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Obama Punishes Responsible Parties

Wednesday, February 18, 2009, 6:14 PM

This is a headline that I have long been waiting to see, because without accountability at every level, a society is a weak shadow of what it can and should be.

Unfortunately, the responsible parties I am referring to have never committed any crime, nor do they deserve to be punished.

I am among them.    Perhaps you are as well.

If you did not buy more house than you could afford, or never issued a loan to a party that could (obviously and predictably) not repay that loan, then you just got punished.

Here’s the data:

Obama Plans $75 Billion Outlay to Fight Foreclosures

Published: February 18, 2009

Seeking to stabilize the foundering housing market, President Obama is offering a plan to help as many as nine million families refinance their mortgages or avoid foreclosure, according to a summary released by the White House on Wednesday morning.

The plan, which is more ambitious than expected, would spend $75 billion to help keep as many as four million families in their homes, and would help as many as five million more refinance their mortgages to take advantage of lower interest rates.

Okay, there are so many beliefs and opinions wrapped into those opening salvos that I feel I must step in and expose them. One thing that I do in conference, and in the Crash Course, is distinguish between facts, opinions, and beliefs. This article, which comes from the front page of the New York Times will be absorbed by many as “fact.” Let’s be more careful.

  1. Seeking to stabilize the foundering housing market…” is a statement of opinion, not fact. While this sounds laudable and worthy as a goal, there can be no doubt that any plan that funnels money to homeowners is really going to end up in mortgage companies and banks, and very rapidly at that. So it could just as easily be framed as, “Seeking to stabilize the foundering mortgage and banking businesses that made extremely foolish loans…”. The difference between the way that the NYT framed it and the way that I did does not reflect a difference over facts, only opinion.
  2. Saying, “…help as many as nine million families refinance their mortgages or avoid foreclosure…” is also presenting something as fact that does not even stand up to the slightest scrutiny. The $75 billion price tag divided by 9 million gives us a value of $8,333.33 for each of the nine million homes. There is simply no possible way that $8,333 each is going to make the difference between 9 million people keeping or losing their homes. It might if that was applied to this year’s balance gap, but over the life of the loan? No possible way.

But it’s not just the NYT that is mis-representing the issue. Obama said:

“The plan not only helps responsible homeowners on the verge of defaulting, but prevents neighborhoods and communities from being pulled over the edge too. It will prevent the worst consequences of this crisis from wreaking even greater havoc on the economy. And by bringing down the foreclosure rate, it will help to shore up housing prices for everyone.”

He can wrap this with as many words as he wants but the plain facts are that only people in trouble with their mortgages get any handouts here. People who are not delinquent, or who are perhaps renting, only get the opportunity to pay for the mistakes of others.

Politically, this is a great plan. Good sound bites and it looks like action. Also, roughly 9 million votes are secured for the next election. Two thumbs up in this regard.

Economically, it stinks. This is throwing good money after bad, and, worse, by seeking to “shore up sinking house prices,” it betrays a complete ignorance of the actual root of the problem. Blaming sinking housing prices for the fix we are in is equivalent to blaming the car for the drunk driving wreck. If Obama were to craft a similar program for drunk drivers, it would include new cars for any that happened to wreck their own. The problem is not that house prices are sinking, it’s that they got too high to sustain. It was a bubble for goodness sake! That’s the very definition of a bubble. Any and all attempts to “shore up” bubble prices is a doomed effort that will assuredly squander both additional capital and valuable time.

Morally, it is a complete disaster. The clear implication here for every sentient person is that it pays to be reckless. Moral hazard is written all over this one. I can easily envision millions of people arriving at the same conclusion:  “I need to stop paying my mortgage right away so that I qualify for a handout!” It’s entirely sensible, and I would seriously consider this option if I had a mortgage and little or no equity in the house. As it is, I am a prudent renter who saw the bubble for what it was and will now pay a double price for having been so prescient. First, I will have to endure government-subsidized house prices set above market rates, and I will have to pay for the reckless actions of house owners and lenders who behaved recklessly. This is no way to set an example and is not how I wish my country to be run.

Taken together, these actions represent a near-total lack of vision and leadership.

Here’s one example that should illustrate exactly why this plan is DOA.

Feb. 18 (Bloomberg) -- It has taken Susan Erb just three years to see the value of her Merced, California, home plunge by more than half to $350,000. Next month, her mortgage payment jumps 20 percent to $3,321 and she knows she can’t afford it. Her bank won’t rework the loan unless she stops paying altogether.

Think about a house underwater by $350,000. Think about a monthly payment of $3,321. Now join these to the total $8,333 offered by the Obama plan. How far will that $8,333 go? About 8 months of payments is my assessment and then the house will still be more than a third of a million underwater.

The reason I sometimes despair at ever finding our way equitably through this mess is captured by this quote (from same link as above):

Rina Serrano, 35, an after-school program supervisor for the Merced County Office of Education, may lose her job next year due to budget cuts. The value of her house, built by Calabasas, California-based Ryland Group Inc. in the Bellevue Ranch development, fell by at least a third since she purchased it in 2007. Her husband’s cabinetmaking business is down by half.

“Nobody has given us any options, but my feeling is there should be some assistance,” said Serrano, 35, a mother of four. The couple took out a 30-year fixed loan and aren’t behind on payments but they are underwater by about $70,000.

Here’s a person who has not yet missed a payment, but whose house is worth less than her mortgage, who wants “some assistance.” Where you might think, “Be more careful next time!” there are many who simply want to be relieved of the consequences of their poor decisions and too many politicans who are eager to try.

And who can blame them? I too would like to have every bad decision I ever made paid for by someone else but I am also mature enough to know that this is not a realistic way to approach life.

