No, No, No!

by on October 4, 2008 at 7:21 am in Current Affairs | Permalink

Fannie Mae said it will set aside the loan of a woman who shot herself
as sheriff’s deputies tried to evict her from her foreclosed home….

"We’re going to forgive whatever outstanding balance she had on the
loan and give her the house," Faith said. "Given the circumstances, we
think it’s appropriate."

In other words, the taxpayers are now subsidizing self-injury.

1 Naadir Jeewa October 4, 2008 at 7:34 am

That’s a novel approach to healthcare, I have to say.

2 outsourcing October 4, 2008 at 7:57 am

Looks like that is only way left out…for taxpayers.

3 mrshl October 4, 2008 at 8:48 am

“In other words, the taxpayers are now subsidizing self-injury.” Uh, isn’t that pretty much what a bailout is?

4 David October 4, 2008 at 9:15 am

Perhaps a “market in everything” for the trigger shy? I’ll aim for a nice clean through-and-through.

5 Sune October 4, 2008 at 9:27 am

So if I shoot myself to get debt relief, which body part should I aim for? Is a shot through the hand sufficient?

6 Bruce Humbert October 4, 2008 at 10:41 am

DanC,
There are tragic stories everywhere – but we once were a nation that did not feel compelled to force those that have to support those who don’t. We urged the haves to be generous – to give through church and charity – and for years this system worked fairly well. This poor woman has the right to our sympathy – but she has no right to our (my) money.

You are right that we are all paying dearly for the mismangement of our government by politicians. But we as voters bear the ultimate responsibility. Barney Frank, Chris Dodd, Joe Biden and numerous others got re-elected by landslide margins – while they created the laws and policies that turned millions of good renters into millions of lousy homeowners.

7 Lee October 4, 2008 at 11:13 am

“We urged the haves to be generous – to give through church and charity – and for years this system worked fairly well.”

No, actually, it didn’t. From poor infant mortality, childhood malnutrition and overall low life-expectancy through the spread of preventable epidemics right on through to lack of education and abusive treatment in the workplace, faith-based societies have proven themselvesincapable of solving key social problems. If you had said ‘Mosque and Charity’, you would have had a more defensible statement as Islam does a much better job of forcing it’s adherents to help the poor; but given a choice between a theocracy and a socialist state I know which one I’d choose to live in.

8 Cowcup October 4, 2008 at 11:22 am

You guys are nuts!

Being a libertarian, failed to fight against the bailout for banks. Now mocking a little bailout for an old lady?!

Exactly like McCain, attacking the greed, unable to attack the Chris Dodd and B Frank!

Losers!

9 anonymous October 4, 2008 at 11:45 am

Does anyone else think this woman must have had other things going on pushed her towards sch self-desctruction? I can’t believe a mere eviction would be enough to inspire such behavior in a well-adjusted person. After all, it is *only* money.. you can come back after such things.

Yeah, it’s just one person, but what if it becomes more common? A lot of people (such as some in this forum, half-jokingly) might go for some non-life-threatening serious injury for a few hundred thousand dollars.

10 save_the_rustbelt October 4, 2008 at 11:49 am

I would mention that professors at publically financed (and aren’t they all) universities are the biggest welfare queens of all, but that would be bad manners.

In the current environment, banks and financiers are better off not foreclosing, so that it is more likely someone will occupy the home and perhaps keep it up and keep insurance on it. Otherwise the banks end up maintaining a home with no value.

The contest here is who is dumber and greedier, the bankers or the Wall Streeters. I guess we are paying to find out.

11 Mercutio.Mont October 4, 2008 at 11:58 am

Some of these commenters are out of their minds. If we subsidize suicide attempts, guess what we’ll get more of?

Supporting Fannie’s decision to forgive the loan is tantamount to supporting suicide attempts.

