Mortgage Bailout
Here’s a list of bad and good effects of the Bush administration’s plan to stem mortgage foreclosures.
The good:
– It highlights the need for better economics instruction in our nation’s schools.
– It’s not nearly as bad a plan as it would be if Congress had its way. (Good defensive move by the president, even if it was by accident.)
– Judging by letters to the editor, it has solidified public approval ratings of the president and Congress. At about 15%. Combined.
– It gives the administration and Congress the appearance of “doing something.”
– The five-year freeze on mortgage rates protects today’s presidential candidates from having to deal with the issue until after their re-election campaigns in 2012.
– It enables everyone to deflect blame for the collapse of the housing market. Buyers blame Realtors, Realtors blame lenders, lenders blame investors in mortgage- backed securities, investors blame Wall Street investment firms. Wall Street firms don’t care because their presidents will enjoy multimillion-dollar severances.
The bad:
– It allows states, for the first time, to sell tax-exempt bonds to refinance loans or pay closing costs, a taxpayer-financed bailout. (The president confirmed that it’s a taxpayer-financed bailout when he declared, “It’s not a taxpayer-financed bailout.”)
– It wrecks the sanctity of contracts. If you signed a loan you can’t afford, evade it by claiming you were (a) greedy, (b) duped, or (c) not paying attention.
– It rewards imprudent or dishonest home buyers, lenders and investors in mortgage securities.
– For five years, it gives imprudent buyers a lower rate of interest than that paid by prudent buyers.
– It thwarts the self-correcting forces of free housing and lending markets.
– It artificially props up housing prices, which perpetuates the problem.
– It drives lenders to raise rates on new mortgages to compensate for artificially low rates on existing ones, prolonging the market slowdown.
– It sets a precedent of taxpayer-financed bailouts of investment losses, bad busi ness decisions, overloaded credit cards, bad luck. (Maybe casino losses will be covered in next year’s program.)
The buyer, lender and investors are better off when the buyer stays in the house, paying at least part of what he or she owes, rather than leaving the house to stand vacant. In a free market, in a culture of individual responsibility, buyers and lenders would work out such deals by themselves.
Reed Royalty
President
OCTax
San Juan Capistrano
1% Plan
The news out of Indonesia was both distressing and predictable: Delegates from nearly 190 countries who attended the U.N.’s conference on the environment ranked the U.S. and Saudi Arabia as the world’s worst “climate sinners.”
The goal of the conference was to jump-start negotiations that will lead to an international accord to succeed the Kyoto Protocol, which expires in 2012.
The real takeaway for me is this: How can we, as individuals, translate these findings into day-to-day decisions that reduce our carbon footprint?
The answer lies in a little holiday light. You know the one. It’s part of your Christmas tree or Hanukkah decoration, or what helps to illuminate your front yard. Unless you are like my neighbor, who lights up his house through Easter, you’ll start taking down your lights before the Jan. 3 Iowa caucuses are over. So much for reducing Orange County’s carbon footprint this holiday season.
But what about next year? What can people do in 2008? Should they buy a $30,000 Prius or invest $18,000 in solar panels? One place to look is in Nevada City and Grass Valley.
Last year, Nevada City residents lined up to trade in old holiday lights for new, light-emitting diode lights that use a fraction of the energy of conventional bulbs.
These energy-savers were provided by Pacific Gas & Electric through the Motherlode Energy Watch of Placerville. This year, PowerUp offered more Christmas lights and changed out all the outdoor lights on downtown Nevada City businesses.
Small changes like this have made a huge impact on both the city’s carbon footprint and businesses’ bottom line. In 2006, Nevada City’s New York Hotel, decorated with 300 LED lights, reduced its holiday electricity costs from $67 to 94 cents.
Nevada City also helped neighboring Grass Valley change all its downtown Christmas lights. Grass Valley’s electric bill dropped from $4,000 to $60 by using the new lights.
If two small Northern California communities can reduce their carbon footprints and electric bills, then what can we do in OC?
Plenty. Here’s my “1% plan” starting Dec. 1, 2008:
If 1% of the county’s 3 million residents volunteer to plug in their holiday lights at 5:30 p.m. instead of 5 p.m., and unplug their lights at 10:30 p.m. instead of 11 p.m., then OC could save 1 million kilowatt hours of electricity next December.
A 1 million kilowatt hour reduction will save $200,000 in real dollars.
That’s not enough to make the world spin in another direction, but it is quantifiable.
There are other things people and cities can do next year. One is to make sure the vendors who are hired to wrap trees or light up city hall use LED lights. When you add the reductions from OC’s 34 cities to those in the county’s unincorporated areas, we should be able to save another million kilowatt hours of electricity on top of what homeowners save.
Denny Freidenrich
Laguna Beach