So there it is. If you have been responsible, you have just been punished. And you know what? Nobody can possibly blame you for deciding that being responsible is for suckers.

It’s not a stretch to imagine that a few folks will even come to the conclusion that hard work and prudence are no longer the core values of our country.

Does the current administration really want to foster this sort of a mindset right at the outset of a nasty recession/depression?

It would seem that the answer is “yes.”

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155 Comments

Denny Johnson's picture
Denny Johnson
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Re: Obama Punishes Responsible Parties

And another burden pushed on to younger generations..........not allowing prices to drop to realistic/affordable levels.

grl's picture
grl
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Re: Obama Punishes Responsible Parties

...and I thought I had finally passed through the anger stage for good.

Nichoman's picture
Nichoman
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Re: Obama Punishes Responsible Parties

So is this the "Change We Can Believe In"?

Or...more business as usual by both political parties.

Another data point increases my worst concerns of how this will unfold/collapse.

 

Nichoman  

 

Downrange's picture
Downrange
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Re: Obama Punishes Responsible Parties

Chris, I realize and to a large degree admire your wish to make the Crash Course (and, by extension, this website) non-partisan and a-political, but this move just confirms that the two-party system in our country is, in actuality, a one-party system, and that collectivism and the final destruction of our formerly constitiutional republic is what they have in mind.  This is Marxist-Leninist redistribution of wealth, pure and simple.

Sometimes it's best we call a spade a spade.

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SamLinder
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Re: Obama Punishes Responsible Parties

“Nobody has given us any options, but my feeling is there should be
some assistance,” said Serrano, 35, a mother of four. The couple took
out a 30-year fixed loan and aren’t behind on payments but they are
underwater by about $70,000.

Chris,

It's this attitude that, unfortunately, has become pervasive in our society - much to my disgust.

In the "Scenario: Implosion, Collapse, & Liberation" thread on January 5, 2009 - my post #11, I said:

When I lived in California in the 90's, I was upside down on my
mortgage for many years. It never once occurred to me during that time
to walk away from my obligation and I am dismayed at the attitude in
this country that seems to think it's become an acceptable practice.
BTW, in time my mortgage "righted itself" and I was able to sell my
house at a small profit. 

 

If you did not buy more house than you could afford, or never issued a
loan to a party that could (obviously and predictably) not repay that
loan, then you just got punished.

It's times like these when I fantasize about a place where all the really genuine, responsible people can live and seal ourselves off from the insanity that exists in the rest of the world!  Sigh................

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maveri
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Re: Obama Punishes Responsible Parties

Never under estimate those in power doing everything possible to hold onto their current lifestyles, even at the expense of their fellow man/future generations.

I have kids and when they go to a friends party and it's time to go, the response is always the same "Can't we play for a bit longer"!  The economy I think is the same - people keep wanting the game to go on for a bit longer, just as my kids do.

If they (my kids) are allowed to play on, the result is that they are more tired and more worn-out the next day and then EVERYONE suffers, so for the sake of the whole family, I am unwavering when it comes time to end the party game and come home because the long term result is worse for all if they are allowed to play on.

While there's probably much to my anaology that doesn't hold water in relation to the economy/living beyond one's means, it's how I view things for now and it's how I can drag the bigger picture back to something that's relevant for me.

:-)

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Re: Obama Punishes Responsible Parties

Yes, I have noticed how the Marxists funnel money from the people to bankers on a regular basis. 

This is ultimately benefiting the banks, as Chris pointed out...It will give some temporary relief to regular people who made bad decisions but it only delays the inevitable forclosures and bank failures. 

We need to ask why were these loans made in the first place?  Why did we have a housing bubble and who ultimately benefits from the level of debt that has been created? The individuals highlighted in these articles are just pawns in a much larger game. Personally, I would not want to be in the shoes of anyone who qualifies for this "aid" because I do not think it will be enough to bail them out of their situation.

What really irritates me is the transfer of tax dollars to banksters that is occurring on a massive scale through the TARP and now this so called mortgage rescue program.  The banks should be required to absorb some of these losses they helped to create.  The lack of accountibility fis consistent with the way the government has dealt with Wall St., Fannie, Freddie and the auto industry.  Who's next in line for a hand out?

Ray Hewitt's picture
Ray Hewitt
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Re: Obama Punishes Responsible Parties

It is well to remember that this is the nature of political power and why we should should be preparing for a major collapse if we haven't already. The state of the economy is well over the red line now.

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Ray Hewitt
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Rahm Emanuel tax dodger

This thread is a perfect segue into another story.

NEWS broke last week that Rahm Emanuel, now White House
chief of staff, lived rent- free for years in the home of Rep. Rosa De
Lauro (D-Conn.) - and failed to disclose the gift, as congressional
ethics rules mandate. But this is only the tip of Emanuel's previously
undislosed ethics problems.

One issue is the work Emanuel tossed the way
of De Lauro's husband. But the bigger one goes back to Emanuel's days
on the board of now-bankrupt mortgage giant Freddie Mac.

Emanuel is a multimillionaire, but lived for the last five years
for free in the tony Capitol Hill townhouse owned by De Lauro and her
husband, Democratic pollster Stan Greenberg.

Rahm's rent is just the tip of the ethics iceberg

mainecooncat's picture
mainecooncat
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Re: Obama Punishes Responsible Parties
Ray Hewitt wrote:

It is well to remember that this is the nature of political power and why we should should be preparing for a major collapse if we haven't already. The state of the economy is well over the red line now.

Oh, you mean we're not going to "hit bottom" and "return to growth" in the next ninety days or so?

By the way, Ray, good to see you again, my friend. (And that I mean sincerely.)

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mainecooncat
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Re: Obama Punishes Responsible Parties

Regarding Emanuel, no surprise there. Guy's a total thug and slime-ball.

