if these people were renting, there would not be a problem.  Sickness?  Job loss?  Give your notice and move to a smaller pad, or move in with a relative.  But the government pushed and pushed and pushed these people to buy houses, to buy “the American Dream.”  Nevermind the fact that they could not afford to make the dream a reality.

I will champion three immediate steps to help homeowners:

  • Institutionalize the short-sale process so homeowners can force a short-sale when their bank refuses to modify an underwater mortgage.

Now, what about the people who were not so short-sighted, and actually saved their money, who perhaps put some in the bank? When the mortgages are not paid, won’t the ones who made good decisions get screwed? Oh, the banks have FDIC insurance on those deposits. That’s good. Who’s going to pay off the FDIC? The very same taxpayers who have their money in the bank. (Once again siphoning off some for the bureaucrats to administer the transfer the money from your left pocket to your right.)

  • Guarantee an FHA loan two years after the short sale – so homeowners with good credit can recover.

If they have good credit, why are they short-selling their houses?

  • Give homeowners the same bankruptcy protections we give big corporations.

And what protections would those be? Shall we simply ignore their lenders’ legal rights and take all of the assets, like 0bama did with GM?

None of these proposals should cost the federal government a penny.

And they won’t require a single new bureaucrat, either!

They won’t weaken the financial system – banks have already written off underwater mortgages. Our government must help middle class homeowners caught up in the housing bubble. We cannot forget the Too-Small-To-Save.

The banks have not “written off” underwater mortgages. In most cases, the banks don’t even know whether a particular mortgage is underwater. What they know is whether the payments are being made on time. If you cannot make your mortgage payments, you should not be in that house. If you cannot sell your house for what you owe, you made that choice, deal with it. Similarly, the banks made the loans. If the loans don’t get repaid, then the banks should have to deal with that, and should not be bailed out by the taxpayers.

The biggest problem with this country is the idea that the government should save you from every bad decision you make, and the burden of your bad decisions should be laid on those who make good decisions. We should not be bailing out banks that made bad loans, and we should not be bailing out people who took loans they could not afford. When stupidity and ignorance stop being a crushing burden, we get more stupidity and ignorance.

Now, while that paragraph would normally conclude this post, I would like to offer a suggested regulation that might prevent such a housing crisis in the future.  Long ago, the margin requirement was 10%.  So, by putting up $10 of one’s own money, borrowing $90 from the broker, one could buy $100 of stock.  Of course, if the stock price fell, one would have to sell some stock to keep the 10% margin requirement.  Well, stocks took a tumble, and people sold to cover the margin calls.  So stock prices went down more, and more people sold, and so it went into the 1929 stock market crash.  To prevent a repeat, the margin requirements were raised to 50%.  Perhaps that would not be such a bad idea for buying houses, too.