Uncle Sam is Rich Enough to Give Us All a Farm (or at least our Houses back)

Sharon September 16th, 2008

A  welcome, warm and hearty, do we give the sons of toil

To come to the West and settle and labor on free soil;

We’ve room enough and land enough, they needn’t feel alarm -

O! come to the land of freedom and vote yourself a farm.

Then come along, come along, make no delay;

Come from every nation, come from every way.

Our lands, they are broad enough – don’t be alarmed,

For Uncle Sam is rich enough to give us all a farm.


Yes! we’re bound to lead the nations for our motto’s “Go ahead,”

And we’ll tell the foreign paupers that our people are well fed;

For the nations must remember that Uncle Sam is not a fool,

For the people do the voting and the children go to school.

Then come along, come along, make no delay;

Come from every nation, come from every way.

Our lands, they are broad enough – don’t be alarmed,

For Uncle Sam is rich enough to give us all a farm.

- Uncle Sam’s Farm, a patriotic song of the Westward Movement,

I recognize that as modest proposals go, this is of far lower likelihood of implementation than eating Swift’s suggestion that we should eat the children of the poor ;-) .  Still, I feel obliged to mention that there is a way of transforming the nationalization of Freddie, Fannie and the bailout of almost every mortgage-holding bank (at some level or other – they’ve all been bellying up to the Fed’s lending table, using your mortgage as collateral) from a straight out blind rape of the taxpayer and the sale of their children’s future to something reasonably just and good (not perfect).  Because it would be reasonably just and good, and because it would strip the assets of many rich people, it will not happen.  Still, I think it is worth mentioning that given that we’ve all just committed to nationalizing our mortgages – and as long as the taxpayers are going to be paying for millions of mortgages anyway, and as long as we’re nationalizing everything in sight, there really isn’t any reason I can see (other than that it would be a just decision and wouldn’t serve the rich) that we couldn’t simply give everyone with a mortgage held by Fannie and Freddie their houses, free and clear.  And for that matter, anyone with a mortgage held by any bank that needs a massive federal bail out.

There’s even some precedent for this – in the 19th century the US got “rich enough” to give us all (an exaggeration) a farm by buying a large chunk of what is now the US, from people who had previously stolen it from the people who lived there.  The US then promptly stole it some more (I realize this is not a technical description, but it is fairly accurate), and killed off millions of the denizens, and gave away (in trade for improvement and modest fees) a lot of land.  It then helped subsidize other people to buy back the improved or partially improved land from failed homesteaders, and to a degree, improving the lot of many people who went to live in the West on the land of the people they’d destroyed to get it.

There are other precedents as well – in the 1980s, Fannie Mae took over mortgages on New York City apartments that were so far behind code that it was cheaper to sell them to the residents and stick them with the burden of repair than it was to actually fix the buildings and bring them to code.  Friends of mine living in Harlem were offered a chance to buy their apartment for $1 from Fannie Mae – they declined, arguing that $1 was overpriced, and insisting that their landlord bring the building to code, but the precedent suggests that when faced with an irredeemable loss, even the institutions in question know that a below-market sell-off is better than the alternative. 

We effectively have the government owning millions of mortgages, many of which are bad paper or likely to become it. They are, in the net, not assets, but liabilities. The government isn’t precisely rich enough to do much of anything – and they are pouring money into a losing proposition – millions of those houses are going to have negative equity, millions will go into foreclosure – many already are approaching it, since 1 in every 10 Americans is having trouble paying their mortgage.  As the houses are foreclosed upon, millions of Americans get poor, angry and desperate, and most of the foreclosed properties will never even sell at auction – they will be stripped of value, dismantled, squatted in and then bulldozed.  The government will be sued by municipality after municipality because of losses of property values, upkeep, etc…. Right now the government is facing the total loss of a large percentage of the things we invested our wealth in for the last decades.

Or, they could do something truly remarkable and radical – they could obviate the mortgages, speed up the inevitable demise of the companies but allow them a massive tax writeoff, and sell every mortgage held by the government directly, or every corporation that requires a government bailout to the homeowner for a nominal sum – I would suggest $100.  That’s it, you own your house free and clear, the broken remains of our financial system will prevent you from getting a new mortgage, so I hope you like the place, but with that sized investment, most of us would get to have houses and we’d have the pleasure of seeing the housing market hit bottom right fast. 

I’m sure this idea will take hold in congress any time now, since we all know that Bush and Co. are all for the “ownership society.”  The last decade saw more people than ever before owning their houses – and we could, once and for all, make that ownership lasting and profound, allocate property ownership to millions of people facing foreclosure or endless debt slavery.  It would be an economic stimulus package of a sort never before offered.  It would win the election and the love of the people for whoever offered it.  It would transform something nearly worthless into something of infinite value.  It would screw the companies and save the people – because if we can hold on to those small plots of land and the houses that shelter us, we can find ways to grow food, make do, make use of what we have. 

I know that our leadership won’t do this.  But there is also another alternative – we could do it.  During the Great Depression, many rural areas had “penny auctions” for foreclosures – local residents would keep out (often with force) buyers looking for a bargain, and not allow them to bid when houses came up for foreclosure.  And then, as one’s house and goods came up for auction, each person in the community would bid a penny for each item.  At the end of the auction, a hand full of change would be dispensed and the farm and land returned to the original owners.  In other places, groups of tenant activists barred evictions, and sherriffs and city leaders declined to enforce evictions or foreclosures.

The truth is that there’s a great deal that could be done to reallocate housing to the people who need it, and housing wealth to the people who will appreciate it as true wealth – a place of their own, a bit of land to grow food on.  It would require great commitment, organization, a sense of justice and a good bit of anger.  The good thing is that events are certainly proceeding towards anger, anyway.  The truth is that Uncle Sam may not do much for us in the coming years, but he could give us our houses, our little backyard farms.

Not holding my breath, though.