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Re: Obama Punishes Responsible Parties

I've seen prettier plane wrecks - and they worked better.

http://vimeo.com/2893203

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mainecooncat
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Re: Obama Punishes Responsible Parties
Bluemarble wrote:

Yes, I have noticed how the Marxists funnel money from the people to bankers on a regular basis. 

This is ultimately benefiting the banks, as Chris pointed out...It will give some temporary relief to regular people who made bad decisions but it only delays the inevitable forclosures and bank failures. 

We need to ask why were these loans made in the first place?  Why did we have a housing bubble and who ultimately benefits from the level of debt that has been created? The individuals highlighted in these articles are just pawns in a much larger game. Personally, I would not want to be in the shoes of anyone who qualifies for this "aid" because I do not think it will be enough to bail them out of their situation.

What really irritates me is the transfer of tax dollars to banksters that is occurring on a massive scale through the TARP and now this so called mortgage rescue program.  The banks should be required to absorb some of these losses they helped to create.  The lack of accountibility fis consistent with the way the government has dealt with Wall St., Fannie, Freddie and the auto industry.  Who's next in line for a hand out?

Best post of the lot, Bluemarble.

This is small peanuts compared to the direct transfer of trillions of dollars of the country's money into the coffers of private, corrupt banks.

Let's see. They get the money now. Economy collapses. Regular ol' folk stuck here. And they all head off with Cheney to their Dubai-steads while looking like Bush gazing down moronically over the destruction wrought by Katrina as their private jets leave a newly minted third world nation for the last time.

Oh, and thanks for reminding me about the basic tenet of Marxism, which of course is, as you say, funneling money from the citizenry to the bankers who either were or will be high-ranking government officials. I forgot about that part!

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mainecooncat
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Re: Obama Punishes Responsible Parties

Hey Davos,

As you and I have talked about (I think), the resets coming in Alt-A land over the next 3-4 years are going to be mindboggling, as the 60 Minutes vid you recently posted attests. So the funniest part about Obama's plan aside from whatever political or ethical considerations one has is its utter impotence to prevent reality from unfolding. That's why when I hear someone saying at the local breakfast joint that now is the time to get into real estate to "make money" I almost spit my coffee clear across the place.

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Re: Obama Punishes Responsible Parties

Crikey!  People are mad about this one.

Read the first page of comments left under the NYT article;

Angry folks.

In case the NYT pulls them down, here's a few.

++++++++++++++++++++++++++++++++++++ 

To Whom It May Concern, What kind of propaganda are we selling to the American people? This is NOT about your overdue mortgage its about who cooked the books and cooked the world's economy. We as a people, the citizens of this great country have been manipulated into "this mess". Laws where changed and laws created to allow greedy banks and financial institutions to make them money. Now that it has backfired and the few greedy bastards who perpetrated this scheme, the ones at the top of the ponzi scheme, got out first and left the corrupt government holding the bag. The tax payers are the ones accountable. I am sick to death about the continued abuse by the financial interests who are now using divisive, propaganda to make us all think that it is the homeowner who "bought more than they could afford" "who took advantage and should have known better" well to them I say, "they stab you in the back and you say that your not looking"

The most unfortunate lesson to be learned from all of this; the one percent of this country has gotten away with the greatest transference of wealth and they did it legally.

— Ross, New York

++++++++++++++++++++++++++++++++++++

This is awesome! No downside on anything ever! Except for the responsible people! Welcome to the era of responsibility! Now pay up, there are deadbeats who need your money.

— austinite, austin tx

++++++++++++++++++++++++++++++++++++ 

Great! $75 billion to help people that should not have been in a house in the first place. Obama seems to love to reward people who make mistakes and overreach and let the responsible people pick up the tab.

— John, L.A.

++++++++++++++++++++++++++++++++++++ 

Hey, President Obama - Are you also going to bail me out when I purchase a stock at the top of the market and it drops in value?

Prices are falling for a reason - because they were and still are too high. Virtually nowhere in the country do median homes prices reflect their historic metric of 3x median incomes. Propping up home prices artificially does NOT help the distressed homeowner. All it does is delay the inevitable and prevent qualified home buyers from buying at a price point that actually makes sense.

Would someone in our government PLEASE let the markets sort out some of this mess? The Fed, lenders, and borrowers all share some responsibility for the mess we're in, but you don't give someone who got drunk the night before more alcohol the next morning to cure their hangover. Our alcohol was cheap debt and our hangover is this recession. Adding more debt will NOT cure the hangover, at least long term...

— David E., College Park, MD

Davos's picture
Davos
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Re: Obama Punishes Responsible Parties

Hello MaineCoonCat:

Yeah, wave II sould be a killer...Hang onto your coffee :) take care

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Re: Obama Punishes Responsible Parties

I have difficulty in separating out the responsible from the not-responsible.

For starters, those who participated in the real estate bubble are all in responsible in some way.  Obviously, the elites that engineered the debt instruments have the greatest amount of explaining to do.  However, those who bought properties also tended to validate the system by their own participation.  The idea was to get mortgaged to the hilt and pray two things would happen.  One, wages would rise so the note could be serviced by inflated money.  Two, even if wages went stagnant, the value of the property would always increase.  So what if "one" fails, sell it at a profit.  Millions of people were in it up to their eyeballs and giddy at the prospect of trading, flipping, dipping, or just riding high.  Of course, if you weren't doing what everyone else was, you were stupid.  Now who's stupid?

It appears the stupid are the ones who got caught.  A lot of people are stuck with properties they can't move.  (me for example)  Some are under water. (not me for example)  Fortunately, my wifey and I have always lived within our means.  We've kept our debts to a minimum. 

