Saturday, February 2, 2008

Drumming Up Business

In the preceding post ("Taking Dictation"), I wrote:

Trust me on this: if the federal government starts bailing out bad real estate investments, at least three things will happen. One is, the rules governing the bailout will be written in such a way that most of the largesse will go to folks who are already better off than the typical taxpayer, turning it into a subsidy for the better-off by the worse-off....
That was a week ago. And as if on cue, we have the following, posted by Michelle Malkin, from a property attorney in Florida:

I’m a property attorney in Northwest Florida, the epicenter of the real estate “boom” and “bust” and from my ringside seat I can tell you predatory lending was not a factor. Buyers and Lenders were equally at fault for reasons you have already written about. But that’s not the why I am writing.

A large number of the foreclosures involve investment properties such as second home, beach condos, vacation cottages, raw land, residences for rent, etc. In the past year I have learned the details of some fifty or so foreclosures from prospective clients. Of these 50 or so foreclosures, only two involved a primary residence and one of those involves a genuine and unforseeable hardship…

From where I sit, most of the foreclosures are not the horrible tragedy portrayed in the press. People are not always losing their primary home. I admit that I live in the middle of a tourist destination so my local perspective may not match that of the rest of the nation. But my point is that many of the foreclosure statistics are significantly inflated by the large number of foreclosures on investment properties. 48 of those 50 or so foreclosures I mentioned are investment properties and they are counted in the state and national foreclosure statistics bandied about in the press.

I am only a small lawyer with a small practice. If this is what I see, imagine what is going on in the rest of Florida. Florida is a leading foreclosure state right now and many, if not most, of these foreclosures do not involve primary residences yet these foreclosures inflate the doom and gloom numbers used to justify a political solution to an artificial crisis.
Let's stipulate that the vast majority of folks who invest in second homes are better off than the typical taxpayer. Not everyone can afford a mortgage payment, let alone two of them. When we're bailing out real estate investors, it's about redistributing money from those who have less of it, to those who have more. Remember that it's your money that Congress is being generous with, and it means that you now have less money with which to meet your other obligations.

Liberals in the media and academia love to point at the "greed" that underlies free enterprise, implicitly portraying government programs as untainted by that very human condition. Last I heard, however, there is only one species of human, and all are fallen from grace, not just the ones who work for private industry. The truth is that, regardless whether they work for Wal*Mart or the U.S. Senate, people tend to make decisions that enhance their own lives. Politicians have every incentive to sell voters on the idea that government can solve their problems. This is marketing, pure and simple; GM does it when they show you their shiny Malibus with babes driving them; Hillary Clinton does it when she insists before a stacked audience that the government can do a better job of managing health care.

The reason big-government liberals are so scornful of free enterprise is the same reason that Miller is so scornful of Bud -- nobody likes competition. And like most sales campaigns, there is a certain amount of snake oil. Drink Miller and be surrounded by gorgeous babes. Chew Wrigley's gum and pretty girls will want to kiss you. Fund our new government program and we will save America from financial ruin. It's essentially the same thing as those annoying spam offers to act now if you want to enhance your male. The difference is just a matter of scale, not plausibility.

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