More Foreclosures, Please . . .
http://www.ritholtz.com/blog/2010/03/mor e-foreclosures-please/

Your solution sounds more like a debtors prison. Besides, default is exactly what businesses and corporations do. Should businessmen be exempt so they can get rich locking up those who did the very same thing?

But why let “defaulters” simply walk away from their homes, which would force the banks to “eat” their bad loans that they should never have made in the first place?

Why not collect “defaulters” and put them into public “workhouses” until their debts are paid off? They could be used on public work projects driving down the expenses of state and local governments.

Entrepreneurs would obviously see an opportunity for investment, so it would create jobs from things like constructing the workhouses, to staff to run them — and of course, guards with dogs to keep these “slackers” from running away.

This idea could start a whole new industry and the country as a whole would benefit tremendously.

Great idea, James! Maybe you could suggest it to President Obama as a way to cut our national debt.

Gordon

The subprime crisis was not caused by permissive laws but by by credit underwriters putting very little of their own and a lot of foolish investors’ money at risk.
It takes two sides to get into hock.

What has happened over time is that government (being politicians and their bureaucracy minions) spend money with reckless abandon and no respect for how hard the populous works to earn a living. Those gold-plated pensions and pork-barrel projects were earned for the most part hour by hour, day by day with sweat and hard labor. So now in the crunch, have you heard of ONE politician anywhere in ANY country which has rolled back their pay, or a public service pension by 50% to put it back in line with the private sector? When was the last time you saw an independent efficiency analysis done on ANY public service contract, or ANY bureaucracy or ANY politician? The fact is — NEVER. Let the unsustainable economic cost to society collapse, financed by sovereign debt and taxes, so the people can vote out the insatiable pigs at the trough, and reclaim their country.

A dollar can go to servicing national debt interest or it can go to schools, community safety, and health. Your choice.

How did it happen? Unqualified people were allowed by law to acquire debt (mortgages) which they could not service. Thats it, period – nothing more or less. False income declarations and false debt/equity declarations allowed the asset acquisition (real estate) to be bid up beyond its true value, and when the debt could not be serviced, default occurred.

Trying to maintain possession of an overvalued asset acquired by unqualified owners is the same for a house, car, or that flat screen TV when payments aren’t made — the item is re-possessed and offered back to the marketplace where the true price can be established by auction.

The reason that the economic crisis will get a LOT worse, is that the fundamental cause has not been fixed. Home ownership MUST require: 1) income tax documentation used to prove income. 2) a 10-15% unencumbered cash deposit 3) a maximum 50% debt service ratio. Those simple changes would solve the problem. Canada, which has similar requirements has seen NO underwater problem. In contrast, our gutless politicians are wasting billions with convoluted foolish schemes which put the entire country “underwater” with a crushing national debt.