Still we got sucked into the notion that one's home is an "investment".  This is such crap.  How can a house produce wealth that isn't a speculative bubble?  Does a house in itself produce anything?  What commodity comes out of it?  Bread?  Steel?  Strawberries?  This notion that a house is an investment even runs counter to capitalism!  How can someone investing in real estate be considered a "rational player"?  Isn't the market supposed to be "rational players" seeking their highest good?  The unseen hand guiding us along to prosperity?  But, the propaganda system said it's all good so be fruitful and multiply.  And we bought it.  Some more than others.

If everyone in the game is responsible, then why are the players getting a hand out from Uncle Sugar?  No one held a gun to the heads of the mortgagees.  The banks got everything they wanted from congress and the executive.  Shouldn't they be happy with it?  Or is it a case of "those whom the gods would destroy, they first grant wishes?"

The deeper trouble in this is that the banks virtually own congress.  They get whatever they want.  Serving on a banking committee is a gold mine in campaign contributions.  My question is, if the banks get what they want and do pretty much what they want, can we rule out the idea that this credit collapse was engineered?  I keep coming back to the similarities of previous panics, depressions, recessions, etc.  Suddenly the money dries up.  Who's in control of the stock of money?  The Federal Reserve for starters.  It's accountable only to its share holders.  Remember their refusal to account for $billions in bail out money?  Modern banking is a form of social parisitism.  We pay rent on our common currency.  Is it right that our currency should in itself be a profit center?  Who does that serve?  What kind of society does that encourage us to be?  Benjamin Franklin described Colonial Sript as a currency that was issued by the public authority in a quantity sufficient to facilitate trade and keep prices stable.  It was issued interest free for the good of all and to the advantage of no one.  He further said that the control of the currency was the PRIME reason for the war of independence against England.  Since then until 1913 the story of America might justifiably be described as a relentless battle of the banks against everyone else for the control of the power to issue currency.  As Amstel Rothchild said, "Let me control and issue the currency and I care not who makes the laws."  Well, now the banks have what they've always wanted.  Can anyone say with certainty that this latest credit melt down wasn't their idea?

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affert
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Re: Obama Punishes Responsible Parties

Worst headline EVER

"Commentary: If you oppose stimulus, don't take the money"

http://www.cnn.com/2009/POLITICS/02/16/begala.carolina/index.html

Gah! 

Admittedly, he's talking to a governer, not a tax payer, but still!   I would LOVE to opt out of the stimulus plan.  But, short of moving to a different country, I'm not sure how this would be possible.

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Re: Obama Punishes Responsible Parties

A good analysis and depressing BS from the new president, just like the old. This one has no excuse, he knows he's spouting lies.

Somehow I knew it was going to turn out like this.

SG

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Re: Obama Punishes Responsible Parties

Mr. Martenson,

  Your post is spot-on.  So much so, I can't even take the devil's advocate in this case to try to see this from another perspective.  This situation is as black and white as it can get.

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Re: Obama Punishes Responsible Parties

 

I'm a responsible homeowner and I can't quite work up a dudgeon about this. I have a neighbor who got laid off and is giving up his house. He's apologized to me and the neighbors profusely but he has no other options. So his foreclosure will drag down our property values. I have no idea whether Obama's plan will work (it seems a bit of a stretch) but after all the bail-out money going to tycoons and fat cats, the relative pittance going to overextended homeowners seems minor.


It's important to remember the finacopathy that was at the heart of our economy just a few years ago. If you tuned in CNBC or read The Wall St Journal, it was all about the housing market and "new paradigms" and how everything was different this time. Alan Greenspan was vouching for ARMs, financial advisors were telling their clients to buy more house than they needed, and many people without pensions or savings were told that homeownership was destined to be their only path to financial security. Aside from a few doomers and Austrian School types, who was blowing the whistle on this charade? Really, I was getting nervous in 2005 but people just looked at me like I was crazy when I said home prices were too high to be sustainable.

At any rate, I'm grateful for Chris and this site since it gives me a sense of sanity about the economic double bind we're all in. I'm still getting "crazy" looks from people when I talk about these issues even with the global economy crashing around us. I'm not sure if it's denial or if most people just accept the conventional wisdom that things will get better later this year. This crash will define us probably for the rest of our lives. It's a profound counterweight to the mindless and oblvious consumption of post-war prosperity. It's also a touchstone for the new reality, which is really the old reality: life is tough.

 

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Re: Obama Punishes Responsible Parties

Daddy,  Can we have a full fledged tax revolt now?  If not, can we have a tea party in Boston? Let us not forget these words.

Quote:

When, in the course of human events, it becomes necessary for one
people to dissolve the political bonds which have connected them with
another, and to assume among the powers of the earth, the separate and
equal station to which the laws of nature and of nature's God entitle
them, a decent respect to the opinions of mankind requires that they
should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created
equal, that they are endowed by their Creator with certain unalienable
rights, that among these are life, liberty and the pursuit of
happiness. That to secure these rights, governments are instituted
among men, deriving their just powers from the consent of the governed.
That whenever any form of government becomes destructive to these ends,
it is the right of the people to alter or to abolish it, and to
institute new government, laying its foundation on such principles and
organizing its powers in such form, as to them shall seem most likely
to effect their safety and happiness.

 

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Re: Obama Punishes Responsible Parties

and then what happened?

so what.

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CB
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Re: Obama Punishes Responsible Parties

I don't believe it is correct or productive to blame or direct anger toward the individual borrowers - their participation was required to make the scheme work - they are the marks. If the banks had been required to hold the mortgages there would have been no housing bubble as they would have done due diligence on the borrowers and the number of bad loans would have been minimal. The scheme depended on the ability of the mortgage lenders to sell the loan - sooner the better. The easier the credit was to obtain the faster the housing prices would inflate as the demand increased. The more loan originations and re-finances the more profit to be skimmed. The financial industry skimmed billions from this trade - and now the Obama plan will reimburse them - that is the crime here, not that a few homeowners, "deserving" or not, will be able to keep paying the banks interest on their loans for a little longer. Realestate prices will not magically reinflate and consumers will not go back to borrowing beyond their means - the party is over. This is nothing more than a payout to the banks that has the political dressing of "help for homeowners".