97 Responses to “Uncle Sam is Rich Enough to Give Us All a Farm (or at least our Houses back)”

  1. Ani says:

    The only problem I have with this idea Sharon- is that unlike in the Depression when many people were losing their homes and land though no fault of their own, many of the people who have mortgages in default now bought overpriced homes they couldn’t afford in the first place, often lying about their assets and income to do so- and yes, I know they did so in cahoots with the lenders but they still did this- and others used their homes as ATM’s, living way beyond their means.

    So it may not sound nice to say this, but as someone who has really worked hard to afford to buy land, and build a modest home that I am still building- and who doesn’t use their home as an ATM, I would resist the call to reward people for bad choices.

    Now I know I could be crucified here for saying this- but while I have no problem with helping out those who are truly deserving of it, I don’t want to subsidize the McMansion buyers and second home buyers and others who have gone into debt living off their homes.

  2. Laurie says:

    I totally agree with Ani. She said just what I was thinking.

  3. Meadowlark says:

    I third that. Although the idea is brilliant for people that I know… people who are in a primary home and who truly qualified for a normal mortgage.

    I do have issues with the bailout for other people I know – 2 people in a 4500 sqft home, 2 news cars, a boat, rv and more. Um… yeah. No bailout for you greedbucket. :/

  4. Anonymous says:

    I agree with Ani and Laurie. We’ve been waiting, living in an city apartment in a rough area with broken windows our landlords refuse to fix. I’m not complaining. We made a choice to wait and save for a 20% down payment before buying a modest house. Neither one of us is a financial wiz but we educated ourselves about mortgages (“les gages de la mort,” the wages of death). Whose going to hand out the houses and garden plots to responsible, low income savers like us?

  5. Paula Hewitt says:

    i agree with the others- plus i sort of wonder if those people who overextended themselves and then get a free home would actually appreciate what they were given. i was always told you appreciate something more if you work for it.
    what about those people with mortgages with a company that isnt about to go under (are there any companies like that in the US at the moment? Im not sure how it works) I wouldnt be that thrilled to be still paying a mortgage on our modest house while someone in a mcmansion down the road has been handed the house on a platter….and then decides to spend their new savings (prior mortgage payments) on a new car or boat.

  6. Heather Gray says:

    I don’t know if this idea is any better, but since there’s a glut of homes on the market (true even without the foreclosures I think?), how about moving some of the survivors from the hurricanes this year into some of them? I don’t know how the details would work out, but if the Fed and state gov’ts are expected to rebuild in Texas and other places, it would be less expensive to put people into homes that, in many cases, probably need to have their plumbing, some windows and sheetrock replaced but are essentially structurally sound. Anyone who’s looked at the photos of some areas where only one or two buildings are still standing and knows how long it takes to build even one home, should realize that it will take years to rebuild — if it ever happens.

    I know, the new place wouldn’t be home and there might also be problems with getting jobs, getting to know a whole new neighborhood or even culture, but financially at least, it would cost a whole lot less than trying to rebuild entire cities and towns, and empty houses, condos and apartments wouldn’t be empty anymore. And people in their own places can think about things like employment and being able to get their own food, water, and clothing, instead of wondering what they’re going to do for the next who-knows-how-long?

    About as likely to happen as Sharon’s scenario, of course…

  7. t says:

    that idea sucks rewarding the people who should have never bought a house in the first place and punish the ones that have been saving and waiting to buy a house when they could afford it.

  8. [...] Casaubon’s Book » Blog Archive » Uncle Sam is Rich Enough to Give Us All a Farm (or at least our… I recognize that as modest proposals go, this is of far lower likelihood of implementation than eating Swift’s suggestion that we should eat the children of the poor ;-) . Still, I feel obliged to mention that there is a way of transforming the nationalization of Freddie, Fannie and the bailout of almost every mortgage-holding bank (at some level or other – they’ve all been bellying up to the Fed’s lending table, using your mortgage as collateral) from a straight out blind rape of the taxpayer and the sale of their children’s future to something reasonably just and good (not perfect). Because it would be reasonably just and good, and because it would strip the assets of many rich people, it will not happen. Still, I think it is worth mentioning that given that we’ve all just committed to nationalizing our mortgages – and as long as the taxpayers are going to be paying for millions of mortgages anyway, and as long as we’re nationalizing everything in sight, there really isn’t any reason I can see (other than that it would be a just decision and wouldn’t serve the rich) that we couldn’t simply give everyone with a mortgage held by Fannie and Freddie their houses, free and clear. And for that matter, anyone with a mortgage held by any bank that needs a massive federal bail out. [...]

  9. Russ says:

    Yup. Renters get the shaft again. As always.

    Actually, I know you were being facetious (the Swift reference cinches it).
    But I seriously agree with the logic that, if we had a humanistic government, we would take the land itself (instead of “stock” and god know what other kinds of paper), which is no longer viable as “suburbia”, raze the mcmansions and tear up the pavement and lawns, restore it to farmable status (I don’t know how you’d go about that – maybe it would be alot harder than I think), and redistribute it to those who are willing to farm it.

    One thing is clear. America no longer needs suburbia, indeed needs to devolve it. But it does need many more farmers.

  10. TJ says:

    precicely !!!
    am I going to get an RV, boat, huge tv, horse riding classes for my daugter, vacations in fancy places etc etc oh and a maid for a few years
    all simply because I have NOT stripped every penny of equity out of my house!

    its value is going back to what I paid for it, my paycheck would not cover a huge cache-out, not with the interest rates today

    no I am not spiteful in general – fine – let them keep their boats and vacations (would be REALLY interesting if you could take those memories and auction them off)
    but gimme some … something, half my mortgage would be nice
    for good behavior

  11. Sharon says:

    I admit, I’m sort of fascinated by the reaction. Yes, I’m mostly joking – but the whole “let them pay” bit is sort of funny to me. Even in jest, this brings out a lot of anger. Nor do I think that this would necessarily have to shaft renters – again, there’s more than enough extra inventory out there to give/sell for a nominal price exceess inventory to qualifying renters as well – or instead, in some cases.

