Joe Biden Proposes that Government Should Be Allowed to Change Outstanding Principal Balance on Mortgages

I like Joe Biden. I think he is real, but I couldn't believe what he said in the first half of yesterday's debate.

At one point between the 20th and 30th minute of last night's vice presidential debate, Joe Biden was talking about the economic crisis.  He ended his response by saying that the government should change not just the outstanding interest rate where a borrower had bought a home that they couldn't afford, but also should have the ability to change the outstanding principal of the loan (or the mortgage balance).

Now, I am entirely in favor of doing everything possible to keep people in their homes, but we are speaking about grown ups who knowingly and consciously entered into arrangements to purchase a home.  It is a stretch to say that their financial illiteracy caused them not to understand the mortgage terms, but a much greater stretch to say that they did not understand that the price that they were paying was high.

Where is the accountability in our system?  How does the government propose to compensate those who rented instead of purchasing?  Or, those who purchased smaller homes and lived within our means during the housing bubble?

The Democrats are promising the world.  They are making more promises, while they should be making fewer.

If we go in this direction, then I fully hope that Barack and Joe will indemnify me for all of the mistakes that I have made in my life.  My software company failed after I sunk a fortune into it.  I have gotten killed over the last year in all of my stock market investments.  I spend a fortune on a divorce.  My large SUV has devalued dramatically since I purchased it because gas prices have spiked up. 

I am waiting for Barack and Joe to cut me a check to make me whole.  :)

Herman Kline
Herman Kline: Herman is a recent graduate of Wesleyan College with a strong interest in finance and firm belief that General Electric is a scam on the public perpetuated by Jack Welch and Jeff Immelt that will ultimately fail to do hidden off-balance sheet liabilities. Herman's favorite place is on the side of a mountain or rock climbing wall.

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Comments

  • thedorightman

    October 04, 2008

    Oh it's so easy...the little old lady figured it out; all you have to do is shoot in a couple of flesh wounds [like in 'Nam.] and Fanny pays off your mortgage....now where did i put that pistola?

  • Wary

    October 04, 2008

    I was floored when I heard him make this comment. As you so well put it: Where is the accountability in this ticket?
    Everyone that is in danger of losing their house today either bought high because they expected 20-30% annual increases in home prices to continue, or they refinanced their homes to take out equity and spend it, often in extravagant ways. Meanwhile, chumps like me kept a more conservative house and mortgage.

    Now Obama wants me to pay for the party. It we reduce the principal on these loans then there is no possibility of the cost of the bailout package being reduced when the economy strengthens as it inevitably will. This type of thinking borders on communism, and I for one am very scared.

  • Sam Cass

    October 03, 2008

    In one sense I agree but on the other hand, I'd rather allow everyone to adjust the principal on their mortgage as opposed to allowing banks to "adjust" the assets on their balance sheets.

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