 Greenspan says a number of interesting things in the "House of Cards" interview. Two that stood out to me were 1: he could have stopped the bubble but it would have caused financial pain (and displeased his friends on Wallstreet) and 2: the firms that got hurt in the meltdown were just too stupid to get out while the music was still playing - what a mentality! What a bunch of crooks!

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GALT'S GULCH

Anyone here have a map to the place?  I'm out on the Interstate with my thumb in the air, but I'm not sure which way to go just yet.  Help a brother out?!?!

I can still day dream about moving to a land where men and women live free and honorably and respect one another, can't I?

Yes, I'm often chastised for being an "idealist".  Shame on me.

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Re: GALT'S GULCH

Davos,

 

That auto mechanic video was a hoot.....thanks for the laugh.  I emailed the link to Tom and Ray of NPR CarTalk fame. 

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Re: Obama Punishes Responsible Parties

It was less than twenty years ago when I saved for many years to make a 20% down payment on a house. My grandfather did the same . My father did the same. What the hell has happened to this country in the last twenty years? Why does everyone have to own a house? It used to be that the American dream was a house and that meant something because dreams aren't achieved by handouts or giveaways.

Now the American dream for me is to get the government out of my wallet, my car, my job, my privacy, and everywhere else. A sad state of the union.

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Re: Obama Punishes Responsible Parties
SamLinder wrote:

It's times like these when I fantasize about a place where all the really genuine, responsible people can live and seal ourselves off from the insanity that exists in the rest of the world!  Sigh................

Pretty well anywhere pretty soon.

When they printed money to give to bankers and corps the outcry was a bit muted. Now no one can possibly pay back the debt but they are printing money to give to your fellow citizens and there is a huge outcry.

The money is meaningless isn't it.?

Why pretend?

Or have you got the makings of 'divide and conquer'?. 

Don

________________________________________

7 billion people can be wrong, very wrong

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Re: Obama Punishes Responsible Parties

All this bailout money is, is another loan from private bankers. By this logic, they are saying that we can borrow our way out of debt.

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Re: Obama Punishes Responsible Parties
cmartenson wrote:

Crikey!  People are mad about this one.

This is wrong.  Stop fanning the flames of envy.  Is it right to pay people our money to help their mortgage payments?  Of course not, but mainly because it won't work, not because little people don't deserve help sometimes.  

But whatever...let's focus on the REAL PROBLEM.  This is an irrelevant $85B given the $10T game of robbery that's been happening since Sep.  Fanning the flames on this little story is about pitting groups of individuals against other groups...the same thing the mass media does with the left/right political paradigm...pit half the population against the other to ensure we're distracted with envy, hatred, violence toward our fellow man/woman.  This keeps the masses distracted fighting each other while the big boys get to laugh from their British castles at the serfs arguing with each other.

150% of our anger, rage, violence needs to be directed at the power elite...the banking oligarchy.  It shouldn't be directed at the proletariat.  It shouldn't even be directed at the bourgeois business types, though they could use a dose of better morality/philosophy.  IT NEEDS TO BE DIRECTED AT THE RULING CLASS...those that rule the world's financial system.  Don't let the Rothschilds and their ilk through the mass media they own make you angry at each other!  

azzenstudent wrote:

I have no idea whether Obama's plan will work (it seems a bit of a stretch) but after all the bail-out money going to tycoons and fat cats, the relative pittance going to overextended homeowners seems minor.

Thank you deeply for saying this.  

Were some homeowners dumb?  Sure.  Were the real estate flippers totally out of line?  Absolutely.  But a ton of the buyers were just people buying houses like people normally do at stages in their lives.  It just so happened their timing was off because the rigged system screwed them.  The entire system...government, regulators, bankers, realtors, lawyers, neighbors, friends, family, the wizards at Wharton and Harvard b-school, and the Greenspan media-god himself...was saying it's just a new way of valuing risk that created a step-change in the way the real estate market worked.  You're suggesting the little individual was supposed to know the entire world was wrong?  Blaming homeowners for this situation is like blaming a restaurant owner who gets sucked into the NJ mafia system and has his whole life savings taken.  THE HOUSING BUBBLE WAS A GLOBAL FINANCIAL MAFIA SHAKEDOWN OPERATION.  It sucked people in so there would be a ton of wealth and houses transferred to bankers once deflation ran its course.  

Now, as I said, this Obama plan won't work.  What I wish they would do is pass legislation forcing banks to do what every other darn business in the world has to do...be flexible and work with customers during downturns in the business cycle.  Banks are the idiots who valued THEIR ASSETS (loans) irresponsibly.  That's the real sin...not the borrower evaluating the liability wrongly.  They should be forced to rework their failed assets (now valued at 50 cents on the dollar) with the borrowers liabilities (still valued at 100 cents on the dollar), i.e. maybe they agree to write down their assets to 75 cents on the dollar depending on the borrower's situation.  That's the only thing that would work.  And it saves the banks from foreclosing their entire balance sheet and getting only 50 cents.  

Banks are the only institutions that are so in bed with government that they get to have ridiculous products (like ARMs that suddenly shoot up and charge usury rates) totally backed by government enforcement.  Every other business has to talk with and cooperate with customers when the business cycle turns down.  Banks don't.  They just say "F you, get out of the house, I'm giving your house to this rich developer, and the government endorses it, ha ha ha."  That's BS folks.  THEY SHOULD BEAR PART OF THE RISK...IT'S THEIR ASSET FOR F SAKES.  Their attitude kills community and human tenderness.  What was portrayed in "It's a Wonderful Life" was true back then and it's much much much more true today...we have no sense of community anymore...all because of the banksters running the world.  F them.