    It is certainly true, that in any mass reallocation of wealth, some people who are undeserving will profit. Certainly, we would reward some people for foolishness, deception, greed and malice. On other hand, the current model rewards even worse people for their foolishness, deception, greed and malice – instead of rewarding the guy whose pinnacle of dreams is expressed in an SUV and a McMansion, we reward guys whose greed knows no bounds, the money guys in corporations. And yet, people seem to prefer that to the idea that any ordinary person would get something they didn’t deserve.

    I run into this idea all the time in our society. We’re told not to donate money to homeless people because they might spend it on drugs or drink – even though they also might spend it on food. We’re told that because some people cheat to get more welfare, welfare queens are endemic and we should strip the poor of their benefits. Although we give lip service to caring about the injustices committed by more powerful people, the ones that make us really, really angry are the people like us who got a little extra, and didn’t deserve it.

    Were I seriously making this proposal, I suspect there are probably ways one could begin to sort out just foreclosures with unjust ones. But I admit, sorting out the “good victims” from the “bad victims” and figuring out who is the “deserving foreclosed” doesn’t appeal to me any more than sorting out the deserving homeless. The really, really undeserving people are the ones who stand to make out like bandits, who your pocket is being picked to serve. I don’t see enough concentrated anger out there to stop it, and it frustrates me that there’s so much for small fools and venal sins, when there are so many better targets.

    Sharon

  12. theotherryan says:

    I would be for re homesteading some of the abandoned upper midwest and west. That being said rewarding people who made poor decisions is stupid. I do not own a home because I haven’t saved a good 20% down yet though I can afford to make mortgage payments. Giving a home free and clear to someone who should not have been given a loan in the first place is insane. I make good decisions so I pay for their shitty decisions while they profit? Horrible idea.

  13. Jill says:

    I think a really good argument could be made that Sharon’s proposal is in the self-interest of everyone. (Well, everyone but the bankers and brokers and robber barons who would extort money from those who could manage to pay down at least the interest only on the sub prime mortgaged homes forever and ever, which I’m thinking is what will happen). So, even if you think most people don’t “deserve” to have their homes given to them…what does your home, and your community begin to look like if many of your neighbors, and especially your less economically stable neighbors, are forced out? Where do they go? I’m betting that they end up *somewhere* in your community, with their children, homeless and hungry. Not exactly a recipe for peace and prosperity, particularly as the cycle begins to accelerate, and more and more folks lose their homes to unemployment and under-employment. And what happens to their now-empty homes? Seriously, I think we all need to consider this.

    I’ve always believed that if people own their own homes, they’re invested (at least minimally) in the well being of the community. So folks may not like the idea of gifting (unlucky and irresponsible) people the balance of their mortgages, but on balance, it seems to me that Sharon’s plan would be good for (most) all, including those of us who own our own homes (and yes, I do own my house, free and clear, in part because my husband and I lived frugally for many years, but also, because we were lucky and made the right moves at the right times).

    Jill, the anti-Horatio Algerian

  14. Strega says:

    I’m surprised by the comments as well, honestly.

    The mortgage crisis has already spurred a big demand on the rental market — which means fewer vacancies and higher rents. If you rent, it is in your own best interest to keep even more people from competing with you in the rental market. And homeowners who aren’t paying mortgages will at least be paying property taxes.

    It is reassuring to believe that every victim (of anything) is stupid or greedy or evil, and that justice is being done. Of course, a lot of people who believed equally comforting lies about how the system worked now have homes they can’t afford.

  15. Rebecca says:

    It’s always easier to play blame the victim and point fingers at people saying ‘they are unworthy!’ than it is to look at your own problems and faults or go looking for the people who truly caused this mess -the brokers, bankers, etc.

    But, I’m sure the ‘let them pay’ crowd has never made any mistakes, or any wrong choices, and has never needed a handup.

    We’ve also been trained in this culture to blame the victim for everything from rape to homelessness without looking at the real perpertrators -the culture that encourages it, the ones that cause it, etc.

  16. The thing that caught my attention here was the penny auctions from the Depression. It seems to me that for this to work, those auctions would have to be absolute auctions (no reserve on anything), and I simply can’t see that happening now. It is much more likely that the foreclosing party would set a minimum acceptable bid below which there would simply be no sale. They would retain the property and the family would still be homeless.

  17. Kerr says:

    Shouldn’t we start with the people that song was written to rob?

  18. jerah says:

    Wow. I think this conversation is the first one I’ve heard (read?) recently where people are expressing what the problem really is:

    A) The rich are entitled fucks and everyone reading the headlines in the last few days is smirking and thinking “Good. I-bankers are finally getting what’s coming to them.” They have made the rest of us poor or about to become poor.

    B) Most of the responsible citizenry are pissed at the other half (or more) of the citizenry who are either poor or about to be made poor and who, through their own greediness, propped up the greediness of the i-bankers.

    C) We are the rich. Most of the rest of the world is actually poor. Whether we bail out AIG or Bear Stearns or American mortgage holders, we don’t have a proper sense of proportion. We are the rich of the world. We have been screwing the poor. Whether or not we can lay claim to being “working class” (and I’ve seen actual arguments break out among college-educated people about whether they came from “working class” backgrounds or not – apparently people are all vying for the poorer-than-thou label, in this country), we’re The Rich we are complaining about. And now that we’re faced with the possibility of being The Slightly-Poorer, we’re panicking.

    As well we should. We don’t even have the cultural skills to forgive the poor for being poor, of course we’re worried. If everyone were us, we’d be screwed.

  19. Vegan says:

    I agree with Sharon and Rebecca. Why is the anger not directed at the elites, at corporations, at the financiers, at the corrupt government (Republicans and Democrats) who connive with the elitist criminals?

