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No, No, No!
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.
Posted by Alex Tabarrok on October 4, 2008 at 07:21 AM in Current Affairs | Permalink
Comments
That's a novel approach to healthcare, I have to say.
Posted by: Naadir Jeewa at Oct 4, 2008 7:34:24 AM
So, this is what it takes to get rid of my school (undergrad and grad) debt? Can taxpayers subsidize me too?
Hmph.
Posted by: Spinster at Oct 4, 2008 7:36:10 AM
Looks like that is only way left out...for taxpayers.
Posted by: outsourcing at Oct 4, 2008 7:57:40 AM
Wonder if Fannie would have been as forgiving if the sheriff's deputies had shot her?
Posted by: at Oct 4, 2008 8:00:13 AM
"In other words, the taxpayers are now subsidizing self-injury." Uh, isn't that pretty much what a bailout is?
Posted by: mrshl at Oct 4, 2008 8:48:31 AM
See Tim Harford's piece on moral hazard in todays Financal Times. Apparently self-injury to collect insurance was a popular gainful occupation in parts of Florida in the 1950s.
Posted by: Diversity at Oct 4, 2008 9:07:02 AM
Perhaps a "market in everything" for the trigger shy? I'll aim for a nice clean through-and-through.
Posted by: David at Oct 4, 2008 9:15:27 AM
Spinster: I recommend studying classic cop shows like Mannix first to see what sorts of shots will allow you to not only be absolved from your debts, but still allow you to apprehend a criminal or two before heading off to the hospital!
Posted by: liberalarts at Oct 4, 2008 9:25:00 AM
So if I shoot myself to get debt relief, which body part should I aim for? Is a shot through the hand sufficient?
Posted by: Sune at Oct 4, 2008 9:27:24 AM
This is a tragic story. The core of the problem is that the women lives in a section of Akron with sharply declining home values. The neighborhood is full of abandoned homes and increasing crime. The home has little value for the bank or anyone else. Even if the bank foreclosed, they would be able to do little but board up the building and leave it vacant. (And some in Ohio would encourage officials to go after the bank to force the bank to invest in the house to bring it up to all relevant codes.)
In better times the women could have sold her home but she, like some others, have seen her greatest asset turn into a burden. Through events that she could not control her life has become a nightmare. Northeast Ohio is in serious economic trouble and decent people are paying for the mismanagement of politicians.
And some of the bloggers here should shoot themselves
Posted by: DanC at Oct 4, 2008 10:13:10 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.
Posted by: Bruce Humbert at Oct 4, 2008 10:41:43 AM
DanC is not telling the whole story. The core of the problem is she took out a second mortgage on the home 4 years ago at age 86.
Soon enough it won't take something as drastic as a self-inflicted wound to "take a load off Fannie." You'll just have to be a member of a vulnerable class. The governmnent won't want to be seen kicking single moms and widows out of their houses, so their history of reckless behavior with debt will be ignored.
Meanwhile our ethical, responsible struggling poor and middle class will be shown daily what chumps they were for believing in the rules.
Posted by: David at Oct 4, 2008 10:44:49 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.
Posted by: Lee at Oct 4, 2008 11:13:29 AM
On the basis of what income was she allowed to take out these loans--social security? Was she supposed to understand that the banks would give her loans that she couldn't afford to pay back???
This is precisely the sort of situation that should have been taken care of by the "bailout" but wasn't: it's not "reckless borrowing" if you believe that you can pay it back and intend to do so...but it is "reckless lending" if an examination of your financial situation could make it clear that you are unable. The government shares the blame--because of a policy of "encouraging homeownership"--but someone who is 86 should not. Why? Because for most of her adult life, (well-regulated!) banks could be depended upon to make mortgage loans carefully, and it is wrong to assume that she could recognize the changes in the rules of the game.
Posted by: Richard Berlin at Oct 4, 2008 11:17:02 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!
Posted by: Cowcup at Oct 4, 2008 11:22:56 AM
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.
Posted by: Cowcup at Oct 4, 2008 11:29:43 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.
Posted by: anonymous at Oct 4, 2008 11:45:20 AM
Hey, gotta agree with the last commentators... Alex, that was a real a**hole statement from you (whatever the rights and wrongs of the situation)...
Shame
Posted by: tadhgin at Oct 4, 2008 11:46:40 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.
Posted by: save_the_rustbelt at Oct 4, 2008 11:49:49 AM
I (belatedly) went and read the article, and noticed that she's 90 years old. This was a good experiment, as it revealed that there's something very different and much more devastating about being evicted from a house you may have lived in for many many years, and especially when you're old. I was right, she does have something else going on: this is her HOME, in a very strong sense, probably.
How do we account for this economically?
Posted by: same anonymous as above at Oct 4, 2008 11:52:20 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.
Posted by: Mercutio.Mont at Oct 4, 2008 11:58:12 AM
Cowcup,
Chill. I don't think Alex is opposed to little old ladies. Alex says "the taxpayers are now subsidizing self-injury" which to me indicates that he is opposed to self-injury and its probable increase after the government announces it will subsidize it.
"given a choice between a theocracy and a socialist state"
Thankfully, that's not our choice. We have another choice. Allow the market to solve problem. You are quibbling over methods to redistrubute wealth, but only the market creates it. Most of those problems you cite are techical problems that the government simply benefits from the advancement of technology. Between a voluntary approach to redistribution and an involuntary mode, I'll take conversion over coercion.
Posted by: Andrew at Oct 4, 2008 12:09:38 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.
Posted by: Anon. at Oct 4, 2008 12:09:42 PM
Wow, you really draw some crazies out in your comment section. I'm glad I usually stick to my feed.
Your post is right on the mark, and it's disappointing, if ironic, that some commentors suffer from dementia when discussing the elderly.
Posted by: Joe Bingham at Oct 4, 2008 12:12:00 PM
Onlt whose wounds are instantly fatal should receive such consideration. Why should we subsidize anyone who can't even off him/her self?
Posted by: garmarn at Oct 4, 2008 12:16:11 PM