 

cmartenson wrote:

Does the current administration really want to foster this sort of a mindset right at the outset of a nasty recession/depression?

Of course they do Chris.  They foster this mindset all the time. This depression provides the perfect opportunity to amp it up big time.  They want serfs, i.e. make as many people addicted to empire government as possible.  Republicans do it in terms of security dependence ("just sit home and watch TV, we'll make you safe").  Democrats do it in terms of economic dependence ("just sit home and watch TV, we'll send you a check").  2 sides of the same coin...all in the name of dumbing us down so the banking/DC oligarchy becomes even more elite in terms of relative power...fills their narcissistic emptiness.

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Re: Obama Punishes Responsible Parties
cmartenson wrote:

Does the current administration really want to foster this sort of a mindset right at the outset of a nasty recession/depression?

 Of course they do Chris.  They foster this mindset all the time. This depression provides the perfect opportunity to amp it up big time.  They want serfs, i.e. make as many people addicted to empire government as possible.  Republicans do it in terms of security dependence ("just sit home and watch TV, we'll make you safe").  Democrats do it in terms of economic dependence ("just sit home and watch TV, we'll send you a check").  2 sides of the same coin...all in the name of dumbing us down so the banking/DC oligarchy becomes even more elite in terms of relative power, which fills their narcissistic emptiness.


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Re: Obama Punishes Responsible Parties

Well guys from my point of view this is what I see every day in the medical field. They want to run the housing problem exactly like they run the Medicaid system. It appears this is all they understand?

What I see everyday are patients with 90% self inflicted disease states. Like the 30 year old 350+ lb way over obese person that smokes & drinks while on a very bad over indulgent diet of food the Govt provides via food stamps.

Now this slob has high cholesterol, diabetes & high blood pressure. Hum how do we fix this problem?? That is simple right? We put him on meds that cost somebody (Joey tax payer)  $2000 a month or more. The way we fix that smoking problem is by sticking the tax payer again by providing this guy with a breathing machine & lots of inhalers. Works every time right??LOL. What do we get for this investment but a never ending dependent idiot that refuses to take any responsibility for themselves & what they have created?

These types will tell me I just don’t understand how I could be falling apart like this…just bad luck or genes I guess?

These are all black holes with no end in sight.

Maybe the best way to fix this depression is to put everyone on antidepressants.

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Re: Obama Punishes Responsible Parties

Just yesterday I posted a forum topic here on this, for anyone interested in my two cents:

http://www.peakprosperity.com/forum/obama-mortgage-bailout/13539

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Re: Obama Punishes Responsible Parties

Hello GreenDoc:

Super, I'm sure Click and Clack will have fun with that.  Smart MIT guys those 2. Take care

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Re: Obama Punishes Responsible Parties

As long as the people who control goverment perpetuate (and they will) the system of "economic welfare" ,the USA and similar "Democracies" are doomed to face the inevitable...

I'm not being negative, I'm being a realist

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Re: Obama Punishes Responsible Parties
Quote:

Maybe the best way to fix this depression is to put everyone on antidepressants.

Soma Holidays anyone?

In all honesty, the dystopia we're seeing emerge from WADC isn't going to just "stop".

The Bankers are never going to have enough money.
The Politicos are never going to have enough power.

So what do they do? Team up and play "Good Cop, Bad Cop" against the citizenry.

Kinda makes you wonder about public education and social programs. More and more I'm seeing "Indoctrination" rather than education.

My question is this:
How do we end the Federal Reserve and take their boot away from our collective throat?

Cheers!

Aaron

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Re: Obama Punishes Responsible Parties

“You cannot legislate the poor into freedom by legislating the wealthy out of freedom. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that, my dear friend, is about the end of any nation. You cannot multiply wealth by dividing it." ~ Dr. Adrian Rogers

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Re: Obama Punishes Responsible Parties

Things like the housing debacle happen when all parties - in this case lenders, buyers, investers, and regulators - fail to do due diligence to look at the risks and raise a red flag.

The greatest crime here I see is that it pays for businesses to be reckless with lending because government will step in to support when needed.

I don't see a return to stability until govenment intervention ends, the rules stop changing, and markets self adjust. 

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Re: Obama Punishes Responsible Parties

The State will ensure producers and savers pay dearly for those who don't.

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Re: Obama Punishes Responsible Parties

I agree Woodman. This silliness will continue.

It would appear that now is a time for the common man to consider self-preservation and financial protection. Clearly we are heading down the proverbial rabbit hole... each should consider making decisions that are in their own families well being... consequences of said decisions are known, it'll just take a longer time frame for any consequences to be enforced. I believe the system is beyond capacity in its ability to handle increasing defaults, and it is getting worse by the day. That time can be well used by those who see this for what it is... an opportunity to preserve part of your wealth.

In the future, having some blemish's on one's credit report will likely be far more acceptable. Logic dictates that for banks to survive, they eventually need to make loans. I am hard pressed to envision a future where individuals and businesses (in large quantities) escape from this transitory period unscathed. 

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Re: Obama Punishes Responsible Parties

RussB,

That's a fine piece of work there.  I hope everyone has taken a gander at it.

My waggish summary for all this is that you get more of whatever it is you subsidize.

Want more bad mortgages?  Just subsidize them.

Want more bad investment decisions?  Just subsidize them.

Want education costs that rise faster than inflation?  Just subsidize them.

It's really that straightforward in most cases.