    Of course, the avaricious common people must take some blame, but let’s place the bulk of the blame on the powerful elites who are the masters of lies and wars and constantly lie to the American populace and have exploited the desires of the powerless.

    Why aren’t we in the streets protesting the $85 billion going to AIG? And how about protesting the billions going towards the destruction of Iraq and their infrastructure and the destruction of their children’s lives and dreams?

    Sadly, we have been programmed by our imperial, white supremacist corrupt culture to condemn our neighbor, but worship authority and the rulers and the powerful.

  20. clew says:

    We could give the houses to climate refugees from Bangladesh and Tuvalu and Bolivia and so forth; this would have the practical advantage of seeding subsistence farming know-how through all the depressed areas. (There are allotments in Yesler Terrace, in Seattle, growing lemongrass and hot peppers and (exaggerating) vanilla beans. This has to take some serious granny-fu.)

    On a slightly different note about the deserving and undeserving– it really can’t be assumed that people who lost their houses in the Great Depression had been sensible beforehand. The Roaring Twenties invented all the kinds of fast-and-loose they could, and their idea of grandfatherly propriety included the robber barons of the Gilded Age. Even the farmers could be get-rich-quick gamblers. Check out _The Worst Hard Time_ for a really alarming tale of fiscal and climate risk reinforcing each other and then going badly wrong…

    More practically, I think there should be some rule that any foreclosed house must be sold in a fixed, short period of time to someone who has no other domicile (and a very conservative mortgage, if any). The banks will take a haircut, which will be passed on to the rest of us somehow, but if a bunch of houses *have* to be sold the prices will come down to where people can pay them. And with people living in them, we won’t have the problem of actual material wealth rotting away, as so many depressed neighborhoods do. (Maybe there could be a special deal for organized groups that want to buy several close properties — some way for cohousing or shared-land groups to coalesce in the existing built stock.)

  21. Wendy says:

    Personally, I’m all for it! Give me my house!

    One of the points Dimitry Orlov makes in his very interesting slide show regarding why the USSR was much better prepared for collapse than the US will be was that the people didn’t lose their homes, which meant that, at least, they had a place to live when the economy crumbled. With the way things stand right now, that won’t be the case here in the US, and that’s a rather terrifying idea.

    Orlov states just exactly what Sharon has proposed – the kindest thing the US government could do for its citizenry, right now, is give us our homes.

    Personally, I’m all for it. I don’t care if we “reward” a few folks who were idiots and bought more than they could afford. Ultimately, they’ll bear the burden of maintaining those elephants – without the benefit of credit. In the meantime, those of us who were responsible, bought what we could afford, and have been diligently paying our debts for years, will also be rewarded for our hardwork and good ethics.

    I don’t understand why people would punish us all for the sins of a few. Makes no sense.

    I’m all for it … and I’m not joking in the least.

  22. Brad K. says:

    Sharon, I like your idea. Sell the house outright to the threatened mortgage holder – and *don’t* reimburse losses to the mortgage company, beyond a token perhaps 20% of insured loss.

    This saves taxpayer money, and reduces bureaucracy, cost, and hardship.

    People evicted aren’t likely to be contributing to their community any time soon. Resolving a big mortgage with a token payment can turn that around.

    I can’t see such a program affecting the real estate market that much, unless it de-inflates overpriced housing. Perhaps the token sale could be conditional for three years – with a lien in the government’s name for the mortgage principal value plus interest and expenses. Stay in the home for three years, or sacrifice most of the sale proceeds. Or make the lien for 10 years, no accrued interest, and the homeowner would be allowed to pay down the lien at will (from nothing per year to payoff in 5 months), with no supervision, no penalties, no oversight until sale of the home resolves the lien, or the lien expires in ten years.

    Selling the homes back reduces loading on social services for shelter, etc. I like the idea.

  23. knutty knitter says:

    There is a system here that ran for years where farms were developed and generally set up for beginning farming by the government and then alloted by a ballot. You had to apply to be on the ballot list and meet various requirements but once there you could remain until you happened to win a farm. It worked very well. Something like that could surely be workable for housing too. That way most of the people on the ballot would be deserving of a home just as our farmers were.

    viv in nz

  24. Ani says:

    Sharon-

    And you don’t think this will lead to all sorts of people expecting that they will always be bailed out for their stupidity and excesses- just like Lehman supposed they were “too big too fail”- not so said the fed- and now AIG is being bailed out????

    It’s not that I’m cool with the prospect of the CEO’s of these companies departing the scene with their pockets full of money- I have expressed my thoughts on this in another post on another thread of yours- so my anger is not just at the slobs with their overpriced McMansions and cruise vacations financed by their “equity”. I’m royally pissed at them all actually.I just don’t consider many of these people to be victims- they willfully participated in buying overpriced homes which would have overpriced payments beyond what they could afford once the rates reset- and they wrung as much money out of their homes as they could- so why should I feel sorry for them? If you think this is spiteful or nasty then so be it- but as someone who has strived to live within my means, raised a child on my own and has worked hard for everything I’ve got- the notion of rewarding a bunch of spendthrifts is not going down easy.

    What about the CEO’s of these companies? I would like to see them stripped of their wealth, and potentially forced to face criminal charges as I do think crimes were committed.

    So no- I can see where having a bunch of empty forclosed homes around isn’t a great idea- but giving them away to their foolish owners? No dice! I’m all for helping out those in need through no major fault of their own- and yes- this brings up the whole issue of the “deserving” poor- and a thorny one that is- but this is what drives people to the Republican side imo- so we ought to be conscious of this.

    There was a great deal of greed going down on both the parts of many of the homebuyers and the lenders and others who particpated in the whole scam- and I for one resent how I will be paying for this the rest of my life as will our children….

  25. Lets face it – ALOT of people bought homes with the idea of flipping them in the near future. They also used their homes as ATM to pay for outsized SUV’s (another mistake they have recently come to realize), large screen TV’s, etc.

    Now these people are stuck. Why should the rest of us have to pay for their bad investments? They gambled, they lost, move on.

