The Nihilists are Revolting

DAVID BROOKS DOESN’T make sense to me:

What we need in this situation is authority. Not heavy-handed government regulation, but the steady and powerful hand of some public institutions that can guard against the corrupting influences of sloppy money and then prevent destructive contagions when the credit dries up.

[New York Times: Revolt of the Nihilists]

For what is the “steady and powerful hand of public institutions” if not “heavy-handed government regulation”?

But that’s not what I intended to address. This is what I would like to address:

[Emphasis added.] There’s no time to find a brand-new package, so the Congressional plan should go up for another vote on Thursday, this time with additions that would change its political prospects. Leaders need to add provisions that would shore up housing prices and directly help mortgage holders.

Housing is overpriced. If one chooses to live in a populated area where there are, you know, jobs and such, I dare guess that one paid more for their dwelling than it is truly worth, in terms of the labor and materials required to construct it. Even accounting for economic forces that Your Montag is in no way qualified to discuss, like supply and demand, (housing will presumably cost more due to higher demand in populated areas where there are, you know, jobs and such,) it still had to have been pure folly to believe what our realtors and lenders told us: that housing values always and would always rise. Forever!

In addition to people falling for that folly, mortgages are a rip off. Over a thirty year term, depending on interest rates, and whether you can afford to pay down your principle early, chances are you will pay more than the purchase price of your home in interest! ($100,000 mortgage, 6.5% interest, 30 years: $632 monthly principle + interest: $227,520 total p + i payments.) Totally fucking fucked if you ask me. I don’t own my house it PWNS me.

Besides the general problem of mortgages being a rip off, we also had lenders colluding with realtors to inflate housing prices. Realtors set the price of a home based on what some other poor schmuck got taken for when he bought the house up the street. Then the bank appraises the property for the same amount, because if they appraise it any lower, they risk blowing the deal. Through this clever arrangement, a good salesperson, the realtor, can push market prices wherever they need to go: Always up!

Seems to me that this self-perpetuating process of inflating prices, along with the practice among lenders and investors of buying and selling mortgages, might (inevitably, even) lead to a so-called “housing bubble” or maybe a so-called “sub prime mortgage crisis.” Just saying.

So when Brooks says we need to “shore up housing prices,” he advocates preserving the very condition that is at the root of this crisis, from this layman’s point of view. Ergo, where Brooks says we need to “shore up housing prices,” I would say we need to allow a correction for artificially inflated housing prices. And where Brooks says we should “directly help mortgage holders,” I would say we need to directly help mortgage payers, by which I mean ‘borrowers’.

Here’s what I propose:

Hey, The Government, do nothing. Because, as the illustrious IOZ might say doing nothing is doing something.

Hey, Lenders, you bet poorly, you lost. Now cut your losses. You aren’t going to be able to sell those foreclosures in this market, so keep the homeowners in the homes. Look at what the borrower has paid thus far in interest, and give back a goodly portion of it in equity. (Call this the portion of the value that you made up in your head when you thought you could push housing prices upward indefinitely.) Then, lower the interest rate so that they can afford to make payments. (Call this is the part where you admit it’s ridiculous to charge someone $127,520 interest on a $100,000 loan.)

Not that I think this can happen of course. In actuality, I believe the capitalists will not give up any of “their” capital. Dollars or property. They may be losing on the dollars side just now, with the bubble collapsing, but that’s all in a day’s work, really. They should have realized that was a fantasy from the start. Of course that won’t stop them from trying to get whatever they can from the pending bailout. They will continue to accumulate and hold on to as much capital as possible, and it will get uglier. They will keep it for leverage. For whatever it is that is coming. And what is coming is going to be bigger than this little crisis we have today, I can feel it.

The empire is in decline.