 

 

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Re: Obama Punishes Responsible Parties

I thought it would be productive to post a framework in everyone's mind as to how these subsidies work and what is NEVER mentioned in mainstream.

What we have here is the ’seen vs. unseen’ fallacy at work.

Government produces no wealth. They take wealth from others and
redistribute it to others under their monopoly of the monetary system
and violence. Let me illustrate with an example:

A and B (usually a government comittee, hence A and B) put their
heads together and decide what C shall be made to do for D. All eyes
are on how D benefits. Endless political commentary and punditry abound
around D. A and B is the State. C is the person who does productive
economic work and pays taxes extorted via A and B and D is the
recipient of the swindled money from C, less the cut that A and B
squander on themselves or their favoured insiders.

What is not seen is the economic benefits of what C might have done
if C was allowed to retain his money and spend it as they saw fit.
Existing businesses would not receive C’s money anymore or future
businesses may not come into existence. In otherwords, current and
future businesses effectively subsidize D, favoured by A and B.

A and B have another mechanism to swindle C; devalue the money s/he
has in their pockets by printing new currency into existence to finance
D. This new currency has an inflationary effect on C’s savings for
today, tomorrow, or passed onto C’s children. Government sponsored
inflationary attacks on C by the State/Banking cartel rob C in such a
manner that not one in a million C’s can diagnose. C pays for D via
inflation, not taxation.

The most skilled statistician cannot tell you what millions of C’s
would have done, today or tomorrow, had they been allowed to retain
their money (or the value of it) to spend into the economy.

C is the forgotten man.

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Re: Obama Punishes Responsible Parties

I'm looking for the video, Ron Paul said it well, people do stupid things with money when money is cheap. Schiff said something similar, if a kindergarten teacher gives the class a bunch of candy and then leaves the room who is really the bad guy? (My answer: Greenspan?)

Oh well, like the hope video says, lets give the diabetic kid a lollipop and lucky us, we get to pay for it.

Take care

think this is the kids candy one

http://www.foxnews.com/video-search/m/21738128/outraged.htm

and here is the lolipop one

http://vimeo.com/2893203

Oh well, at least we can prepare and profit from it, hopefully there will be some semblance of a Democracy left. Seems to me like my generation is the generation of smoke and mirrors and phony appearances. Financially we are seeing everyone who had 900 dollar suits in their undies, my greatest concern is all the crap they did to the constitution from gold and silver coins to BS like the Patriot act are going to leave our Statute of Liberty naked. A depression is one thing. Russia is another.

I've been toying with the idea of doing a book called Preception. A chapter for [email protected] that is named somehting that leads us to believe one thing when it is totally another.

The "Federal" Reserve

The "Patriot" Act

"Bailout"

Homeland "Security"

and a million more like it 

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Re: Obama Punishes Responsible Parties

Punish those that are responsible, make future generations pay for the mistakes of the irresponsible and reward the greedy. Nice.

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Re: Obama Punishes Responsible Parties

Ok We know it is not going to work and you can give millions of samples,but what is going to happened to me the reponsable one when my neighborhood becomes a dump and most of the empty houses are damage and can not be sold again. yes, they are groups of people that go to this houses and they even take the kitchen sink,toilet and all the cooper plumbing if available. There is not a win situation for responsable people. We are stock in here with no choices of what to do. Of course, I am more prepare than 90% of my neighbors but who care if they are not going to be here next year why should they prepare.

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Re: Obama Punishes Responsible Parties

The mortgage mess is propaganda.  The big money and mess is with the corrupt banking sector.  Imagine giving mortgages that reset to twice the mortgage payment and many are also reverse amortized mortgages that are leaving homeowners owning more than they borrowed.

The bad mortgages were given to unqualified borrowers with the intent to dump the bad debt on Fannie, Freddie and unwitting bond buyers.  What a rotten and predatory system!

The thing that stinks the most is that over and over, the monetary policies of this nation are being decided behind closed doors.  Why is there never a debate...or at least alternatives explored?

The big banks, the fed, and a few corrupt politicians are making decisions without any transparency and in defiance of constitutional law. 

Welcome to corporate fascism - as long as banks run the country we will continue to be a client state - not a republic.  The real problem that they will never discuss is that the federal reserve bank must be abolished.

Larry

 

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Re: Obama Punishes Responsible Parties

emdiaz, I sympathize with your situation and indeed this is how the govt is trying to sell the public on the "package." But understand there is another segment of "victims" that is probably larger than responsible homeowers in distressed neighborhoods - that would be all of the responsible renters who did not buy because they understood home prices were too high (it was really a no-brainer) and who did not get sucked into the siren song. With the latest plan to bailout distressed mortgage holders (really its another bank bailout but that's not the point here), the plan is actually attempting to put a bottom on the housing market - a false bottom. Ignoring for purposes of this post all of the potential consequences from such a plan, it also shuts a large contingent of future home buyers - those who currently rent - out of the market because home prices will continue to be (artificially) inflated. My only point here is that life isn't fair; I am sorry you might be living in a distressed neighborhood even as a responsible homeowner, but that doesn't mean that the big bully can come in and take MY money to make it better for you but worse for others.

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Re: Obama Punishes Responsible Parties
Lisa G wrote:

emdiaz, I sympathize with your situation and indeed this is how the govt is trying to sell the public on the "package." But understand there is another segment of "victims" that is probably larger than responsible homeowers in distressed neighborhoods - that would be all of the responsible renters who did not buy because they understood home prices were too high (it was really a no-brainer) and who did not get sucked into the siren song. With the latest plan to bailout distressed mortgage holders (really its another bank bailout but that's not the point here), the plan is actually attempting to put a bottom on the housing market - a false bottom. Ignoring for purposes of this post all of the potential consequences from such a plan, it also shuts a large contingent of future home buyers - those who currently rent - out of the market because home prices will continue to be (artificially) inflated. My only point here is that life isn't fair; I am sorry you might be living in a distressed neighborhood even as a responsible homeowner, but that doesn't mean that the big bully can come in and take MY money to make it better for you but worse for others.