  26. Ailsa Ek says:

    Well, we have a 300K+ house too with a Fannie Mae-backed mortgage. It’s a split-level, with lousy insulation, which is settling on one side because the builders didn’t prepare the ground properly. We have an acre of land and permission to raise chickens (thank goodness) and an excellent school system (which is what that 300K is really paying for, not the house itself). It’s our first home, and we thought we had been sensible checking the place out and figuring what we could afford, but we bought in 2000, before the dot.bomb and my husband’s job is tied to the electronics market (computer chip test heads).

    We have a boat, a canoe that used to belong to his parents. We’ve got what I consider a wide-screen TV – my brother upgraded his AV system and gave us his old one. We had a minivan a few years ago, but we sold it, used the proceeds to pay down our credit cards a bit, and bought a diesel VW bug (42 mpg!)

    Yes, we are still rich by global standards, and I am thankful for that every day, trust me. We bought a woodstove this summer. We bought the starter canning set from Lehman’s last summer. We have a CSA membership. I have multiple 5-gallon buckets full of grain in the cupboards and serving as endtables in the living room. But we aren’t using our house as a big ATM or planning to flip the place or anything like that. The idea of our mortgage just going… away… Well, that’s a wonderful lovely happy dream. And I promise we wouldn’t buy a speedboat with the money.

  27. Becky says:

    Is it just me, or do recent events sound like the Borg slogan: “You will be assimilated?”

  28. MEA says:

    I’m one of those who paid for the house with a traditional mortage and didn’t borrow against it because I was waiting for a rainey day.

    I really don’t care of the undeserving rich get give a house after they squander their money foolishly as long as the deserving rich and poor (of any sort) get theirs too under this scheme.

    First, I realise that is isn’t going to play out this way, but a year ago I was saying why don’t we just let people keep their houses and save a bunch of social upheaval because the economy is flushed anyway.

    That said, I’m all for stablzing people’s lives. The fewer people we have who need to be housed the better. They fewer adults we have coping with extra strain, the better. The fewer children caught up in the fall out from all this, the much, much, much better.

    If we try to punish some people for making foolish choices (aside from wasting a lot of time working out all the borderline cases) we end up wasting engery and resources on getting the bad people out of their houses.

    Yes, their choices helped creat the lovely situtation we all find outselves in, but why make it worse for all of us.

    MEA

  29. MEA says:

    I’m one of those who paid for the house with a traditional mortage and didn’t borrow against it because I was waiting for a rainey day.

    I really don’t care of the undeserving rich get give a house after they squander their money foolishly as long as the deserving rich and poor (of any sort) get theirs too under this scheme.

    First, I realise that is isn’t going to play out this way, but a year ago I was saying why don’t we just let people keep their houses and save a bunch of social upheaval because the economy is flushed anyway.

    That said, I’m all for stablzing people’s lives. The fewer people we have who need to be housed the better. They fewer adults we have coping with extra strain, the better. The fewer children caught up in the fall out from all this, the much, much, much better.

    If we try to punish some people for making foolish choices (aside from wasting a lot of time working out all the borderline cases) we end up wasting engery and resources on getting the bad people out of their houses.

    Yes, their choices helped creat the lovely situtation we all find outselves in, but why make it worse for all of us.

    Helping people out of their bad choices one more time isn’t going to set them up to expect to be bailed out anymore than they all ready do. And being given that chance at a time like this might tip them into reality.

    MEA

  30. Meadowlark says:

    We had quite an extensive discussion on this last night. Husband thinks it’s a great idea… along the lines of others above, his opinion is that it would be better than having people homeless and having empty homes. Crime rates will certainly increase that way. He likens it to the lottery… some people played and won big. Some people chose not to play (traditional mortgages, plenty down, renters) and didn’t win. It’s just the luck of the draw, but in the end, a giveaway would benefit more people as a group than injure me personally and my indignation at “bad people being rewarded”.

  31. Shiner says:

    Unless all this gov’t debt give away is distributed EQUALLY I am against the idea for all the reasons above.

    Don’t get me wrong i’m all for sociallizing the land.
    The only qualification to the give away should be citizenship.

    If the distribution is not equal no matter how you slice it its the have’s screwing the have nots again.

    We are ALL going to pay for these bailouts in the form of taxes and inflation.

    If you could afford to buy a house without lying you are a have.

    The only poor people who would benefit are the liars whose complicity allowed housing prices to skyrocket. Poor people not willing to lie about income will be left holding the bag. Again.

    I’m not at all interested in paying anyones else’s morgtage.

  32. Isis says:

    Hmm… So just give those houses to people who have paid maybe 5% of their mortgages? While anyone who’s been renting has to continue paying rent? Not to mention that you’d then have people who got those houses essentially for free selling them to other people and making a handsome profit out of it. I mean, you might no longer be able to make a million dollars off your McMansion, but you’d get a few hundreds (or at the very least a few tens) of thousands of dollars. And the taxpayers get to pay for the whole thing? Lovely.

    Look, I completely agree that it would be ludicrous to make people sleep in the park while all those houses are sitting empty. No argument there. But I think something like this might be a better idea:

    Forgive any remaining mortgage debt to people who’ve already paid off, say, 50% of their principal.

    For others, adjust the principal, so that they can pay a reasonable rather than a highly inflated value for their house.

    If people can’t pay even the adjusted mortgage, the house becomes government property to be used as low cost housing. The priority for renting goes to the previous owners (so that, if they so choose, they can stay in the very same house, only not owning it and then possibly selling it for profit, but paying modest rent). For McMansions, the rent would obviously be more expensive, and if they can’t afford rent, previous owners should be allowed to have another family (of their choice, such as in-laws or best friends) move in with them to share the rent (with both families paying directly to the government, so everyone living in the house gets low-cost housing, rather than having people rent their low-cost house at a profit).

