Holman W. Jenkins penned a masterpiece editorial in the Wall Street Journal today.
Titled “The Fed Can’t Fix Home Prices” Holman lays it out”¦
To get to a real solution, speculators and investors need to believe that home prices are hitting bottom, that any mortgage debt they might buy today for 80 cents on the dollar today won’t be worth 30 cents tomorrow. Then the vultures will pile in: The transfer of wealth from the overleveraged banks and hedge funds to those who kept cash handy will be shocking, ugly and cathartic — but it will also be relatively quick. Credit markets will begin to function again. The economy will grow. (my emphasis)
Jenkins discusses some ramifications of a declining economy in a Presidential election year, and provides a sound argument that taxpayers shouldn’t be bailing out the mortgage lenders or those borrowers that bit off more than they could chew.
This afternoon I had the pleasure of meeting up with Adam Klawonn, Adjunct Professor of Journalism at ASU, Associate Editor of Phoenix Magazine, and President of Forrest Media, which produces The Zonie Report. (That Adam had time to spend a couple of hours chatting about blogging, online media and real estate is pretty remarkable. The guy has a full plate”¦)
We touched on whether or not the government should intervene in the real estate market.
Adam asked pointed questions: Is the “credit crisis” the fault of the lenders, investors, or borrowers? Should we (as in you, me and every other Joe Taxpayer) pay for the folks that used their homes like a ATM machine? (my choice of words, not Adam’s)
Jenkins summed it up well in the WSJ piece:
Millions of Americans have negative equity in their homes, but did not bite off more mortgage than their incomes could support. These people are still paying their mortgages and never imagined doing anything else. Millions of others have positive equity in their homes despite seeing painful declines in their home value. Now all these homeowners are to be taxed to benefit more irresponsible borrowers?
I may take a little grief from some fellow real estate professionals and I’ll likely piss off some folks when I say that I agree with Jenkins.
Forestalling foreclosures is simply putting off the inevitable. The fed needs to back off and let the market and economic forces play out naturally. Yes, it will take time, and yes, it will get bloody. But it’s the only viable solution.
Hat tip to Scott Brunner, VARBuzz.
[tags]Fed mortgage bail out, real estate economy[/tags]