12% of homes in foreclosure
 

http://www.nytimes.com/2009/05/29/bu...e.html?_r=1&hp

Among other things prime mortgages are overtaking subprime as the leading type of loan defaulted on which should (but won't) put to bed the whole "the people who are defaulting deserve to default" meme.

Also the article brings up that these houses are going to flood an already saturated market which will lower both their own value and the value of others up for sale. When Congress was trying to pass cramdown legislation* a couple months back one of the things which kept coming up was this whole "well you're just rewarding people for not being able to pay!" thing when actually the point was that you're allowing them to keep paying whereas once they lose the house altogether now you're getting paid nothing and you're gonna go on getting paid nothing because this is a market where houses are p. much impossible to sell.



*cramdown = bankrupcy judges are allowed to reduce the amount owed to the current appraised value of a house.

The problem with many places that provide lending, they KEEP trying to take when someone has nothing. If you have someone who owes you and has payed interest, but still has the debt, once the full mount is payed off you have made a profit. This, I have no argument with, it's how the banks make money, and I have no problem with the enterprise. The problem though, is they have no emotion about it. They would rather collect on their debt as best as they can, at the expense of someone else. It's obscene this type of greed, and whats worse is that the people that own banks will never be in that situation ever, simply because they do this to other people.

This problem would probably be fixed if the governments intervened in pay packets, only allowing people to earn $500 000, or so per year. If the bank owners are limited, then they wouldn't dig for the obscene amount of profits that lending would give. I mean, how much money does a human being need to live, even if they are providing for a family of 10? In fact, if all businesses were like that, then people could get paid more and would be able to pay off their house mortgages and loans better.

Human greed is the reason why things get this bad. There's no other reason really.

A ton of huge companies just went bankrupt (banks, car dealerships). Would that contribute or would it not be enough to bridge the gap?

There's something about giving the government the ability to limit how much I can earn that doesn't sit right with me. I'll have to agree with the critics in that it sounds like punishing success.

If business owners are as greedy as you say, why would they pay their workers more if an income cap were placed on them?

The proposed cap is at 500k a year. Half a million. It's quite sufficient.

In fact, didn't Obama put forth some proposal that did exactly that? And aren't there some business owners who are being limited to an annual salary of ONE dollar?

It's not the amount, it's the principal. I know people can survive just fine with half a mil, but I'm just not comfortable with the government having that power.

Honestly, I'd be more comfortable with a cap than I am with a small percentage of the population doing everything possible to funnel every last cent up the pyramid. It's a bit of a bandaid solution to a deeper problem in capitalism (and economic systems in general), but since I doubt they're going to suddenly embrace a new philosophy, gut the old system, and replace it with something new and better; a bandaid solution is probably the best you could hope for.

Edit: And being successful at making money does not mean you are actually contributing eleventy billion dollars worth of work. In most cases, it probably means that you're doing as much or less work than anyone else, but you're also making money on all their work.

No, it's a reward for success. A reward called "Five hundred thousand dollars a year." That's like, the exact opposite of a punishment.

When I worry about the government having power, I worry about it having power that will adversely affect anybody, anywhere. As opposed to the power to do things that benefit the overwhelming majority of humanity, while also benefitting the remaining minority, by making sure they don't have so much friggin' money lying around that it drives them completely insane (as the founder of Paypal clearly has been).

Capping the level of success that we're willing to reward is a completely sensible thing to do, because the fact of the matter is that past a certain level, your "success" isn't actually doing any good for anybody else, and is actually coming at everybody else's expense.

...And not for nothing but the other point I try to raise here is that some of us still like to pretend that it's hypothetically possible we might at some point get to live in something resembling a democracy; and one of the things with democracy is you can't have it in a system where you give .001% of the population all the dang money, because that percent of the population now has a death grip on power thanks to their mountain of wealth that nobody else can ever dream of scaling.

A reason I could think of that they would pay their workers more would be that they kept earning more than that cap. If a person would bring in over 1.5 million in profit they would have to get rid of 1 million. The logical ways are to upgrade the equipment used in the business, or pay the workers more. However, placing a income cap could also cause business owners to want to do less work so they only profited that 500k causing more job loss, and furthering the economic deterioration. So the cap could be a good or a bad thing depending on the reactions of the people it would affect. But the government having that kind of power seems kind of communistic to me.

Edit:
^ THIS. Thank you.