    This kind of scheme would not increase homelessness, would not tear communities apart, but would minimize the opportunities for abuse.

    Just my 2c.

  33. Rebecca says:

    My, didn’t this open a whole kettle of worms? While we’re busy throwing stones at each other (and ignoring our own glass houses) it should be pointed out that we are so overbuilt with housing stock that even if every house was given to the current mortgage holder there would be plenty left to give to other people. What is worse -an economic crisis with millions upon millions unemployed and homeless or an economic crisis with just millions unemployed?

  34. Isis says:

    Or here’s another option that I wouldn’t object to too strongly. Say just let everyone keep the house (provided it’s their only home: people who have two or more homes should have to pay the full price for all but one house). But for anyone who hadn’t paid 50% or more of the principal, have a clause that says that, in order to keep the house, they have to live in it for the next ten years at least. They can’t rent it (maybe they can rent a room or something like that; but the owners themselves have to actually live in the house) and they can’t sell it for the next ten years. If they wish to move before that, no problem, but the house becomes government property in that case.

    This way, you’d get less profiteering, communities would be strengthened (just think about it: a lot of people would now have a strong incentive to stay put rather than move every couple of years) rather than compromised. After ten years, people could sell the house for whatever they can get; but this is after having lived and grown roots in a community for a decade; and after a decade, many people will stay in the community for various personal reasons even if moving might make more financial sense.

  35. Steve in Colorado says:

    The discussion of whether or not the gov’t should give these houses to folks for free or a reduced price misses the bigger picture (although it is very interesting to see how quickly people choose up sides on this one).

    Whether the gov’t gives money to the banks and financial institutions, or to people misses the real question at hand, IMO. (Granted, there is a fairness thing as whether to bailout big corps vs the little guy; but try not to get involved with that if you can; it only confuses the issue). Either way, the gov’t will be borrowing money and creating more dollars to do this. The pain of that increase in credit will eventually be felt throughout the economy (as I write this gold is up $60/oz and they have not even really started creating the levels of money/credit as would be needed for such a scheme). That means inflation; possibly very, very big inflation.

    And even if you were willing to live with the possible inflation this would cause, it does nothing to address the real problem: We as a society built a great surplus of shodily constructed homes, that require tons of energy to heat and cool, and more energy for the occupants to drive to work and everything else, with too little land to really be useful as a farm or for supporting the occupants. No one wants these houses now (unless you give it to them for free or very low cost), and I suspect even fewer will want them as energy costs continue to spiral upwards.

    As an individual, I would not want one of these dead albatrosses, even if you gave it to me for free. I’d sooner spend my time, energy and money fixing up or building something that is in tune with the needs of the future: energy efficient, enough land to raise some food, and solid construction. I also certainly would not want one of these if I was tied to it long term. Because if you think the value of these McMansions has fallen now, just wait until energy prices double again and no one can afford to heat/cool these sprawling under insulated homes or the gas to commute to work and shopping.

    Many people got into these abandon homes a few years back because of greed. Be careful not to make the same mistake again, if you ever are offered a chance to pick one of these up as a “bargin.” It may not be the good deal it looks like at first.

  36. Isis says:

    Steve,

    No matter how badly constructed, the fact of the matter is these are the houses that America’s got, and millions of new houses cannot be built on a massive scale. It might make sense for this or that individual to build a new, energy-efficient house, but on societal level, these new houses simply cannot be built. Old ones will have to be retrofitted and turned into at least semi-livable spaces for when the price of heating etc. goes through the roof. And the question is: Given these constraints, what is the best way for society to keep as many people as possible off the street?

    As for being tied to a McMansion long term… Look, if you accepted you McMansion essentially for free, and then later decided it wasn’t worth it, then you could just move out. You wouldn’t have to pay anyone. You simply wouldn’t get to make any money off the house, that’s all.

  37. dewey says:

    If homelessness is the problem to be avoided, why not let these people stay in the houses long-term and pay cheap rent, but not gain ownership unless they eventually pay in enough to gain equity? I too do not like the idea of a huge wealth transfer to the dense or greedy. I do not spend a lot of money on luxuries, and if the cost of even a 20% federal reimbursement of the banks for a giant housing handout increased my federal taxes very much, I would have trouble paying my bills. If I were put in that position, and saw others with much bigger houses and newer cars who had thereby been freed of paying rent or mortgage at all, I would be reasonably POed. If one person’s gain is going to be another person’s loss, you would be wise to limit unjust losses imposed on people who cannot readily afford to bear them.

    In a rational society, if there are vacant homes and there are homeless people who have any kind of income, there will also be private rentals. I used to live in a mansion in New Orleans that had been broken up into about 18 apartments. This is an approach that might keep McMansions occupied while reducing homelessness and today’s steep rents. Of course, many jurisdictions will not permit it. If city and suburban governments continue to demand only rich-single-family housing while their neighborhoods turn into strip-mined ghost towns, then at least 51% of the residents remaining must be NIMBYists who deserve that outcome – otherwise they would step up and demand change. That’s democracy. (Tough bricks for the intelligent 49%.)

  38. Rosa says:

    Everyone who’s mad at the idea of giving money away in little bits (yes, $300K is a lot of money…except in terms of the unknowable cost of the Fannie Mae/Freddie Mac bailout we already committed to) is ignoring the huge bailouts we are already doing – of massively rich institutions. The cost is no longer avoidable, the money’s been allocated and it’s being spent. But look where it’s going before you throw stones at your neighbors with their big boat and profligate clothes. Chances are, unless you were a nanny or a maid in New York or DC you’ve never even met people as rich as the people in charge of AIG.

    The feds could have a better effect on the economy at the exact same cost by paying people’s mortgages for them for a while, which would shore up the instutitions we’re currently giving huge handouts too while allowing them to shaft their customers – and their customers families, and neighbors, and tenants. You guys should see the map of foreclosures in my city, it’s hideous. Our homeless shelters are overflowing with people evicted when their landlords were foreclosed on or let the building be condemned for unpaid taxes and utilities.

