Tilting homeowner rules seems unfair

Commentator Will Wilkinson


Renita Jablonski: This week, President Obama also revealed more details about his housing rescue plan. It provides subsidies to financially troubled homeowners. A recent poll found 55 percent of Americans think the plan rewards bad behavior.

The poster boy for that sentiment might just be CNBC's Rick Santelli. A recent tirade against what he calls "subsidizing the losers' mortgages" is still making the rounds on the Internet. Commentator Will Wilkinson isn't surprised.

Will Wilkinson: Love him or hate him, Rick Santelli's now infamous on-air rant has touched a nerve. Shouting from the trading floor of the commodities exchange in Chicago, CNBC's Santelli asked: "How many of you people want to pay for your neighbor's mortgage that has an extra bathroom and can't pay their bills?" The traders behind Santelli lustily booed, and I'm sure some viewers watching at home booed along with them.

Small protests have cropped up in Seattle, Denver, Kansas and elsewhere as groups of disaffected taxpayers gather to decry the Wall Street bailouts, the stimulus package, and the newly proposed housing reforms. Maybe these are a bunch of ideological spoilsports mad they lost the last election, but I don't think this small flame of populist resentment should be so casually dismissed.

Fairness means a level playing field and a stable set of rules. The rules structure our decisions. They're inputs to our strategies in the game of life. Changing rules mid-game tilts the playing field. Those who planned around the old rules aren't wrong to feel the change is unfair.

The housing bill, for example, would help homeowners with negative equity by reducing their mortgage payments. This has left many who settled for something smaller and more affordable, or those who decided to rent rather than take a risk on a house, feeling a bit ripped off.

It's not just that some of us get bailouts, while some of us don't. It's that millions of Americans who played prudently, according to the old rules, end up footing the bill. And that really does seem unfair.

It may be that trying times call for extraordinary measures that are bound to leave some of us unhappy. But the more dramatic an intervention into the economy, the more it rewrites the rules and the more it tilts the field. Some people will be thrown off their game. Some people are going to cry foul.

Jablonski: Will Wilkinson is a fellow at the Cato Institute.

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We chose to live well below our means, paid off our mortgage last year and have no debt whatsoever. I don't like the idea of bailing out the "extra bathroom crowd" that knowingly went in over their heads, but I'm even less inclinced to see empty homes in my neighborhood taken over by squatters, which is exactly what is occuring in South Dallas county. Mr. Wilkinson, life isn't fair. Taxes aren't fair. The mortgage interest deduction isn't fair. But I have no problem with my taxes going to help people who need help. Sure, not all who receive assitance will be deserving, but that's a fair price to pay, in my opinion.

I am an advocate of compassion, but simply don't accept that congress has a constitutional mandate of compassion. That is the role of individuals, non-profits and institutions with that mandate.
The normal process of foreclosure is a very, very painful process. However, it is no more painful than the bailout’s cost of $26,000 per family in the US. How many hours of work is that for you... or for me? Does your compassion reach so far that you would take out a loan to fund your friend or neighbor’s choices? Why not?
I purchased a home that was 1.5x my annual income in a urban neighborhood as I read about people buying houses at 5x, 10x or more of their annual income... many with interest-only or 30 or even 40 year mortgages. My 15-year mortgage will be paid ahead of schedule because I know that debt steals future spending power. If I lose my job, I will be able to pay my mortgage based on savings until I find a new one or until I sell my house (potentially even at a loss).
Anyone else find it an odd coincidence that the states experiencing the largest foreclosure problems are the states with high numbers of electoral votes. Senator Obama spent more time campaigning for president while a Senator than he spent actually working (143 days). February of 2009 is not too early for our President to be operating in his biggest strength, campaigning for re-election. Rather than being funded by internet donors, though, this campaign is being funded via currency devaluation via the Federal Reserve, deficit spending, and looming tax increases.
Macroeconomists believe that the stimulus package is money ill spent. I agree.

What about those playing by the rules? I hear this battle cry daily from conservatives who changed the rules over the last 10+ years. Has anyone told them that the people that "bought a house they couldn't afford" WERE playing by the rules? Indeed, the "rules" were to, er, bank, on the appreciation of the housing market to refi at the end of a promo rate. Now that that system has imploded, you cry foul? I dare you to find more than a handful of these "straw men" that you famously like to hold up. Rather, the overwhelming majority of people in trouble were 1) lead to believe that buying the house, in the manner dictated, was "the way things are done." OR 2) have lost jobs and income despite years or decades of loyal service, prudent planning and "doing things the right way." Sorry, but not everyone has a portfolio to fall back on. And when are you going to get it through your thick skulls that, "bailout" or not, we are ALL paying for this -- through lost home values, lost income and lost jobs. The problems in the economy are the direct result of these fraudulent "securities investments", and a decade of decadence financed by home-equity. Helping these people IS helping ourselves!!

Instead of propagating the overhyped Santelli story, how about doing one on how the credit card companies are changing the rules and hurting customers already in financial trouble despite getting their own bailouts from taxpayers? Maybe I missed that story, but I listen to Marketplace almost every morning and I have yet to hear it.

What are you people talking about? Where did all this economic patriotism come from? I'm sure you're all equally on board with Bush's TARP program, right? Because it's "our" economy, after all, and we all sink or swim together, right?

Yes, there will be some folks who benefit from the housing reform package who may have made unwise decisions and over-extended, based on an unrealistic dream of home ownership. In the interests of helping our country, I have no problem with helping them, even though it is "unfair" to those of us who were prudent and never ever make any misguided decisions. I am far more bothered by the bailouts of companies that rooked us all even as their principals (who had no principles) made off with the golden parachutes, bonuses and minimum effects on their lavish lifestyles while their companies tanked.

Rules? Since when did you guys want rules? There were rules. Glass Steagall? Rules on leveraging? Lending practices? "Changing the rules mid game" is fine when the ref is in your pocket.

Public radio in the US just sucks in general, and Marketplace is among the worst of its shows.

Back in September and October 2008 the show literally mocked people who opposed the bank bailout, then they expressed surprise that the bailout allowed TARP, now this. I wish there were some boring, intellectual business show on NPR that actually informed listeners.

I oppose bailing out homeowners because I do not see the great harm in moving into a rental. If a homeowner has equity stripped out by a dishonest lender, that is old fashioned fraud, and should be prosecuted. I just understand there is no way to prop up any asset price. Someone has to take the loss, and I prefer it to be the lenders.

However, allowing corrupt people like Santelli to state their case without any intelligible analysis is disgusting, and par for the sludge which is Marketplace and public radio. GE, which owns CNBC, which pays Santelli, has received over $100 billion in FDIC assistance.

Please, hire some people with business experience who can inform, not just babble.

Thank you Mr. Wilkinson for speaking the truth so succinctly and directly. You and Mr. Santelli have said exactly what is on many people's minds. It's sad that it takes a public rant like Santelli's to finally be heard. Thank you for reporting on this important issue.

I planned around the old rules, I acted responsibly, and I am all for helping my neighbor. After years of renting, hard work, and saving up a down payment I am now ready to buy a house. However, can someone please explain to me why I cannot get the same "deals", affordable rates or extended terms, on a new home loan that my neighbor gets on his bailout? I know that we got the $8,000 “atta boy”, which I equate with a loan write down, but I would much rather get the same “deals” as my neighbor. From my perspective that would tilt the playing field much closer to what people would consider “fair”.


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