They wouldn't - they would pay themselves less which would create less frivolous and absurd bonus-awards given to the highest ranking CEOs. That money, not being burnt away, could only logically go elsewhere into the company, either hiring more workers, opening more stores/factories/chains, maybe upgrading/repairing current ones, or paying the workers more.

Any one of those is good for me.

It's more about realigning the system of rewards.
The current system doesn't reward success in business. It rewards exploitation of workers, illegal deals and tax evasion as well as pretty much just fucking over every one that is not you.
The problem is that the current system is seen as the only justifiable way, the god given way and that by limiting income we are limiting rewards for sucess.
But we already limit rewards for success in infinite other ways. We, ostensibly, don't let the most successful people avoid the law if they feel like. In many places through history this was a justifiable reward for success and removing it "punished" success.
Nobody's talking about a flat wage, if you are successful you will earn more.

The big problem with wage caps is that you have to be extremely careful as to how you craft laws. Businesses and thier executives are extremely skilled at avoiding such things and thier are numerous sneaky ways you can gain effective extra money that is not related to your wages. One of my favourites was opening fake businesses which are really just fronts for your personal expenses and then funneling company money through them.
And what will likely happen is that companies will just move their headquarters offshore to try and get classified under different wage laws.

I mean it is a good idea in practice but will need
A) Extremely good lawmaking and monitoring of people
and
B) To break the perk driven, short term bonus orientated mindset of top executives.


The other real problem comes through non-income gains, such as capital gains. These are pretty essential to tax and to limit if you limiting income as well but the problem is that you can't predict how much you will make from it.
If all profit you make from investing beyond the cap goes back to the government it will encourage investments in small return, safe investments only as there is no point in investing in high-risk, high return ventures. Whether this is a good thing or not, I'm not entirely sure as I haven't thought it fully through. But it is most likely a useful thing as the world of investments is FAR FAR more bloated than it needs to be to ensure good business capital and should be brought down to size.

I feel the need to intercede and say while these are problems, there are solutions. Have companies who do certain amounts of business in the USA operate according to USA wage cap laws for American employees, make companies provide full incorporation papers and deny any with endless circles of ownership. It's difficult, but doable.

Funny that I bought my house in nov of last year in the midst of the fall.

I was under the impression that if we made a salary cap it would be to pin down the jackals who do exactly this sort of thing. My understanding is that most laws are made to ease people's financial crises and then the more wealthy use them to their advantage by twisting numbers and loopholes, whereas this is trying to cut the loopholes as well as a 'roof' of financial gain.

After all when making these salary caps, we're talking specifically about these very same guys.

I'll tackle the two issues in this thread separately.

1) 12% of all homes in forclosure!!!??? Yikes! On the one hand, I'm concerned for good, hardworking people who are being driven from their homes. For those who have only themselves to blame (poor financial management): I could care less. For those who are being hit by the ripples of the economy: Punch the next banker you see in the face. They've earned it.*

*I should specify, I really only have a problem with large banks because of all the stupid stuff they do. I bank exclusively with credit unions, however, and from what I can tell they've largely avoided this crisis by not being stupid.

2) On the flip side, I'm ok with this. Check out the graphs of the left of this article. Jeebus! 12% year over year price increase of a house (see the "National Housing Price Index" graph). I'm calling it right now: Bull. Shit. Real estate has value, and land won't necessarily always be cheap, especially with population increases. But the serious spike in price increases (check out the other graph that shows localized costs...upwards of 30% increases per year!) indicates that houses were being priced way out of what the market was willing to bear. Lenders/banks really should have known this and adjusted their lending practices accordingly. I'm down with some price deflation so we can get back to sensible costs.

EDIT: The other issue, the idea of wage caps. I dunno. The liberatarian in me says that if people can figure out a way to get the market to bear their stupid salary, let them. Few people would say, for example, that Andrew Carnegie didn't earn his salary. But then, what I really am thinking is that we don't live in a free market, and I wouldn't want to. I want to live in a sensibly regulated market. There are other creative ways of capping salaries. For example: No one can make more than 50 times the lowest wage in a given company. This is also what progressive taxes are for. Instead of regulating salaries, I'd much rather logically regulate what a company can do. Thats a tough proposition, I agree. But it seems to be the fair thing to do. No sense keeping down the next Carnegie because he doesn't feel like he'd be sufficiently rewarded for reinventing our country's industrial system.