    My mom is a retired schoolteacher and she lost 5% of her private retirement savings when Lehman’s went under. She hasn’t even looked (and I’m certainly not going to encourage her to, today) at the balance sheet of her public teacher’s pension fund – which was definitely invested in Fannie & Freddie and probably in a bunch of other stuff that’s dropped like a rock, too.

  39. Isis says:

    “If homelessness is the problem to be avoided, why not let these people stay in the houses long-term and pay cheap rent, but not gain ownership unless they eventually pay in enough to gain equity?”

    Yeah. That was, more or less, my first idea; I still think it’s the better of the two that I proposed.

    But really, the point is to turn houses into places to live, rather than things to make money off. Cheap, government-owned housing would probably be the best option. Maximize the number of people with roofs over their heads, and minimize speculation.

  40. Ailsa Ek says:

    Forgive any remaining mortgage debt to people who’ve already paid off, say, 50% of their principal.

    For others, adjust the principal, so that they can pay a reasonable rather than a highly inflated value for their house.

    I adore this idea.

  41. Delpasored says:

    How will we separate the deserving poor from the foolish we wish to punish? Is the fear that we will be next to lose our homes that makes us so angry at the people who should have made better choices?

    I bought my house in 2001, but was laid off my $65,000 a year job and so lost my income and my health care last year. I now work 2 part time jobs and am only just able to make house payments. Am I one of the undeserving because I should have made better career choices? Should I be punished for having made the mistake of getting old? Not many employers are jumping at the chance to hire a woman in her 50’s.

    Face it, your pensions or jobs may be gone tomorrow, your health care also. Those who have wreaked the economy have made that a certainty. Even if your house is paid off and you think you are safe, can you pay your property taxes? Mine are $2,400 a year BTW. Are you sure you will never be considered one of the undeserving homeless?

  42. Fern says:

    Interesting data point: The amount of $ the govt is using to back AIG is more than what the govt has spent on Aid to Women with Dependent Children since GWB took office….

  43. Ann in Lima says:

    Hi Sharon
    What a great idea! Most of the comments to date focus on the individual side of the equation. None really look at the structural change this move would imply for our economies and the ripple effect to society in general.
    At least two other broud groups of actors (stakeholders) must be considered in order to understand the implications of this proposal, representing corporate and international financial interests. This latter as they own a huge chunck of US financial assets. These groups form the structure of our current international financial system and have significant influence over international politics. Both have a high vested interest in maintaining the status quo of financial power.
    It’s a stroke of genius actually. Transferring land assets to individuals represents a fundamental change in our economic system. De facto the entire system is overhauled. The debt would be effectively written off the books for a significant portion of the citizenry, particular those not well off. Not everyone would be benefitted, but the impact of this significant debt forgiveness would almost certainly cause a revaluation of all types of assets. Lots of paper would be written off. Assets with intrinsic value (gold) or practical application will be more highly valued.
    Is there any chance of it happening? Maybe. There are some really powerful archetypes to draw on and a lot of anger. These last few bailouts have been outrageous. Corporations and their leaders have been getting off without retribution and in this case it is grotesquely obvious. The question is if Americans have the gumption to demand a fair playing field, to demand that individuals benefit from government largesse to the same extent that corporations do. If this could be channeled into a David and Goliath thing it could gain momentum very quickly.
    If the public outcry was strong enough, it would be very difficult for candidates to ignore. If it was loud enough and the threat of social unrest present, it could be possible to apply significant pressure at an international level to allow the US to shed debt. An international agreement would have to be negotiated, but it is well past time for the next Bretton Woods conference. The US could declare that to ensure long term solvency, it was absolutely necessary to purge the bad debt from the system.
    There will also be a more subtle rebalancing of wealth in general. The wealthiest individuals have much of that wealth concentrated in financial instruments. It is very likely that their relative wealth will diminish significantly.

  44. MEA says:

    You know, just becuase we are letting people who are buying houses keep them, it doesn’t mean we can’t also giving housing to the homeless.

    It’s not an either/or fantasy.

  45. Steve in Colorado says:

    Isis:

    I agree to some extent. Like it or not (for me not) we have these millions of houses with questionable utility. However, it is important to remember the other side too:

    If you put people into these homes, it greatly reduces the chances that they will be torn down to make farmland again. And if the people in them spend 4 or 5x the amount on utilities and energy than they would have in an efficient home, then the free or inexpensive home payments get offset by large utility bills, and funds that might have gone to installing energy efficiency and alternative energy capture systems gets burned up with little to show for it. Add to the mix, the the monetary costs of the gov’t giving those houses away (to the poor, the rich, the deserving or whomever) will cause inflation to soar, increasing the cost of food and energy, and most everything, for everyone.

    Again, I suppose one can always just walk away from one of these free homes (depending upon the contract rules they come up with), but there is still a cost, in money wasted on excessive energy use, money wasted trying to save buildings that maybe would best be torn down, and time not making changes.

    OCICBW, but I don’t think we really want to throw away 5 or 10 years trying to save these dinosaurs. Especially not if we all are going to be paying for the attempt for many years to come, with increased taxes and prices on everything…

    Isis wrote:

    Steve,

    No matter how badly constructed, the fact of the matter is these are the houses that America’s got, and millions of new houses cannot be built on a massive scale. It might make sense for this or that individual to build a new, energy-efficient house, but on societal level, these new houses simply cannot be built. Old ones will have to be retrofitted and turned into at least semi-livable spaces for when the price of heating etc. goes through the roof. And the question is: Given these constraints, what is the best way for society to keep as many people as possible off the street?

    As for being tied to a McMansion long term… Look, if you accepted you McMansion essentially for free, and then later decided it wasn’t worth it, then you could just move out. You wouldn’t have to pay anyone. You simply wouldn’t get to make any money off the house, that’s all.