12 Anon. October 4, 2008 at 12:09 pm

Before the subprime problem became a national crisis, stories of people in similar situations (minus the self-injury) peppered papers throughout northeast Ohio. An elderly person who owned his or her own home was convinced to take out a mortgage on a home he or she already owned. The terms of the loan often were different than the person understood, the monthly payment higher than thought, the real estate market was in tough shape which precluded sale, and foreclosure was often the end result.

To me, this situation does deserve outrage, but I direct my outrage at mortgage brokers and others who try to take advantage of the elderly. My grandparents are often approached by people trying to take advantage of them. They tend to consult my mother before making a decision, which has so far prevented anything financially disastrous, but elderly who do not have anyone to look out for them could easily fall prey to any number of swindles.

13 garmarn October 4, 2008 at 12:16 pm

Onlt whose wounds are instantly fatal should receive such consideration. Why should we subsidize anyone who can’t even off him/her self?

14 DanC October 4, 2008 at 12:23 pm

How did a 86 year old women get a mortgage at prevailing rates in the community? She must have had a good credit ranking. So for 86 years this women seems to have played by the rules. Something went wrong declining health, lost investments, something. This is an extreme case and basing public policy on extreme cases is a mistake, But so is attacking people who fall into extreme cases.

What angers me is the bailout of Wall Street. The owners and managers should have been held responsible for the failures of these institutions. Before the regulators failed, the owners of these institutions failed. They were, in some cases, paying outlandish bonuses to people who were leading their institutions to ruin. Owners who so mismange their firms deserve to lose their investments. They should not be bailed out by the government.

So I can uderstand and have mercy on a 90 year old women. I do not understand bailing out the owners and managers of firms who payed millions in bonuses to people who destroyed firms.

So all this debate about good regulations bad regulations misses the point. The owners of these firms failed to do their job.

And desperate 90 year old women are asked to pay for the bailout on wall street without any mercy in return if her life turns bad?

What drives me nuts when Obama talks about the need for regulation is that for too many Democrats regulation is not about protecting consumers or promoting sound policies – it is about social engineering.

Dodd and Franks provided a lot of oversight for Fannie and Freddie. They made sure that they used their regulatory powers to assure that Fannie and Freddie were following a social agenda they desired. Did they care about the sound management of the firms? Doesn’t look like it. But as long as these firms bent to their will on some issues, and political contributions flowed, they didn’t seem too concerned.

Simply politicians will use their regulatory powers to drain resources into projects that they decide in their infinite glory are good for them and by extension good for society,

That is why a President Obama scares me. Senator Obama thinks that increased regulation, increased government control (and takeovers were he thinks it is needed), and taxes based on his sense of equity will grow the economy. That is insane.

President Obama could push America so far to the left that Cuba could become the new capitalist haven in North America.

15 David J October 4, 2008 at 12:34 pm

“…but elderly who do not have anyone to look out for them could easily fall prey to any number of swindles.”

Why not tell the elderly what parents have been telling their kids for decades: “Just Say No”. And then, if the elderly feel they need to make a change (or any of us for the matter) they should find an objective party to represent their interests and that has experience in the matter at hand.

16 Affe October 4, 2008 at 12:44 pm

Agree with Andrew and Joe Bingham – based on his logic, Cowcup simply masks his desire for government subsidies and incentives for elderly suicide with “compassionate” rhetoric. Someone call AARP !

17 DanC October 4, 2008 at 1:16 pm

Somebody please tell me the difference between a 90 year old women holding a gun to her head to avoid foreclosure and a Wall Street firm threatening self destruction if they don’t get a government bailout?

18 L2P October 4, 2008 at 2:12 pm

“Now that it’s worked once, you have to expect that someone else may try the same tactic.”

Yes, I’m sure there will be waves of self-mutilators trying to get out of foreclosure. Alert the hospitals! Double shifts at the ER! Maybe you should start donating blood!

*rolls eyes*

You guys are supposed to be hard-headed, libertarian economic rationalists, aren’t you? So think about how this self-mutilation-to-get-out-of-foreclosure cost-benefit analysis works for anyone who isn’t pretty much insane already. IOW, not the hypothetical rationally self-interested, all-knowing actor you’ve based your fantasy world on.

