Gimme the Money or the Kid Gets It

Listening to Chris Dodd on C-span, on the floor of the Senate defending a mortgage relief bill. I like Chris Dodd; I think he is a workhorse, not a showhorse, and I think he’s good good command of a lot of issues. He’s defending what I think of as a pretty dumb idea; relief for debtors who took, and cannot perform on, all those lunatic subprime loans. Dodd is doing as good a job as you could hope for, trying to anticipate and fend off criticism, but I must say I suspect he feels a little uneasy himself as he says he’s not talkin’ about “speculators” and not talkin’ about loans they never should have got into in the first place, but about some—well, I don’t really know some what; some “middle ground” whose exact identity is unclear to me.

Dodd’s most interesting argument is the one that sounds to me like “gimme the money or the kid gets it.” He’s saying we’ve got to give relief because foreclosures put the neighborhood in trouble—if your neighbors go into foreclosure, your property values go down. This is very likely right; would have been nice to hear him make it three or four years ago when subprime prairie fire was sweeping across the landscape.

As I’ve said before, I tend to think of relief for subprime debtors as a dumb idea (for perspective, I’d feel a lot different I we were talking about homeowners who had slugged it out 20 years into a 30-year fixed-rate loan, and then got whipsawed by some social dislocation that they didn’t have any reason to anticipate).

So, mortgage relief is a dumb idea. But here is a really dumb idea: putting public funds into refurbishing properties, so the lender can get a better price on resale. If we’ve to give relief to anybody, let’s a t least start with the debtors. To give relief to the banks and leave the debtors hanging—why, that strikes me as just adding insult to injury.