  46. Russ says:

    To go with the thought experiment, if the government is going to have control over what’s to be done with these houses, then it doesn’t need to relinquish them at all (and certainly not to profligates).

    Instead, these could be turned into affordable-rent boarding houses. That would still be an imposition on the neighbors who bought their houses fair and square, but then, since in this eventuality we’re going to need to convert every suburban yard to a garden anyway, we could make the avilability of this housing contingent upon one’s enlistment in a sort of gardening brigade.

    I have this, perhaps utopian, vision of what my (currently hideously ugly) suburban street would look like if every yard was crammed to bursting with crops and the street was a pedestrian and bicycle mall.

    Too bad I’m not a painter.

  47. Sharon says:

    This has been a genuinely fascinating conversation – I appreciate the contributions.

    A couple of thoughts.

    1. Steve, I don’t buy the idea that the McMansions are total garbage and should be dumped – not to mention the fact that even talking only about recent construction ignores that plenty of Fannie and Freddie mortgage holders own older houses. The thing is, they are crap houses, as houses go – but they are still houses. I live in an old farmhouse, and the original part of the house have far less insulation than a McMansion – but we use vastly less heating energy (very close to 90% less) than the average American – we do this mostly by closing off rooms and not heating it all during the winter. I don’t buy the idea that they can’t be lived in – nor do I think that most people, facing eviction will say “I’d rather wait until the depression is over and build a better house – I can’t deal with this.”

    2. I don’t object to some of the alternate proposals, but what I like most about this – and again, I’m not speaking only of Fannie and Freddie mortgages – I actually think you could make a legal case for doing this with *ALL* US housing if you really worked it (and if we lived on another planet ;-) ). Just obviate all mortgages – take the wealth out of the financial institutions, and hand it out to the rest of the people. And yes, give it to renters as well.

    My concern with the idea of having the government act as landlord is that historically, the government has been a *TERRIBLE* landlord – look at the history of American public housing. I’m really not convinced that in an economic crisis, creating an enormous beaurocratic management of lots of far flung rental housing is a good use of time – or likely to lead to anything good. My major lack of interest in sorting out the deserving from the undeserving is simply that however we do it, we’d leave it to the government – something our government does really badly. Better give it all away, and, as they say, let god sort it out ;-) .

    Anyway, not holding my breath, but what a fun conversation!

    Sharon

  48. dewey says:

    Delpasored – Yes, it IS my fear that I will be next that causes me to be “so angry” at the idea of a giveaway. My job will not be secure in tough times, and if I were laid off I too would soon be scrambling to keep a roof over my kitty’s head. I should accumulate more of a financial cushion that would buy me time to find alternatives, but as it is I barely break even every month. For my own family’s sake, I can’t afford to assume much more of a tax burden. If the feds make one homebuyer’s mortgage disappear, thus giving him a huge handout, pay the bank compensation, then jack up my taxes to pay for that compensation, and that someday means that I can’t pay my mortgage — then somehow I as a responsible [and lucky] buyer will have been defined as less worthy of having or keeping wealth than either the unlucky [or vain and foolish] buyer or the greedy bank.

    People resent big handouts when they are perceived as a zero-sum game: giving to you means taking away from me. If there is a way for you or anyone else to be given a free house that does not hurt me, I’d have no problem with it; I don’t object to the undeserved good fortune of Powerball winners. But if providing security and comfort for your family meant inflicting risk and belt-tightening on mine, I’d have a problem. If the fact that I am not YET in the hole doesn’t make me more deserving than people who are in the hole, it doesn’t make me LESS deserving either. Anyone [not you!] who suggests otherwise is well down the road to proposing a purge of the kulaks.

    You raise an interesting point with the property tax issue. In a way, it can be said that nobody under our system is allowed to own property; you rent it from the government, and will be violently removed if you do not pay your rent. Except in a couple of states, if you have $100,000 and you spend it on a huge diamond necklace, then that necklace permanently belongs to you. Even if you later become penniless, you don’t have to pay an annual percentage for permission to keep it; you can just carry it around until you feel like selling it. But if you spend that $100,000 on a mortgage-free house, you had better never let yourself fall out of the cash economy, because the minute you stop paying property taxes, you will find that it’s not yours at all.

  49. Shiner says:

    If we have a crash this is all a moot point as people will just live wherever they want and no one will have the werewithall to move all of us anyway.

    If we dont have a crash these mortgages still have some value. The gov’t can maybe even make a profit. If even half of the money the gov’t spends is returned it will matter for citizens (less inflation/taxes)

    To just give it away and let the poor (renters) once again fund the better off (homeowners) with their tax dollars is criminal.

    This money will be paid back by all of us. I my opinion even suggesting I pay someones mortgage is vile. no no no…

  50. Boysmom says:

    I don’t think the Fed should be bailing out the banks. Nor do I think the government should be bailing out people who are loosing their homes due to the type of mortgage or mortgages they chose to take out. Look, if someone could put 20% down and pay their mortgage on a traditional type payment two years ago they can still pay it. Even if the home has since gone upside down, the monthly dollar amount hasn’t changed. It’s the folks who signed up for exotic mortgages who are loosing their homes.
    I’d rather see the money go to, say, seed grants for folks to start small businesses with, and the training on how to run a small business. So that those folks who could pay their mortgage just fine until they lost their job have a hand up in getting started on something else. Waivers of mortgage payments on a primary residence only for, say, six months or a year for folks who’ve lost their jobs (folks who’d qualify for unemployment) would be okay in my book. That would give those folks a chance to find another job, start a business, sell the house, or even find some renters and rent out a few rooms.
    I don’t have any sympathy for folks who say “We didn’t know our payments would go up.” until they proove fraud committed by their broker or loan officer in court : if you don’t read the contract before you sign it, you deserve what you sign up for. (Same goes for CC&Rs that prevent you from renting rooms out, gardening, or keeping livestock.)
    I could see the value in a New Homestead Act, as long as it was open to everyone, not just the irresponsible.

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