Tuesday, October 9, 2012

Underwater mortgages

I'm confused. A person borrows money to buy something (if it's a house it's called a mortgage). If the value of the purchase drops, the lender is being asked to decrease or forgive the amount borrowed ("principal forgiveness").

But what if the value of the purchase were to increase instead of decrease, as it often did in the recent past? By the above logic, a lender should be entitled to get more than the amount that was borrowed. 

What does the change in the market price of the purchase have to do with the amount of money that was borrowed? It's a loan and needs to be paid back.

Now, if a buyer borrowed more than he or she could afford to repay in the hope that the value of the home would rise and be sold for a profit, that's gambling. Why should the lender be on the hook for the buyer's speculation?

On the other hand, if the lender deceived the buyer in some way, in order to make a sale or get a fee for refinancing a mortgage, the lender should be prosecuted.

Sensible, fair, regulation of banking (among other things), administered by honest and competent people is the only real solution to the problem that got us to where we are. 

Unfettered free markets as touted by the far right Tea Party and libertarian ideologues might eventually self regulate but not before destroying a lot of people in the process.

The right thing for the wrong reason

On Sunday, Dec 9, Pg B7 of the Providence Journal there was an article, "Ending death penalty on ballot".  California's Proposition 34 would change the death penalty to life without parole even for those those who are already on death row.

The reason stated is "the entire process is far too costly, and that scrapping the death penalty could save millions of dollars."  Excuse me, but that's a terrible reason to justify not putting a convicted murderer to death.  Using such logic, why not save even more money by limiting the trials for accused murderers to two days?  Now that would really save tons of money.

I have no emotional or ethical problem with the death penalty for someone who has demonstrated he or she is unfit to live among civilized people.

However there is a far more compelling reason to eliminate the death penalty and it has nothing to do with compassion or sympathy. Juries are people and one undeniable characteristic of each one us is that we can make mistakes. Even judges can make mistakes. Believe it or not even lawyers can make mistakes.

Until we the people become infallible, putting someone to death is simply wrong because courts can make mistakes. And saving a few bucks wouldn't hurt either.