 

Lisa, 

You are correct.  When we get into the business of State redistribution of wealth, it turns us against each other fighting over our shares of the loot we think we are entitled to.  We become a society of cannibals.  And such a society is doomed to destruction.

The real culprit here is State intervention in our communities, monetary system, and the way a Central Bank cartelizes the private banks to inflate together - and thus fail together - causing the boom/bust cycles they were supposed to prevent.

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Re: Obama Punishes Responsible Parties

I know this may surprise some and many may think I’m being hyperbolic but this has got to be one of the most unenlightened threads I’ve read on this usually top-notch website in quite some time.

The problem I have with this thread is that there seems to be a more than healthy dose of righteous indignation as people claim how responsible they are, while decrying the handouts that, let’s face it, probably less than one percent of the citizenry will actually benefit from. So this is not some widespread program and, as many have pointed out, pales in comparison to previous bailouts. As Chris M. has shown with the math, this plan won’t help most people who it is designed to help. So it’s not as if millions of people are suddenly going to have their homes paid off by the government, which I think is what many (mostly in contexts other than this website) somehow believe. Also, as Chris M. has shown, this program is really yet another backdoor vehicle for propping up the fraudulent and parasitic banking and mortgage industry. It’s essentially a futile attempt to buy some time. Emphasis on futile.

To those who are concerned that this will somehow distort home prices, hurting your responsible home ownership. No go on that one. Housing prices will be falling for years to come -- potentially as far into the future as 2014 -- and in many of the most inflated places may fall to 10-20% of their peak bubble values. This Obama plan is impotent to influence these gargantuan macro trends. Maybe if he put several trillion into the program but not the pittance he’s calling for.

The mortgage mess is essentially a canard and one of many less significant byproducts of systemic rot and erroneous design, which Chris M. has done a great job distilling for the consumers of this site: debt-based, fractional reserve lending, necessitated growth, wealth created through extraction and not production, etc.

So I hope all of those who are offended by this legislation were also as deeply offended -- and vocal about it -- by the far more substantial and nakedly criminal TARP bologna and undocumented handouts by the Fed directly into Wall Street’s coffers. If you were/are then this post is not addressed to you. I know Chris M. was, as he called it a wide-scale looting operation or some other equally apt descriptor.

I know it’s hard for many to admit -- and probably most won’t ever admit it -- but to simply be American is to “get something for nothing” and to live beyond one’s means. This is not “anti-American,” so please spare me that and other reactionary rejoinders, but simply a fact of life. A stark truth in a dog-eat-dog paradigm-based world that‘s more a zero-sum game than proponents of globalization are willing to admit. As libertarian and Austrian Schooler Peter Schiff has pointed out, Americans en masse are the ones artificially reaping the wealth created by others, and this imbalance cannot continue because disproportionately prospering due to the work inputs of others is unsustainable and in Ayn Rand’s view immoral. This doesn’t necessarily mean one is a bad person or immoral or even unethical, it just means that one has been fortunate enough in the guiding hands of fate to have been born in the United States at this point in the course of history.

To be truly responsible, to be truly concerned with the path and trajectory of our world is too look deeply and acknowledge this reality. One must put aside -- if one has it all -- outmoded notions of nationalism or emotional responses such as, “Well, my granddaddy fought for this country…” This has nothing to do with global, objective reality only people’s narrow, emotional defense mechanisms.

So for one American to say to another, “You’re irresponsible because you bought a house you need help with and now the government is going to spend some tax dollars on you. You evil thing. You ruiner of our economy. You corrupter of capitalism,” leaves me somewhat hollow with a pinch of hypocrisy.

To those concerned with transfer of wealth:

The only significant transfer of wealth that has occurred in this country -- dating back to colonial times -- is from the bottom 80% or so to the top 20%. Propagandistic bogeyman such as Reagan’s “welfare queens” are just that, propaganda to whip up the masses against one another while the real getting-something-for-nothing is going on behind closed doors, out of sight, and with such subtle methods as to be intellectually ungraspable by most.

To fully understand the two-plus centuries of looting, war profiteering, big business subsidies, and currency devaluation that has occurred in this country, Kevin Phillips’ “Wealth and Democracy” is the gold standard.

To say the least, we are at a critical juncture in this country’s history and the last thing we can afford now is in-fighting amongst the masses, which, of course, is to the benefit of those running the show. The longer we cling to the truly false paradigm of political spectrums and affiliations the longer the real divide in this country -- the one between the bottom 80 or 90% and those who determine the broad thrusts of government and business -- will go unspoken and un-acted upon.

So to all the liberals and Democrats, I say: Get over your Obamas and Hillarys. These people are not more intelligent, more compassionate, more concerned about the little people than anyone else, especially so your Republican shibboleths of Bush and Cheney. Obama, as each day goes by, seems to me already to be one of the biggest charlatans I could have ever imagined.

So to all the conservatives and Republicans, I say: Return to your libertarian, intellectual, responsible roots and toss aside this conservatism-come-lately defined by anti-intellectualism, pro-war and interventionism, and the bogus and cynical “culture wars.”

To both groups: Please realize that when the truly terrible happens, both sets of your leaders will be flying overhead abandoning you because they are not your brothers and sisters, not your ideological counterparts, not your friends.

In the coming years and decades all we have is each other, how ever flawed, vulnerable, and deeply human those people turn out to be. Fighting amongst ourselves at the propagandistic behest of our political and media masters is a darkened road that can only lead to chaos.

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Re: Obama Punishes Responsible Parties

thanks maine

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