If you see anything wrong with this, just face the fact that you’re a self-centered, marginally non-psychotic bastard. The rest is just the window dressing you need to look at yourself in the morning.

19 David October 4, 2008 at 2:43 pm

L2P, If you read any Mises or knew anything about libertarianism you’d know that they don’t beleive in homo economicus. So whatever my fantasy world is based on, it’s not the rationally self-interested omniscient. And had you followed a previous post to Tim Harford’s FT column, you’d know that this sort of thing has happened before.

I read a story about a this woman and didn’t ignore unpleasant facts like a four year old second mortgage, and didn’t assume that because of her age her motives have always been pure. If that makes me a bastard, then so be it. I’ve been called worse things by better people.

I don’t want anyone else–sane or not–to shoot themselves in the shoulder over a house. So when the government drops a foreclosure action immediately after such an outburst I think it’s ill advised. I’m sorry that doesn’t comport with your righteous indignation.

20 Chris Crocker October 4, 2008 at 3:18 pm

Cowcup:

LEAVE ALEX ALONE! HE’S A HUMAN! Leave Alex alone, PLEASE! *sobbing* LEAVE ALEX TABARROK ALONE RIGHT NOW! I MEAN IT! Anyone who has a problem with Alex you deal with ME!

21 soft_of_knowledgeable October 4, 2008 at 4:51 pm

Actually you people don’t appreciate the subtlety of Fannie’s strategy. Right now the courts are backlogged with foreclosure eviction cases. Some of the suicide attempts will be successful. If the suicide attempts are successful then Fannie can foreclose without homeowner opposition.

22 Rex Rhino October 4, 2008 at 7:03 pm

Shame on you!

Alex, this is sick and weak.

If you’re unable to continue argue against the bailout, if you’re unable to continue fight for the coming intervention, then show some sympathy to the old lady. At least you still have some common sense left.

I think you should have read von Mises, I remember once he said something relate to this. I can’t recite the exact words, but the idea is you should fight for the import issues. Please don’t make libertarian looks like a clown.

This is totally sick.

No, you are the one that is sick! You are the one who wants the government to pay people to self-mutilate themselves! Wait until 100 more people try the “shoot myself to get out of debt” trick and most aren’t as lucky!

23 Andrew October 4, 2008 at 8:32 pm

Taxpayers have always subsidized self-injury. We pay the government. Duh.

24 Will W. October 5, 2008 at 8:22 am

I’m sorry professor, but this was a pretty heartless post.

I was annoyed that many people actually called their congressman to protest the bail-out w/out understanding how serious it was. But if this is how the people who support such economic policies appear to voters, then it’s no mystery why there’s so much populism for politicians to exploit.

It’s good to remember (for myself, as well) that people have value beyond their contribution to the GDP, or even in this case, (the very small) risk that Americans would seriously start shooting themselves trying to get out of their loans.

25 Alex Tabarrok October 5, 2008 at 10:56 am

It’s interesting that many people are ready to insult me even though I said nothing nasty about the old lady. But ok let’s stipulate that I am a cruel, heartless, sick bastard. Now what do we think of Fannie Mae’s policy? Hmmm…that didn’t get us very far did it?

The issue is not sympathy the issue is whether we should have sympathy for all 90 year old ladies who lose their homes or just the ones that shoot themselves.

In other words, this post is about incentives and the categorical imperative.

26 Jesus saves America spends October 5, 2008 at 2:38 pm

Someone who couldn’t afford got a loan from someone who shouldn’t loan. Lonee shot herself and loaner lost money. See there is after all justice in the world.

The subsidy of suicide argument is overrated. TC said so in the other post about, moral hazard of bailout. Unless Fannie Mae is paying for her medical expenses, I don’t see how this is subsidizing suicide.

