Ron Paul On Face The Nation

[DJ Vu 176]

The reason for that is mainly that we can't deduct our mortgage interest from out taxes so we don't refinance like crazy like Americans do.

I think most of the people who get in trouble with their mortgages are refinancing so they can lower their monthly payments, not because of tax breaks. It's the wealthier people who care about the taxes.I'm just guessing at that.

[FCP Bob 1,312]

I think most of the people who get in trouble with their mortgages are refinancing so they can lower their monthly payments, not because of tax breaks. It's the wealthier people who care about the taxes.I'm just guessing at that.

How often when they refinace though do they borrow some of the equity in the home so that they can buy things or invest ?There are all sorts of reasons that people do things but I remember looking at the average amount of equity in both Canada and the US and the Canadian number if far higher and this was also true when prices were at their peak in the US. It's rational is a lot of cases for an American to maximize their mortgage debt but it does leave things more vulnerable during bad times.

[BaseJester 1]

This is the kind of BS that people have been spouting to try and deflect attention from the complete and total failure of the private banking sector leading up to 2008. The privileges granted to Fannie and Freddie were but a tiny part of a massive meltdown. Nothing involving Fannie or Freddie made private banks bundle together shitty loans then strong-arm the ratings agencies into giving them AAA ratings so they could insure those shitty loan bundles and deceive investors then wait until it was too late to admit there was a huge problem.

I'm finding two types of articles on the web.1. GSE's were "forced" to get into bad loans to compete with stupid things Wall Street was up to.2. GSE's were involved in most of the transactions some way.Here's a #2, in the New York Times:

The administration’s plans for winding down Fannie and Freddie are likely to command support on both sides of the political aisle. Roughly 90 percent of the money invested in mortgages currently flows through Fannie, Freddie and the Federal Housing Administration, which guarantees loans of lesser value.

Is this wrong?

[hblask 1]

I find the idea that if one banking entity makes bad loans, every other bank has no choice but to make bad loans too......to be completely laughable on its face.

Pretend you are running a business at margins of around 3-5%. You and your competitors have cut all your costs to the bone in order to maintain that margin. Now, the government tells banks, including yours: if you make loans at 100% value to people with bad credit, we will back that loan. Not only that, but you can keep the closing costs and immediately sell the loan to somebody else, who will be convinced that we will back 100% of the loan if it defaults. Go.Your bank, having been in business for 100 years, says that's nuts. Giving loans for 100% of the value to people with bad credit? WTF?Your competitor, who has fewer scruples and has been in the business for less time also thinks it's a crazy idea, but says, hey, the govt will back us, and if we just do a couple of them we can't get hurt too bad. So they make a couple bad loans. They sell them. They make a profit! Wow, it's like printing money. Soon, they are making more of these loans. Not only that, but they figure out that even if the loans aren't *actually* owned by Freddie and Fannie, investors have been convinced that bad loans are OK if you just bundle them together, because all that last bundle from Freddie and Fannie worked out. So now, your competitor's profit margins go to 7, 8, 9%. They start attracting investors, who are leaving your bank in droves.What do you do: lose your business, or dip your toe into the bad mortgage business?Yes, believe it or not, the government giving your competitors a 2 or 3 or 5% advantage can make you do crazy things rather than go out of business.But again, look at the first domino in that: a threat to make bad loans combined with a promise to cover the losses if they fail, combined with an easy almost risk-free profit.Without the bad loans, there are no CDS's. Without CDS's, there is a much smaller harm when the housing bubble collapses -- and the bubble would've been smaller to start with.

[hblask 1]

I think most of the people who get in trouble with their mortgages are refinancing so they can lower their monthly payments, not because of tax breaks. It's the wealthier people who care about the taxes.I'm just guessing at that.

This is backed by data that I am way too lazy to back up. But like most tax breaks, most of the benefit goes to the wealthy. The poor don't own homes, and the middle class tends not to itemize. That leaves the rich to claim the mortgage deduction. And yes, it distorts the housing market, especially the high end market.

[hblask 1]

How often when they refinace though do they borrow some of the equity in the home so that they can buy things or invest ?There are all sorts of reasons that people do things but I remember looking at the average amount of equity in both Canada and the US and the Canadian number if far higher and this was also true when prices were at their peak in the US. It's rational is a lot of cases for an American to maximize their mortgage debt but it does leave things more vulnerable during bad times.

Yep, before the push for "affordable housing" here in the US, we used to have pretty high equity -- you couldn't even get a loan for more than 80% of value, even a second mortgage, except in rare cases. Then someone decided that poor people need houses, and poor people don't have down payments, so 100% of value become common, even encouraged.

[brvheart 1,752]

Ron had a very good showing in NH tonight.

[LongLiveYorke 38]

Ron had a very good showing in NH tonight.

Mexico?

