It is in a two page OpEd yesterday, with the apocalyptic title, The End of the Financial World as We Know It, written by Michael Lewis, an editor at Vanity Fail and David Einhorn, a hedge fund manager.  It begins as a restatement of articles that have been written in the Times along with every serious publication over the last few months on the causes of the current economic debacle.

After a discussion of all that had gone wrong, the authors give their first, most important recommendation:

If we are going to spend trillions of dollars of taxpayer money, it makes more sense to focus less on the failed institutions at the top of the financial system and more on the individuals at the bottom. Instead of buying dodgy assets and guaranteeing deals that should never have been made in the first place, we should use our money to A) repair the social safety net, now badly rent in ways that cause perfectly rational people to be terrified; and B) transform the bailout of the banks into a rescue of homeowners.

“Rescue of Homeowners” is a powerful compassionate slogan. Of course, the rescue that these authors propose is not for all home owners. It is not a rescue for homeowners who decided not to overextend themselves, or to jump into the madness of the price wars of a few years to bid them a little higher.

This proposal says they want to, “focus…more..on individuals at the bottom,” defined simply as the owner of a home that is now worth less than their mortgage. . No, individuals at the bottom usually rent, or may be living on the street-or about to be, or staying in the spare room with their parents

It continues:

We should begin by breaking the cycle of deteriorating housing values and resulting foreclosures. Many homeowners realize that it doesn’t make sense to make payments on a mortgage that exceeds the value of their house. As many as 20 million families face the decision of whether to make the payments or turn in the keys. Congress seems to have understood this problem, which is why last year it created a program under the Federal Housing Authority to issue homeowners new government loans based on the current appraised value of their homes.

So these esteemed writers think it doesn’t make sense to pay a mortgage if the value has dropped. O.K. he is about to give his solution, which if it is followed would make this real estate bubble seem mild compared to future ones, knowing that if the real estate market goes down, you not only walk away as one can do now, but get to stay at a reduced price. And, of course, if prices go up, it’s all yours as you pocket the profit without even paying taxes.

First they ridicule the existing law passed to assist homeowners, since it requires that the debtor pay equity loans before qualifying. How cruel it is to demand that someone who actually recieved a check for a hundred thousand dollars to use as he pleases, actually pays it back.

And yet the program, called Hope Now, seems to have become one more excellent example of the unhappy political influence of Wall Street. As it now stands, banks must initiate any new loan; and they are loath to do so because it requires them to recognize an immediate loss. They prefer to “work with borrowers” through loan modifications and payment plans that present fewer accounting and earnings problems but fail to resolve and, thereby, prolong the underlying issues. It appears that the banking lobby also somehow inserted into the law the dubious requirement that troubled homeowners repay all home equity loans before qualifying. The result: very few loans will be issued through this program.

Now these writers are not only claiming to help “those at the bottom” but are exposing the “unhappy political influence of Wall Street”….and the “Banking Lobby.”

And now comes the most absurd double talk I can recall reading in this newspaper.

THIS could be fixed. Congress might grant qualifying homeowners the ability to get new government loans based on the current appraised values without requiring their bank’s consent. When a corporation gets into trouble, its lenders often accept a partial payment in return for some share in any future recovery. Similarly, homeowners should be permitted to satisfy current first mortgages with a combination of the proceeds of the new government loan and a share in any future recovery from the future sale or refinancing of their homes.

They are not talking about permitting homeowners adopt to satisfy a mortgage, they are suggesting laws that mandate banks accept them. A mortgagee is permitted right now to make any arrangement the two parties, mortgagor and mortgagee agree to. The writers are suggesting changes in laws that revise the terms of mortgage contracts, unlike the current law that attempt to mediate such adjustments.

But there is more:

Lenders who issued second mortgages should be forced to release their claims on property. The important point is that homeowners, not lenders, be granted the right to obtain new government loans. To work, the program needs to be universal and should not require homeowners to file for bankruptcy.

Follow this: Those who gave second mortgages, who are also are holders of promissory notes, should simply have these instruments voided. And now, to dispel their illusion of this being for “those at the bottom,” there is to be no requirement that homeowners file for bankruptcy. This is the most absurd variation of previous suggestions that those in bankrupcy can have their mortgages reduced.

Under this plan the “homeowner” may have several houses, and millions in the bank, but this one asset that has dropped in value will be reduced, underwritten by taxpayers, including those truly “at the bottom,” to ensure that this subgroup is protected from market forces.

The Times many editorials proposing “foreclosure relief” recieved tens of thousands of comments, the vast majority opposed to their proposal to have taxpayers support those who can or will not pay their mortgages from having their homes foreclosed. None of these editorials have gone as far as this OpEd, which would not even make the attempt to exclude the wealthy from the program.

While the technical proposals for enhanced regulation are now accepted wisdom, this housing recommendation which they describe as the most important element of their plan is presented without the acknowledgment of the ramifications, both immediately to the counter parties- banks, savings and loans, or holders of securitized debt; and to future generations in the form of “moral hazard”– policies that undermine the principles of a robust equitable economy.

The Times devoted two full pages for this simplistic thoughtless “universal” suggestion to have taxpayers remediate several trillion dollars of negative equity in homes.  If they publish a single letter in opposition I will be surprised.

This was the title of a full two page OpEd yesterday on the New York Times.

I have been a regular contributor to Dailykos over the last few years, which does not mean I accept their Left truisms any more than that of the right. The causes of the current world wide economic crisis leaves a wake of enough blame to go around for both parties.

The New York Times news section has been rather even handed in its analysis, under a series of articles categorized as The Reckoning. They don’t spare Democrats for pressuring the GSEs to give mortgages to minority members who could not afford them, or Charles Schumer for preventing effective control of the rating agencies that were “selling” AAA endorsements of securitized mortgages.

Their Editorial Board, however, has had a single minded simplistic solution to this mess, which is to ensure that those who overpaid, or over burdened their homes with equity loans, never face the consequences of their complicity in this monumental debacle. The OpEd yesterday, took this even a step further, by proposing that even the wealthy, those who do not declare bankruptcy, universally get this taxpayer bailout.

This diary, N.Y. Times Longest OpEd includes bizarre housing plan was not written for the left or the right, but for those who are seeking the most reasonable way out of our current economic disaster.

http://www.dailykos.com/story/2009/1/4/151442/9850/256/680111

I look forward to your comments.