27 David October 5, 2008 at 5:03 pm

At the risk of seeming a heartless bastard again, I’d just like to point out there’s a reason life insurance policies don’t pay out for suicide. No I don’t exepct a wave of self-mutilation at foreclosure evictions but–how did that argument for the bailout go? If there’s even a 1% chance of the worst-case scenario…

A good time to work out Ms. Polk’s loan would have been before foreclosure and eviction. There are other options that would have kept her in the home besides forgiving the entire loan and giving her clear title. That’s bigger than a whiner’s discount or a PR strategy.

People who prey on the elderly are evil, and not enough is done to fight it. But with all due respect to DanC, Ms. Polk didn’t get swindled out of money. She (apparently) got swindled into $45,000. What happened to it? Is it uncouth–or uncompassionate–to ask?

28 Anonymous October 5, 2008 at 5:31 pm

Somebody please tell me the difference between a 90 year old women holding a gun to her head to avoid foreclosure and a Wall Street firm threatening self destruction if they don’t get a government bailout?

No difference.

That was easy!

29 DanC October 5, 2008 at 7:08 pm

To David
Who gives a 30 year mortgage to a 86 year old women. Plus a $10,000 + HELOC. Where did the money go? And we have no information on points paid, application fees paid, etc. Given how quickly the lender ran away, they may not have wanted the paperwork to see the light of day. Did a mortgage broker stick her with five points on the loan, it happens to desperate people.

We really don’t have all the facts. So I repeat, tough cases often lead to bad public policy and we should be looking at the root cause of the problem. And it is unlikely that elderly women across the country will start shooting themselves.

30 DanC October 5, 2008 at 7:54 pm

David

As an aside most insurance companies do pay on suicides, just not during x number of years after initial issue.

I don’t know what policy you think is wrong. I think t is wrong to think that little old ladies have a motive to start shooting themselves. In Ohio, I don’t know why she didn’t declare bankruptcy. The women clearly has some cognitive problems.

This case tells us very little except that in the current market people are facing very tough choices. That home prices have declined so dramatically in some markets that normal mutually beneficial transactions are turning bad, for all involved

31 Romie P. October 5, 2008 at 10:18 pm

First and foremost, this is a tragic story and my sympathy goes out to the lady and her family and friends as well. It just shows what this country has come to when you attempt to take your own life just to keep you house. This situation can be blamed on poor government handling, but also just to the natural fact that the bank gave a large sum loan to an elderly woman knowing that she did not have the collateral or capital to pay it off in the future.

Given the fact the women was in the nineties and her home was not exactly in the best condition, it makes me wonder how much of a balance she had to payoff. I am not really sure if I agree with the decision to forgive her loan just because she nearly took her life. If you look at outcomes that could have occurred, the loan was still going to remain unpaid. If her suicide attempt was successful, the bank would have still had to pay the balance off. If she was evicted, the bank would have had a hard time trying to resell that home given the environment it was in.

32 DanC October 6, 2008 at 12:11 am

Gadfly
What failed policy do you think caused this women’s troubles? The fact that Dodd and Franks demanded that FM make such loans?

Or the fact that complicated federal regulations created incentives for firms to become more covert. Read the New York Times about the 200 people who’s only job was to monitor Fannie and Freddie but they were no match for the political moves of members of Congress. Or is it the policy that bails out the owners of firms that were so mismanaged?

33 Anonymous October 6, 2008 at 7:47 am

we should be looking at the root cause of the problem.

And that is people not qualified borrowing, lenders lending to those not qualified, legislators encouraging both, and taxpayers bailing out, all of whom shouldn’t.

34 Gadfly October 6, 2008 at 7:09 pm

Hi DanC,

There are a host of failed polices that led us to our present condition. Take your pick: war on credit and the huge government budget deficit, insurmountable trade deficits, extreme outsourcing, loose monetary policy, etc. This correction has been overdue for a long time now and it is far from over. The American people were promised prosperity and opportunity for blindly supporting deregulation and globalization and these are the kind of results we got.

Comments on this entry are closed.

Previous post:

Next post: