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PrintFebruary 22, 2009
Exactly who is getting bailed out?
According to startling data in today's New York Post, in the 275 billion Obama bailout, 45 states are, in effect, paying for the mortgage crisis of 5 states: Nevada (where an astonishing 47.8% of mortgages are under water, California, Arizona, Florida, and Michigan.
Michigan's ongoing economic implosion aside, all of these states saw speculators making huge amounts of money as prices climbed in response to an avalanche of newly-qualified buyers.
Richard Baehr writes:
In California, most of the defaults are in Central Valley. Hispanic purchasers were a big share of the total. There was a bit of speculative excess (second home buyers) in the San Diego area. In Nevada, Arizona, and Florida, there are heavy concentrations of bad loans are in specific cities: Las Vegas, Phoenix, Miami, where many of the buyers were "investment" oriented second home flippers. Many of purchasers never lived a day in their homes in Las Vegas and Miami. Michigan is different. Devastation in the Detroit metro area and other former car plant cities.
Ed Lasky notes:
Four of the 5 states were Sunbelt states, where economic growth was relatively healthy over the years (except for California). So it was speculative fever that caused the problems, not an economic crisis.
What about all those people we have read about over the years? The ones bragging about their ability to flip houses for a fortune? Are we rewarding their greed? Obama talks a lot about greed, but he does not talk about people who rolled the dice, lost the gamble, and expect us to pay (for) the house.
Rick Moran adds:
Don't forget Greenspan and the Federal Reserve who fed the frenzy with impossibly low interest rates. Isn't one of the fed's jobs to recognize bubbles like that and gently burst them? Think of the dot-com bubble that hurt a lot of speculators (and those with vastly overvalued stocks) but didn't send the entire economy into the kind of free fall we're seeing now. The downturn was mild and was only exacerbated when 800 billion went up in smoke on 9/11.
Rick Moran adds:
Don't forget Greenspan and the Federal Reserve who fed the frenzy with impossibly low interest rates. Isn't one of the fed's jobs to recognize bubbles like that and gently burst them? Think of the dot-com bubble that hurt a lot of speculators (and those with vastly overvalued stocks) but didn't send the entire economy into the kind of free fall we're seeing now. The downturn was mild and was only exacerbated when 800 billion went up in smoke on 9/11.