[The Ocho 970]

This is backed by data that I am way too lazy to back up. But like most tax breaks, most of the benefit goes to the wealthy. The poor don't own homes, and the middle class tends not to itemize. That leaves the rich to claim the mortgage deduction. And yes, it distorts the housing market, especially the high end market.

Huh? Anyone who owns a home pretty much itemizes. Unless it's almost paid off, or they have a 100K mortgage.

[hblask 1]

Huh? Anyone who owns a home pretty much itemizes. Unless it's almost paid off, or they have a 100K mortgage.

Well, that would've been my thought, but apparently it's not true. Someone went through IRS statistics, and most of the people who make $50K or less don't itemize. I'd be a lot happier if I could get a second confirmation of that statistic, but it's the most reliable analysis I've seen so far.

[BaseJester 1]

Huh? Anyone who owns a home pretty much itemizes. Unless it's almost paid off, or they have a 100K mortgage.

I think you're saying that a $100k mortgage principle is unusually small. I don't think that's the case for the Midwest or the South.

[vbnautilus 48]

Well, that would've been my thought, but apparently it's not true. Someone went through IRS statistics, and most of the people who make $50K or less don't itemize. I'd be a lot happier if I could get a second confirmation of that statistic, but it's the most reliable analysis I've seen so far.

That's the middle class?People making less than $50K own homes? Is my perspective that skewed?

[hblask 1]

That's the middle class?People making less than $50K own homes? Is my perspective that skewed?

I believe median income in the US is right around there. And yes, get out of metropolitan areas, and you can get a home on $50K per year.But I think that was the point: the middle class -- people around the median income -- get very little benefit from the home mortgage deduction.Edit, OK, I looked it up, I was almost right on with my guess:

[BaseJester 1]

That's the middle class?People making less than $50K own homes? Is my perspective that skewed?

census dataMedian household income, 2009 $50,221So, I guess the middle class would include people making both less and more than $50k. If this couple with a $50k income has a $150,000 mortgage at 7% for $10,500 in interest, they're still a little short of the $11,600 stand deduction. Collect some Goodwill receipts and it's break-even to itemize. I'm guessing there is a lot of the middle class for whom itemizing is an improvement over taking the standard deduction, but not a big one.Edit: What he said.

[mk 11]

gd crazns

[hblask 1]

Top contributors to Romney, PaulBoth the size and contributors are interesting.

[hblask 1]

So I saw on the news that Ron Paul was in MN, so I checked if he was going to be anywhere near me. It turns out he was speaking about 10 miles from my house, so I decided to go check it out. The news stories always talk about the enthusiasm of his fans, but they really don't do justice to it. It was amazing. I've been to rock concerts with less enthusiasm. We got there about 10 minutes before it started, and there was a line waiting to get in, and they said it was "less than standing room only" inside. Eventually they opened up some garage style doors at the back out into the 30 degree MN day, and people stood outside watching him through the garage doors.Once he started talking one of his people came by and started shuffling people around to fit more people in, and we ended up listening to his speech from about 10 feet away at the bottom of some stairs. When he finished he came down the stairs and shook hands and was very sweet to my kids. I'm glad I went, it really was an 'event'.

[FCP Bob 1,312]

sounds like a good experience for you Henry.Is Minnesota a caucus state ?

[hblask 1]

sounds like a good experience for you Henry.Is Minnesota a caucus state ?

Yes, we are a caucus state. It is on Tuesday, so I might run out to it, although I hate the actual nuts and bolts of politics.

[mk 11]

So I saw on the news that Ron Paul was in MN, so I checked if he was going to be anywhere near me. It turns out he was speaking about 10 miles from my house, so I decided to go check it out. The news stories always talk about the enthusiasm of his fans, but they really don't do justice to it. It was amazing. I've been to rock concerts with less enthusiasm. We got there about 10 minutes before it started, and there was a line waiting to get in, and they said it was "less than standing room only" inside. Eventually they opened up some garage style doors at the back out into the 30 degree MN day, and people stood outside watching him through the garage doors.Once he started talking one of his people came by and started shuffling people around to fit more people in, and we ended up listening to his speech from about 10 feet away at the bottom of some stairs. When he finished he came down the stairs and shook hands and was very sweet to my kids. I'm glad I went, it really was an 'event'.

I'd be excited to meet BATMAN as well!

[BaseJester 1]

Ron Paul's pointless Internet presidency (Yahoo News)Schieffer: Not much excitement with GOP voters

Ron Paul got more than forty percent of the vote in Virginia, and that's just people saying, "We don't like Mitt Romney."

[FCP Bob 1,312]

Not sure what point you're trying to make BaseJester.Is it that the media isn't giving Paul the credit he deserves for getting 40% of the vote in Virginia ?

[BaseJester 1]

Not sure what point you're trying to make BaseJester.Is it that the media isn't giving Paul the credit he deserves for getting 40% of the vote in Virginia ?

Yeah. The media coverage has been pretty negative.