Monopoly Genre: Hey Buddy, can you spare a “Get Out of Jail Free” card?
On our nation's economic bail out, I feel like I’m going to need to make my bail or we will all wind up in Debtors Jail when we can’t shoulder the burden now placed on us.
I’m very puzzled. The proposed bail out/stimulus (or what ever you want to call it) doesn’t appear to have any direct, “meaningful” tangibility to my practice or my family. Here’s what I've thought about so far:
Let’s start small. For my family, we will not enjoy a $15k tax credit toward the purchase of a new house. We will not enjoy a reduction in our mortgage payments or mortgage balance. We’ve managed to take on obligations we can manage. Go figure, we follow the “rules” and we don’t get a break.
Let’s stay small. My practice has managed growth and client expectations; nothing earth shattering here except for those pesky “might be able to deduct some expenses-blah, blah, blah.” Hmmm, I don’t see any immediate CapEx which I could take advantage of. Is this stimulus trying to encourage me to make unsound business decisions just to “stimulate” someone else's economy? Dang, that sounds bitter.
Let’s look beyond the end of my nose. Facts say: GM and Chrysler need at least $4 billion just to stay afloat. Auto sales are down dramatically. What private entity business in its right mind would loan money to make a widget that does not have a strong demand. What’s the likelihood that kind of “investment” would get repaid or would the loan be defaulted? I don’t think I’d invest in that manner; perhaps if the widget was a “new, improved and totally innovative widget” I might consider it.
Consider the new Advocacy section of the AIA web site, the “Rebuild & Renew” title with the subtitle “Green Communities. Green Economy” makes me think of how everyone is jumping on the “Green is Good” bandwagon without really thinking about the “how to” of making it all work. I have yet to make it through the listening to the whole MP3… sounds like a cheerleader to me. Rah Rah.
Let’s look at how the AIA is supporting the stimulus bill: Schools, Green Buildings, Transit and LCI, Historic Preservation, Tax Relief. Based on the project mix and billions of dollars investments listed for each category, it feels like it might be a battle between the ant and the sneaker. If 80% of all AIA members belong to firms that have less than 15 employees, then why does all this cheerleading seem to favor the large/mega firms? Maybe someone from the AIA can educate me. I’m not seeing the connection to the constituents they should be serving.
Let me make sure I understand the bottom line: $787 billion to create 3,500,000 jobs, that’s a cost of $224,857 per job (so I want to slyly ask, "Where can I sign up for that job?"). Further, the AIA letter indicates an anticipated 14,000 jobs for architects; that has a mere cost of $3.1 million in the “stimulus” enchilada.
Please, someone, post your thoughts and tell me “how/what” you might “see/do” with this change. I really look forward to the rosy glasses you can share.
--Lisa Stacholy, AIA
Comments (2)
Wow, Lisa that's a lot. I can see you really are passionate about this. I have only one small thing to say. I heard it on that bastion of liberal thinking NPR but I don't remember who they were talking to or what show it was. (NPR is often on in my car and I hear things when driving from place to place.
Anyway this is an issue of ethics. Whom do we help in this country. Collectively we help those who make bad decisions. When they are smoking in bed and set the house on fire we still send the fire truck without a bill first and usually without a bill ever. When they are driving drunk we still send the ambulance though often a bill follows. When the ice fishes are stranded on a breakaway floe or the hikers are lost in the remote mountain valley we go through great trouble and expense to rescue them. They made bad decisions but collectively we believe their lives are worth more. Not making good financial decisions is just an extension of that.
We don't help those who are criminal. We allow assistance to those who we presume are innocent but we prohibit profit making from the commission of a crime. We asses damages in criminal malfeasance cases. So from the ethical perspective we should not help investors but we should help families and people who made poor decisions in their living arrangements.
In addition, much like the house fire scenario, we don't help them just to help them. We help to limit the damage to ourselves. If a house fire spreads from house to house an entire city can be lost (Chicago 1896?). The economic and personal damage is stunning. We save as much as we can for the unwise to prevent greater damage to ourselves.
The mortgage scenario is much the same. Do you really want to be caught up in the economic turmoil of falling home values in your neighborhood simply because a few people on your street and the next street and the next street made bad decisions and/or fell on hard times? I don't I would rather pay for their extra half bath than to lose what investment I had in my own home. I'm selfish like that. I don't care so much about their home value. I do care about my own and what needs to happen to maintain my own home values.
Course it's a moot point for me as I was shopping for a home when the bottom fell out. Now I don't know when I will be able to be a buyer again. NIce that home prices are down a bit. Still, wish I had enough dependable income to buy. Maybe next year.
Posted by Louis Smith, AIA, NOMA | February 27, 2009 9:28 AM
Posted on February 27, 2009 09:28
John Dugan, comptroller of the Currency before the OTS 3rd Annual National Housing Forum in Washington DC on 12/8/08, reported that for loans modified in the first quarter of 2008, a whopping 36% of the borrowers re-defaulted on their loans within 3 months. After 6 months, the rate was nearly 53% and after 8 months 58%. Similar results in data for mortgages modified in second quarter of 2008 where the re-default rate after 3 months was 39% and after 6 months 51%. Mr. Dugan summarized, “Put simply, it shows that over half of mortgage modifications seemed to not be working after 6 months (see http://www.occ.treas.gov/ftp/release/2008-142a.pdf).
My understanding is the goal of a loan modification is to renegotiate the terms of a loan so that the monthly expense is less to allow the borrower to stay in the house. It is a great goal to have. I think the data shows that some borrowers can not handle the responsibility.
Posted by Lisa Stacholy | February 20, 2009 11:53 AM
Posted on February 20, 2009 11:53